~~FORM~~ ~~10-Q~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

xFORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2019~~2020

o☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission file number 001-34762

FIRST FINANCIAL ~~BANCORP.~~BANCORP /OH/

(Exact name of registrant as specified in its charter)



Ohio			31-1042001
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

255 East Fifth Street, Suite 800	Cincinnati,	Ohio	45202
(Address of principal executive offices)			(Zip Code)

Registrant's telephone number, including area code: ~~(877)~~ (877) 322-9530

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, No par value	FFBC	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes~~ xYes☒ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ~~Yes~~ xYes☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.



Large accelerated filerx	☒	Accelerated filero	☐

Non-accelerated filero	☐	Smaller reporting companyo	☐

		Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of Exchange Act).

Yes o☐ No x☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The registrant has one class of common stock (no par value) with ~~98,613,714~~97,964,165 shares outstanding at May ~~6, 2019.~~



~~Title of each class~~	~~Trading symbol~~	~~Name of each exchange on which registered~~
~~Common stock, No par value~~	~~FFBC~~	~~The NASDAQ Stock Market LLC~~

7, 2020.

FIRST FINANCIAL BANCORP.

INDEX



	Page No.

Part I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Consolidated Balance Sheets - March 31, ~~2019~~2020 (unaudited) and December 31, ~~2018~~2019	1

Consolidated Statements of Income - Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019 (unaudited)	2

Consolidated Statements of Comprehensive Income - Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019 (unaudited)	3

Consolidated Statements of Changes in Shareholders’ Equity - Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019 (unaudited)	4

Consolidated Statements of Cash Flows - Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019 (unaudited)	5

Notes to Consolidated Financial Statements (unaudited)	6

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations	3540

Item 3 - Quantitative and Qualitative Disclosures about Market Risk	4957

Item 4 - Controls and Procedures	4958

Part II - OTHER INFORMATION

Item 1 - Legal Proceedings	5059

Item 1A - Risk Factors	5059

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	5163

Item 6 - Exhibits	5264

Signatures	5365

Glossary of Abbreviations and Acronyms

First Financial has identified the following list of abbreviations and acronyms that are used in the Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations.



AFS	Available-for-sale	~~FASB~~	~~Financial Accounting Standards Board~~
~~ALLL~~	~~Allowance for loan and lease losses~~	~~FDIC~~	~~Federal Deposit Insurance Corporation~~
~~AOCI~~	~~Accumulated other comprehensive income~~	~~FHLB~~	~~Federal Home Loan Bank~~
~~ASC~~	~~Accounting standards codification~~	First Financial	First Financial Bancorp.
~~ASU~~ACL	~~Accounting standards update~~Allowance for credit losses	Form 10-K	First Financial Bancorp. Annual Report on Form 10-K
~~ATM~~ALLL	~~Automated teller machine~~Allowance for loan and lease losses	FRB	Federal Reserve Bank
~~Bank~~Allowance	~~First Financial Bank~~Collectively or individually, Allowance for credit losses and Allowance for loan and lease losses	GAAP	U.S. Generally Accepted Accounting Principles
AOCI	Accumulated other comprehensive income	HTM	Held-to-maturity
ASC	Accounting standards codification	Insignificant	Less than $0.1 million
ASU	Accounting standards update	IRLC	Interest rate lock commitment
Bank	First Financial Bank	LGD	Loss Given Default
Basel III	Basel Committee regulatory capital reforms, Third Basel Accord	~~HTM~~	~~Held-to-maturity~~
~~Bp/bps~~	~~Basis point(s)~~	~~Insignificant~~	~~Less than $0.1 million~~
~~BOLI~~	~~Bank Owned Life Insurance~~	~~IRLC~~	~~Interest Rate Lock Commitment~~
~~CAM~~	~~Common Area Maintenance~~	MSFG	MainSource Financial Group, Inc.
~~CDs~~BGF or Bannockburn	~~Certificates of deposit~~Bannockburn Global Forex, LLC	N/A	Not applicable
~~C&I~~Bp/bps	~~Commercial & industrial~~Basis point(s)	NII	Net interest income
~~CRE~~BOLI	~~Commercial real estate~~Bank owned life insurance	OBS	Off-balance sheet
CDs	Certificates of deposit	OREO	Other real estate owned
~~Company~~C&I	~~First Financial Bancorp.~~Commercial & industrial	PCA	Prompt corrective action
CRE	Commercial real estate	PCD	Purchased credit deteriorated
Company	First Financial Bancorp.	PCI	Purchase credit impaired
DDA	Demand ~~Deposit Account~~deposit account	PD	Probability of default
Dodd-Frank	Dodd–Frank Wall Street Reform and Consumer Protection Act	R&S	Reasonable and Supportable
EAD	Exposure at Default	ROU	Right-of-use
ERM	Enterprise risk management	SEC	U.S. Securities and Exchange Commission
EVE	Economic value of equity	~~Topic 842~~SOFR	~~FASB ASC Topic 842, Leasing~~Secured Overnight Financing Rate
Fair Value Topic	FASB ASC Topic 820, Fair Value Measurement	Topic 842	FASB ASC Topic 842, Leasing
FASB	Financial Accounting Standards Board	TDR	Troubled debt restructuring
FDIC	Federal Deposit Insurance Corporation	TTS	Through the cycle
FHLB	Federal Home Loan Bank	USD	United States dollars

PART I - FINANCIAL INFORMATION

ITEM I - FINANCIAL STATEMENTS

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)


	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
Assets
Cash and due from banks	$	169,004		$	236,221		$	261,892		$	200,691
Interest-bearing deposits with other banks	50,224			37,738			71,071			56,948
Investment securities available-for-sale, at fair value (amortized cost $3,096,085 at March 31, 2019 and $2,792,326 at December 31, 2018)	3,113,811			2,779,255
Investment securities held-to-maturity (fair value $153,075 at March 31, 2019 and $424,118 at December 31, 2018)	158,305			429,328
Investment securities available-for-sale, at fair value (amortized cost $2,857,355 at March 31, 2020 and $2,798,298 at December 31, 2019)							2,908,688			2,852,084
Investment securities held-to-maturity (fair value $140,065 at March 31, 2020 and $142,821 at December 31, 2019)							136,744			142,862
Other investments	115,731			115,660			143,581			125,020
Loans held for sale	8,217			4,372			27,334			13,680
Loans and leases
Commercial & industrial	2,543,427			2,514,661			2,477,773			2,465,877
Lease financing	95,573			93,415			82,602			88,364
Construction real estate	458,113			548,935			500,311			493,182
Commercial real estate	3,802,179			3,754,681			4,278,257			4,194,651
Residential real estate	975,120			955,646			1,061,792			1,055,949
Home equity	797,118			817,282			781,243			771,869
Installment	90,689			93,212			80,085			82,589
Credit card	46,982			46,382			45,756			49,184
Total loans and leases	8,809,201			8,824,214			9,307,819			9,201,665
Less: Allowance for loan and lease losses	56,722			56,542
Less: Allowance for credit losses ⁽¹⁾							143,885			57,650
Net loans and leases	8,752,479			8,767,672			9,163,934			9,144,015
Premises and equipment	210,676			215,652			212,787			214,506
Goodwill	879,727			880,251			937,771			937,771
Other intangibles	38,571			40,805			73,258			76,201
Accrued interest and other assets	577,518			479,706			1,120,507			747,847
Total assets	$	14,074,263		$	13,986,660		$	15,057,567		$	14,511,625

Liabilities
Deposits
Interest-bearing demand	$	2,235,036		$	2,307,071		$	2,498,109		$	2,364,881
Savings	3,100,894			3,167,325			2,978,250			2,960,979
Time	2,309,810			2,173,564			2,435,858			2,240,441
Total interest-bearing deposits	7,645,740			7,647,960			7,912,217			7,566,301
Noninterest-bearing	2,488,157			2,492,434			2,723,341			2,643,928
Total deposits	10,133,897			10,140,394			10,635,558			10,210,229
Federal funds purchased	95,015			183,591
Federal funds purchased and securities sold under agreements to repurchase							215,824			165,181
FHLB short-term borrowings	952,400			857,100			1,181,900			1,151,000
Total short-term borrowings	1,047,415			1,040,691			1,397,724			1,316,181
Long-term debt	546,423			570,739			325,566			414,376
Total borrowed funds	1,593,838			1,611,430			1,723,290			1,730,557
Accrued interest and other liabilities	216,109			156,587			519,336			323,134
Total liabilities	11,943,844			11,908,411			12,878,184			12,263,920

Shareholders' equity
Common stock - no par value
Authorized - 160,000,000 shares; Issued - 104,281,794 shares in 2019 and 2018	1,622,554			1,633,256
Authorized - 160,000,000 shares; Issued - 104,281,794 shares in 2020 and 2019							1,633,950			1,640,771
Retained earnings	626,408			600,014			660,653			711,249
Accumulated other comprehensive loss	(19,635		)	(44,408		)
Treasury stock, at cost, 5,667,922 shares in 2019 and 6,387,508 shares in 2018	(98,908		)	(110,613		)
Accumulated other comprehensive income (loss)							11,788			13,323
Treasury stock, at cost, 6,312,836 shares in 2020 and 5,790,796 shares in 2019							(127,008		)	(117,638		)
Total shareholders' equity	2,130,419			2,078,249			2,179,383			2,247,705
Total liabilities and shareholders' equity	$	14,074,263		$	13,986,660		$	15,057,567		$	14,511,625

(1) Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

See Notes to Consolidated Financial Statements.

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)


	Three months ended					Three months ended
	March 31,					March 31,
	2019			2018		2020			2019
Interest income
Loans and leases, including fees	$	123,056		$	74,920	$	115,775		$	123,056
Investment securities
Taxable	24,235			13,670		19,005			24,235
Tax-exempt	4,258			1,657		4,582			4,258
Total interest on investment securities	28,493			15,327		23,587			28,493
Other earning assets	210			107		142			210
Total interest income	151,759			90,354		139,504			151,759
Interest expense
Deposits	19,243			10,298		16,365			19,243
Short-term borrowings	5,960			2,663		5,087			5,960
Long-term borrowings	5,041			1,581		3,770			5,041
Total interest expense	30,244			14,542		25,222			30,244
Net interest income	121,515			75,812		114,282			121,515
Provision for loan and lease losses	14,083			2,303
Net interest income after provision for loan and lease losses	107,432			73,509
Provision for credit losses-loans and leases ⁽¹⁾						23,880			14,083
Provision for credit losses-unfunded commitments ⁽¹⁾						1,568			6
Net interest income after provision for credit losses						88,834			107,426
Noninterest income
Service charges on deposit accounts	8,903			5,039		8,435			8,903
Trust and wealth management fees	4,070			3,954		4,469			4,070
Bankcard income	5,586			3,394		2,698			5,586
Client derivative fees	1,704			1,757		3,105			1,704
Foreign exchange income						9,966			0
Net gain from sales of loans	1,890			588		2,831			1,890
Net gain (loss) on sales/transfers of investment securities	(178		)	0		(59		)	(178		)
Other	4,852			2,206		3,939			4,852
Total noninterest income	26,827			16,938		35,384			26,827
Noninterest expenses
Salaries and employee benefits	47,912			31,102		54,822			47,912
Net occupancy	6,630			4,497		6,104			6,630
Furniture and equipment	3,416			2,040		4,053			3,416
Data processing	5,127			3,672		6,389			5,127
Marketing	1,606			801		1,220			1,606
Communication	728			459		890			728
Professional services	2,252			2,198		2,275			2,252
State intangible tax	1,310			765		1,516			1,310
FDIC assessments	950			894		1,405			950
Intangible assets amortization	2,045			280		2,792			2,045
Other	6,523			5,580		8,200			6,517
Total noninterest expenses	78,499			52,288		89,666			78,493
Income before income taxes	55,760			38,159		34,552			55,760
Income tax expense	9,921			7,653		5,924			9,921
Net income	$	45,839		$	30,506	$	28,628		$	45,839
Net earnings per common share - basic	$	0.47		$	0.49	$	0.29		$	0.47
Net earnings per common share - diluted	$	0.47		$	0.49	$	0.29		$	0.47
Cash dividends declared per share	$	0.22		$	0.19	$	0.23		$	0.22
Average common shares outstanding - basic	97,926,088			61,654,686		97,736,690			97,926,088
Average common shares outstanding - diluted	98,436,311			62,180,744		98,356,214			98,436,311

(1) Beginning January 1, 2020, calculation is based on current expected loss methodology. Prior to January 1, 2020, calculation was based on incurred loss methodology.

See Notes to Consolidated Financial Statements.

											FIRST FINANCIAL BANCORP. AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	(Dollars in thousands)	(Unaudited)

	Three months ended					Three months ended
	March 31,					March 31,
	2019		2018			2020			2019
Net income	$	45,839	$	30,506		$	28,628		$	45,839
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on debt securities arising during the period	23,505		(9,830		)	(1,863		)	23,505
Change in retirement obligation	290		323			328			290
Unrealized gain (loss) on derivatives	72		156			0			72
Other comprehensive income (loss)	23,867		(9,351		)	(1,535		)	23,867
Comprehensive income	$	69,706	$	21,155		$	27,093		$	69,706

See Notes to Consolidated Financial Statements.

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Dollars in thousands except per share data)

(Unaudited)


																			Common Stock				Retained			Accumulated other comprehensive			Treasury stock
	Common Stock				Retained			Accumulated other comprehensive			Treasury stock								Shares	Amount			Earnings			income (loss)			Shares		Amount			Total
	Shares	Amount			Earnings			income (loss)			Shares		Amount			Total
Balance at January 1, 2018	68,730,731	$	573,109		$	491,847		$	(20,390	)	(6,661,644	)	$	(113,902	)	$	930,664
Impact of cumulative effect of change in accounting principles					5,093			(5,093		)						0
Net income					30,506											30,506
Other comprehensive income (loss)								(9,351		)						(9,351		)
Cash dividends declared:
Common stock at $0.19 per share					(11,797		)									(11,797		)
Warrant exercises		(24		)							1,428		24			0
Exercise of stock options, net of shares purchased		(65		)							11,800		202			137
Restricted stock awards, net of forfeitures		(3,517		)							131,508		1,389			(2,128		)
Share-based compensation expense		1,954														1,954
Balance at March 31, 2018	68,730,731	$	571,457		$	515,649		$	(34,834	)	(6,516,908	)	$	(112,287	)	$	939,985
Balance at January 1, 2019	104,281,794	$	1,633,256		$	600,014		$	(44,408	)	(6,387,508	)	$	(110,613	)	$	2,078,249		104,281,794	$	1,633,256		$	600,014		$	(44,408	)	(6,387,508	)	$	(110,613	)	$	2,078,249
Impact of cumulative effect of change in accounting principles					2,221			906								3,127
Impact of cumulative effect of adoption of new accounting principles																							2,221			906								3,127
Net income					45,839											45,839							45,839											45,839
Other comprehensive income (loss)								23,867								23,867										23,867								23,867
Cash dividends declared:
Common stock at $0.22 per share					(21,666		)									(21,666		)					(21,666		)									(21,666		)
Warrant exercises		(7,830		)							452,134		7,830			0				(7,830		)							452,134		7,830			0
Exercise of stock options, net of shares purchased		(264		)							20,424		354			90				(264		)							20,424		354			90
Restricted stock awards, net of forfeitures		(5,604		)							247,028		3,521			(2,083		)		(5,604		)							247,028		3,521			(2,083		)
Share-based compensation expense		2,996														2,996				2,996														2,996
Balance at March 31, 2019	104,281,794	$	1,622,554		$	626,408		$	(19,635	)	(5,667,922	)	$	(98,908	)	$	2,130,419		104,281,794	$	1,622,554		$	626,408		$	(19,635	)	(5,667,922	)	$	(98,908	)	$	2,130,419
Balance at January 1, 2020																			104,281,794	$	1,640,771		$	711,249		$	13,323		(5,790,796	)	$	(117,638	)	$	2,247,705
Impact of cumulative effect of adoption of new accounting principles																							(56,882		)									(56,882		)
Net income																							28,628											28,628
Other comprehensive income (loss)																										(1,535		)						(1,535		)
Cash dividends declared:
Common stock at $0.23 per share																							(22,342		)									(22,342		)
Purchase of common stock																													(880,000	)	(16,686		)	(16,686		)
Exercise of stock options, net of shares purchased																				(140		)							10,405		212			72
Restricted stock awards, net of forfeitures																				(8,218		)							347,555		7,104			(1,114		)
Share-based compensation expense																				1,537														1,537
Balance at March 31, 2020																			104,281,794	$	1,633,950		$	660,653		$	11,788		(6,312,836	)	$	(127,008	)	$	2,179,383

See Notes to Consolidated Financial Statements.

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

Three months ended
March 31,
2019 2018
Operating activities
Net income $ 45,839
$ 30,506
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses 14,083
2,303
Depreciation and amortization 6,489
3,076
Stock-based compensation expense 2,996
1,954
Pension expense (income) 375
(156 )
Net amortization (accretion) on investment securities 2,649
2,801
Net (gain) loss on sales of investment securities 178
0
Originations of loans held for sale (41,227 ) (22,383 )
Net gains from sales of loans held for sale (1,890 ) (588 )
Proceeds from sales of loans held for sale 39,273
24,542
Deferred income taxes 12,625
(1,736 )
Amortization of operating leases 1,826
0
Payments for operating leases (1,823 ) 0
Decrease (increase) cash surrender value of life insurance (1,534 ) 786
Decrease (increase) in interest receivable (3,109 ) (1,687 )
(Decrease) increase in interest payable 322
(1,013 )
Decrease (increase) in other assets (30,168 ) 15,414
(Decrease) increase in other liabilities (8,908 ) (1,491 )
Net cash provided by (used in) operating activities 37,996
52,328

Investing activities

Proceeds from sales of securities available-for-sale 0
0
Proceeds from calls, paydowns and maturities of securities available-for-sale 95,114
52,252
Purchases of securities available-for-sale (143,290 ) (77,037 )
Proceeds from calls, paydowns and maturities of securities held-to-maturity 2,398
19,718
Net decrease (increase) in interest-bearing deposits with other banks (12,486 ) 23,774
Net decrease (increase) in loans and leases 438
(89,526 )
Proceeds from disposal of other real estate owned 183
2,222
Purchases of premises and equipment (1,268 ) (4,979 )
Net cash provided by (used in) investing activities (58,911 ) (73,576 )

Financing activities

Net (decrease) increase in total deposits (6,379 ) 115,458
Net (decrease) increase in short-term borrowings 6,724
(156,233 )
Payments on long-term debt (25,187 ) 0
Proceeds from FHLB borrowings 0
50,000
Cash dividends paid on common stock (21,550 ) (22,183 )
Proceeds from exercise of stock options 90
137
Net cash provided by (used in) financing activities (46,302 ) (12,821 )

Cash and due from banks

Change in cash and due from banks (67,217 ) (34,069 )
Cash and due from banks at beginning of period 236,221
150,650
Cash and due from banks at end of period $ 169,004
$ 116,581



	Three months ended
	March 31,
	2020			2019
Operating activities
Net income	$	28,628		$	45,839
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	25,448			14,083
Depreciation and amortization	8,464			6,489
Stock-based compensation expense	1,537			2,996
Pension expense (income)	400			375
Net amortization (accretion) on investment securities	3,981			2,649
Net (gain) loss on sales of investment securities	59			178
Originations of loans held for sale	(111,112		)	(41,227		)
Net gains from sales of loans held for sale	(2,831		)	(1,890		)
Proceeds from sales of loans held for sale	100,288			39,273
Deferred income taxes	2,975			12,625
Amortization of operating leases	2,020			1,826
Payments for operating leases	(1,288		)	(1,823		)
Decrease (increase) cash surrender value of life insurance	(198		)	(1,534		)
Decrease (increase) in interest receivable	(878		)	(3,109		)
(Decrease) increase in interest payable	(2,197		)	322
Decrease (increase) in other assets	(362,619		)	(30,168		)
(Decrease) increase in other liabilities	181,099			(8,908		)
Net cash provided by (used in) operating activities	(126,224		)	37,996

Investing activities
Proceeds from sales of securities available-for-sale	29,922			0
Proceeds from calls, paydowns and maturities of securities available-for-sale	151,629			95,114
Purchases of securities available-for-sale	(234,589		)	(143,290		)
Proceeds from calls, paydowns and maturities of securities held-to-maturity	6,186			2,398
Purchases of other investment securities	(18,659		)	0
Net decrease (increase) in interest-bearing deposits with other banks	(14,123		)	(12,486		)
Net decrease (increase) in loans and leases	(105,697		)	438
Proceeds from disposal of other real estate owned	900			183
Purchases of premises and equipment	(5,805		)	(1,268		)
Net cash provided by (used in) investing activities	(190,236		)	(58,911		)

Financing activities
Net (decrease) increase in total deposits	425,329			(6,379		)
Net (decrease) increase in short-term borrowings	81,543			6,724
Payments on long-term debt	(90,066		)	(25,187		)
Cash dividends paid on common stock	(22,531		)	(21,550		)
Treasury stock purchase	(16,686		)	0
Proceeds from exercise of stock options	72			90
Net cash provided by (used in) financing activities	377,661			(46,302		)

Cash and due from banks
Change in cash and due from banks	61,201			(67,217		)
Cash and due from banks at beginning of period	200,691			236,221
Cash and due from banks at end of period	$	261,892		$	169,004

See Notes to Consolidated Financial Statements.

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2019~~2020

(Unaudited)

NOTE 1: ~~BASIS~~SUMMARY OF ~~PRESENTATION~~SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation.The Consolidated Financial Statements of First Financial Bancorp., a financial holding company principally serving Ohio, Indiana, Kentucky and Illinois, include the accounts and operations of First Financial and its wholly-owned subsidiary, First Financial Bank. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain reclassifications of prior periods' amounts have been made to conform to current year presentation. Such reclassifications had no effect on net earnings.

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. These estimates, assumptions and judgments are inherently subjective and may be susceptible to significant change. Actual realized amounts could differ materially from these estimates.

These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they may not include all of the information and accompanying notes necessary to constitute a complete set of financial statements required by GAAP and should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. Management believes these unaudited consolidated financial statements reflect all adjustments of a normal recurring nature which are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. The Consolidated Balance Sheet as of December 31, ~~2018~~2019 has been derived from the audited financial statements in the Company’s ~~2018~~2019 Form 10-K.

Use of estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. These estimates, assumptions and judgments are inherently subjective and may be susceptible to significant change. Actual realized amounts could differ materially from these estimates.

COVID-19. In the first quarter of 2020, First Financial's operations and financial results were significantly impacted by the COVID-19 pandemic. The spread of COVID-19 has caused significant economic disruption throughout the United States as state and local governments issued stay at home orders and temporarily closed non-essential businesses. The potential financial impact from the pandemic is unknown at this time, however prolonged disruption may adversely impact several industries within the Company's geographic footprint and impair the ability of First Financial's customers to fulfill their contractual obligations to the Company. This could cause First Financial to experience a material adverse effect on business operations, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of valuation impairments on First Financial's intangible assets, investments, loans, mortgage servicing rights or counter-party risk derivatives.

Investment securities. First Financial classifies debt securities into three categories: HTM, trading and AFS. Management classifies investment securities into the appropriate category at the time of purchase and re-evaluates that classification as deemed appropriate.

Investment securities are classified as HTM when First Financial has the positive intent and ability to hold the securities to maturity. HTM securities are recorded at amortized cost.

Investment securities classified as trading are held principally for resale in the near-term and are recorded at fair value. Fair value is determined using quoted market prices. Gains or losses on trading securities, both realized and unrealized, are reported in noninterest income.

Investment securities not classified as either HTM or trading are classified as AFS. AFS securities are recorded at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.

The amortized cost of investment securities classified as either HTM or AFS is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion are considered an adjustment to the yield on the security and included in interest income from investments. Interest and dividends are also included in interest income from investment securities in the Consolidated Statements of Income. Realized gains and losses are based on the amortized cost of the security sold using the specific identification method.

Allowance for credit losses - held-to-maturity securities. Management measures expected credit losses on held-to-maturity debt securities on a collective basis by security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into the following major security types: Mortgage-backed, CMOs and Obligations of state and other political subdivisions.

Nearly all of the HTM securities held by the Company are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The remainder of the Company's HTM securities are non-agency collateralized mortgage obligations and obligations of state and other political subdivisions which currently carry ratings no lower than A+. Accrued interest receivable on held-to maturity debt securities, which totaled $0.3 million as of March 31, 2020, is excluded from the estimate of credit losses.

Allowance for credit losses - available-for-sale securities. For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable on available-for-sale debt securities, which totaled $12.7 million as of March 31, 2020, is excluded from the estimate of credit losses.

Allowance for credit losses - loans and leases.The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management's determination of the adequacy of the ACL is based on an assessment of the expected credit losses on loan and leases over the expected life of the loan. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. Loans are charged off when management believes that the collection of the principal amount owed in full, either through payments from the borrower or a guarantor or from the liquidation of collateral, is unlikely. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Any interest that is accrued but not collected is reversed against interest income when a loan is placed on nonaccrual status, which typically occurs prior to charging off all, or a portion, of a loan. Accrued interest receivable on loans and leases is excluded from the estimate of credit losses.

Management estimates the allowance balance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic forecasts provides the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the Qualitative Framework.

First Financial quantitatively models expected credit loss using Probability of Default (“PD”), Loss Given Default (“LGD”), and Exposure at Default (“EAD”) over the Reasonable and Supportable ("R&S") forecast period, reversion and post-reversion periods.

Utilizing third-party software, the Bank forecasts PD by using a parameterized transition matrix approach. Average transition matrices are calculated over the Through the Cycle ("TTC") period, which was defined as the period from December 2007 to December 2016. TTC transition matrices are adjusted under forward-looking macroeconomic expectations to obtain R&S forecasts.

First Financial is not required to develop forecasts over full the contractual term of the financial asset or group of financial assets. Rather, for periods beyond which the entity is able to make or obtain R&S forecasts of expected credit losses, the

Company reverts in a straight line manner over a one year period to an average TTC loss level that is reflective of the prepayment adjusted contractual term of the financial asset or group of financial assets. The R&S period, elected by the bank to be two years, is forecasted using econometric data sourced from Moody's, an industry-leading independent third party.

FFB utilizes the non-parametric loss curve approach embedded within the third-party software for estimating LGD. The PD multiplied by LGD produces an expected loss rate that, when calculating the ACL, is applied to contractual loan cash flows, adjusted for expected future rates of principal prepayments.

The Company adjusts its quantitative model for certain qualitative factors to reflect the extent to which management expects current conditions and R&S forecasts to differ from the conditions that existed for the period over which historical information was evaluated. The Qualitative Framework reflects changes related to relevant data, such as changes in asset quality trends, portfolio growth and composition, national and local economic factors, credit policy and administration and other factors not considered in the base model.

Loans that do not share risk characteristics are evaluated on an individual basis. First Financial will typically evaluate on an individual basis any loans that are on nonaccrual, designated as a TDR, or reasonably expected to be designated as a TDR. When management determines that foreclosure is probable or when repayment is expected to be provided substantially through the operation or sale of underlying collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs. For loans evaluated on an individual basis that are not determined to be collateral dependent, a discounted cash flow analysis is performed to determine expected credit losses.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. Credit card receivables do not have stated maturities. In determining the estimated life of a credit card receivable, management first estimates the future cash flows expected to be received and then applies those expected future cash flows to the credit card balance.

Allowance for credit losses - unfunded commitments. Effective January 1, 2020, First Financial adopted ASC 326, at which time First Financial estimated expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the Company's ACL methodology for loans and leases. Adjustments to the reserve for unfunded commitments are recorded in Provision for credit losses - unfunded commitments in the Consolidated Statements of Income.

Prior to the adoption of ASC 326, First Financial maintained its reserve to absorb probable losses incurred in standby letters of credit and outstanding loan commitments. First Financial determined the adequacy of this reserve based upon an evaluation of the unfunded credit facilities, which included consideration of historical commitment utilization experience, credit risk ratings and historical loss rates, consistent with the Company's ALLL methodology at the time.

NOTE 2: ACCOUNTING STANDARDS RECENTLY ADOPTED ~~AND~~OR ISSUED ~~ACCOUNTING STANDARDS~~

~~Accounting Guidance~~Standards Adopted in ~~2019~~2020

On January 1, 2020, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases. In ~~February 2016,~~addition, ASC 326 made changes to the ~~FASB issued~~accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an ~~update (ASU 2016-02, Leases) which requires lessees~~allowance rather than as a write-down on available-for-sale debt securities management does not intend to ~~record most leases on their balance sheet and recognize leasing expenses in the income statement. Operating leases where the Bank~~sell or believes that it is the lessee, except for short-term leases that are subject to an accounting policy election, were recorded on the balance sheet by establishing a lease liability and corresponding ROU asset. All entities aremore likely than not they will be required to ~~use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. As the~~sell. The Company ~~elected the transition option provided in ASU No. 2018-11,~~adopted ASC 326 using the modified retrospective ~~approach was applied on~~method for all financial assets measured at amortized cost and off-balance-sheet (OBS) credit exposures. Results for reporting periods beginning after January 1, ~~2019 (as opposed~~2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of$56.9 millionas of January 1, ~~2017). The Company also elected certain relief options offered~~2020 for the cumulative effect of

adopting ASC 326. As detailed in ~~ASU 2016-02 including~~ the ~~package of practical expedients,~~following table, the ~~option not~~transition adjustment included a$61.5 millionincrease to ~~separate lease and non-lease components and instead to account~~ACL, a$12.2 million increase in the ACL for them as a single lease component and the option not to recognize ROU assets and lease liabilities that arise from short-term leases. The Company did not elect the hindsight practical expedient, which allows entities to use hindsight when determining lease term and impairment of ROU assets. The guidance in this ASU became effective January 1, 2019 at which time the Company recorded on the Consolidated Balance Sheet an ROU asset of $60.2 millionunfunded commitments and a ~~lease liability of $65.8 million. For further detail, see Note 7 – Leases.~~

~~In March 2017, the FASB issued an update (ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities) which~~ amended the amortization period for certain purchased callable debt securities held at a premium and shortens the amortization period for the premium to the earliest call date rather than as an adjustment of yield over the contractual life of the instrument. This update more closely aligns the amortization period of premiums and discounts to expectations incorporated$16.8 million decrease in market pricing on the underlying securities, as in most cases, market participants price securities to the call date that produces the worst yield when the coupon is above current market rates (that is, the security is trading at a premium) and price securities to maturity when the coupon is below market rates (that is, the security is trading at a discount) in anticipation that the borrower will act in its economic best interest in an attempt to more closely align interest income recorded on bonds held at a premium or a discount with the economics of the underlying instrument. The guidance in this ASU became effective in January 1, 2019 and did not have a material impact on the Consolidated Financial Statements.Deferred tax liability.

The Company adopted CECL using the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as purchased credit impaired and accounted for under ASC 310-30. In ~~August 2017, the FASB issued an update (ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities) to better align financial reporting for hedging activities~~accordance with the ~~economic objectives~~standard, First Financial did not reassess whether PCI assets met the definition of ~~those activities. This update aligns certain aspects of hedge documentation, effectiveness assessments, accounting and disclosures and expands permissible hedge strategies~~PCD assets as of the date of adoption. The guidance in this ASU became effective January 1, 2019. Upon adoption, the Company reclassified $268.7 million of HTM securities to AFS, resulting in a $0.2 million loss in the Consolidated Statement of Income.

~~Accounting Guidance Issued But Not Yet Adopted~~

~~In June 2016, the FASB issued an update (ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses~~

on Financial Instruments) which significantly changes how entities are required to measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. This update will replace the current incurred loss approach for estimating credit losses with an expected loss model for instruments measured at amortized cost, including loans and leases. Expected credit losses are required to be based on amortized cost and reflect losses expected over the remaining contractual life of the asset. Management is expected to consider any available information relevant to assessing the collectibility of contractual cash flows, such as information about past events, current conditions, voluntary prepayments and reasonable and supportable forecasts, when developing expected credit loss estimates.

In addition to the new framework for calculating the ALLL, this update requires allowances for available-for-sale debt securities rather than a reduction of the security's carrying amount under the current other-than-temporary impairment model. This update also simplifies the accounting model for purchased credit-impaired debt securities and loans and will require new and updated footnote disclosures.

The ~~guidance in this ASU will become effective for interim and annual reporting periods beginning after December 15, 2019.~~

First Financial currently expects as of January 1, 2020 to recognize a one-time cumulative effect adjustment to increase the ALLL with an offsetting reduction to the retained earnings component of equity. In December 2018, the federal bank regulatory agencies approved a final rule ~~that modifies their regulatory capital rules and~~ provides ~~institutions~~banking organizations the option to phase in over a three-year period ~~any~~the day-one adverse effects on regulatory capital ~~effects~~that may result from the adoption of ~~this update.~~the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. First Financial ~~has formed an internal management committee and engaged a third party vendor to assist with~~is adopting the capital transition torelief over the ~~guidance set forth in this update. The committee is currently evaluating~~five year permissible period.



	January 1, 2020
(dollars in thousands)	As Reported under ASC 326		Pre-ASC 326		Impact of ASC 326 Adoption
Assets
Loans
Commercial and industrial	$	28,485	$	18,584	$	9,901
Lease financing	1,089		971		118
Construction real estate	13,960		2,381		11,579
Commercial real estate	47,697		23,579		24,118
Residential real estate	10,789		5,299		5,490
Home equity	13,217		4,787		8,430
Installment	1,193		392		801
Credit card	2,725		1,657		1,068
Allowance for credit losses on loans	$	119,155	$	57,650	$	61,505

Liabilities
Deferred tax liability	$	16,252	$	33,030	$	(16,778	)
Allowance for credit losses on OBS credit exposures	12,740		585		12,155

For more information on the ~~impact of this update on First Financial’s Consolidated Financial Statements, but the ALLL is expected to increase upon adoption since the allowance will be required to cover the full expected life~~calculation of the ~~portfolio. The extent~~ACL, please refer to Note 1 - Summary of ~~this increase is still being evaluated~~Significant Accounting Policies and ~~will depend on economic conditions and~~Note 5 - Allowance for Credit Losses.

During the ~~composition~~first quarter of 2020, the loan and lease portfolio at the time of adoption. Management is currently evaluating the preliminary modeling results, including a qualitative framework to account for the drivers of credit losses that are not captured by the quantitative model.

~~In August 2018, the FASB issued an update (ASU~~Company adopted ASU No. 2018-13, Disclosure Framework: Changes to the Disclosure Requirements for Fair Value ~~Measurement)~~Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Under the changes, entities ~~will~~are no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but ~~will be required to~~must disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ~~The update is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted.~~ This update isdid not ~~expected to~~ have a material impact on the Company’s Consolidated Financial Statements.

NOTE 3: INVESTMENTS

For the three months ended March 31, ~~2019~~2020, there were sales of $29.9 million of AFS securities with 0 gross realized gains and $0.1 million gross realized losses. For the three months ended March 31, ~~2018,~~2019, there were no0 sales of AFS securities and therefore no0 associated gains or losses. In conjunction with the adoption of ASU 2017-12 in the first quarter of 2019, First Financial reclassified $268.7 million of HTM securities to AFS resulting in a $0.2 million realized loss recorded in the Consolidated Statement of Income.

The following is a summary of HTM and AFS investment securities as of March 31, ~~2019:~~2020:


	Held-to-maturity									Available-for-sale									Held-to-maturity									Available-for-sale
(Dollars in thousands)	Amortized cost		Unrecognized gain		Unrecognized loss			Fair value		Amortized cost		Unrealized gain		Unrealized loss			Fair value		Amortized cost		Unrecognized gain		Unrecognized loss			Fair value		Amortized cost		Unrealized gain		Unrealized loss			Fair value
U.S. Treasuries	$	0	$	0	$	0		$	0	$	99	$	0	$	(1	)	$	98	$	0	$	0	$	0		$	0	$	99	$	5	$	0		$	104
Securities of U.S. government agencies and corporations	0		0		0			0		30,880		74		(355		)	30,599		0		0		0			0		116		2		0			118
Mortgage-backed securities - residential	24,937		72		(671		)	24,338		557,730		4,566		(3,449		)	558,847		19,832		1,046		0			20,878		419,423		19,215		(219		)	438,419
Mortgage-backed securities - commercial	109,826		0		(4,414		)	105,412		464,611		1,821		(2,988		)	463,444		97,073		1,671		(375		)	98,369		506,343		7,034		(9,082		)	504,295
Collateralized mortgage obligations	11,936		0		(429		)	11,507		919,486		9,214		(3,067		)	925,633		9,043		149		0			9,192		745,649		28,845		(2,479		)	772,015
Obligations of state and other political subdivisions	11,606		440		(228		)	11,818		542,265		12,496		(504		)	554,257		10,796		830		0			11,626		723,470		30,576		(152		)	753,894
Asset-backed securities	0		0		0			0		502,018		1,180		(1,790		)	501,408		0		0		0			0		382,415		225		(18,841		)	363,799
Other securities	0		0		0			0		78,996		853		(324		)	79,525		0		0		0			0		79,840		90		(3,886		)	76,044
Total	$	158,305	$	512	$	(5,742	)	$	153,075	$	3,096,085	$	30,204	$	(12,478	)	$	3,113,811	$	136,744	$	3,696	$	(375	)	$	140,065	$	2,857,355	$	85,992	$	(34,659	)	$	2,908,688

The following is a summary of HTM and AFS investment securities as of December 31, ~~2018:~~2019:


	Held-to-maturity									Available-for-sale									Held-to-maturity									Available-for-sale
(Dollars in thousands)	Amortized cost		Unrecognized gain		Unrecognized loss			Fair value		Amortized cost		Unrealized gain		Unrealized loss			Fair value		Amortized cost		Unrecognized gain		Unrecognized loss			Fair value		Amortized cost		Unrealized gain		Unrealized loss			Fair value
U.S. Treasuries	$	0	$	0	$	0		$	0	$	99	$	0	$	(2	)	$	97	$	0	$	0	$	0		$	0	$	99	$	1	$	0		$	100
Securities of U.S. government agencies and corporations	0		0		0			0		32,095		57		(233		)	31,919		0		0		0			0		156		2		0			158
Mortgage-backed securities - residential	25,565		0		(1,045		)	24,520		565,071		691		(7,163		)	558,599		20,818		122		(174		)	20,766		421,945		9,709		(99		)	431,555
Mortgage-backed securities - commercial	147,780		258		(4,385		)	143,653		423,797		819		(3,581		)	421,035		101,267		571		(1,225		)	100,613		474,174		4,988		(2,644		)	476,518
Collateralized mortgage obligations	12,540		0		(633		)	11,907		928,586		4,319		(6,158		)	926,747		9,763		0		(108		)	9,655		769,076		16,753		(385		)	785,444
Obligations of state and other political subdivisions	243,443		1,954		(1,359		)	244,038		257,300		2,554		(1,429		)	258,425		11,014		804		(31		)	11,787		652,986		23,729		(462		)	676,253
Asset-backed securities	0		0		0			0		511,430		611		(2,810		)	509,231		0		0		0			0		400,081		1,414		(1,064		)	400,431
Other securities	0		0		0			0		73,948		358		(1,104		)	73,202		0		0		0			0		79,781		1,959		(115		)	81,625
Total	$	429,328	$	2,212	$	(7,422	)	$	424,118	$	2,792,326	$	9,409	$	(22,480	)	$	2,779,255	$	142,862	$	1,497	$	(1,538	)	$	142,821	$	2,798,298	$	58,555	$	(4,769	)	$	2,852,084

The following table provides a summary of investment securities by contractual maturity as of March 31, ~~2019,~~2020, except for residential and commercial mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, which are shown as single totals due to the unpredictability of the timing in principal repayments.


	Held-to-maturity				Available-for-sale				Held-to-maturity				Available-for-sale
(Dollars in thousands)	Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost		Fair value		Amortized cost		Fair value
By Contractual Maturity:
Due in one year or less	$	0	$	0	$	18,503	$	18,522	$	0	$	0	$	5,138	$	5,157
Due after one year through five years	0		0		52,079		52,547		0		0		55,648		56,434
Due after five years through ten years	4,247		4,579		162,531		165,532		4,797		5,476		148,614		147,686
Due after ten years	7,359		7,239		419,127		427,878		5,999		6,150		594,125		620,883
Mortgage-backed securities - residential	24,937		24,338		557,730		558,847		19,832		20,878		419,423		438,419
Mortgage-backed securities - commercial	109,826		105,412		464,611		463,444		97,073		98,369		506,343		504,295
Collateralized mortgage obligations	11,936		11,507		919,486		925,633		9,043		9,192		745,649		772,015
Asset-backed securities	0		0		502,018		501,408		0		0		382,415		363,799
Total	$	158,305	$	153,075	$	3,096,085	$	3,113,811	$	136,744	$	140,065	$	2,857,355	$	2,908,688

Unrealized gains and losses on debt securities are generally due to fluctuations in current market yields relative to the yields of the debt securities at their amortized cost. All securities with unrealized losses are reviewed quarterly to determine if any impairment is considered other than temporary, requiring a write-down to fair value. ~~First Financial~~For securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the ~~percentage loss on a security, duration of~~extent to which fair value is less than amortized cost, any changes to the ~~loss, average life or duration of the security, credit~~ rating of the security by a rating agency and ~~payment performance, as well as the Company's intent and ability~~adverse conditions specifically related to ~~hold~~ the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to ~~maturity, when determining whether any impairment is other than temporary.~~ be collected from the security are compared to the amortized cost basis of the security.

At this time, First Financial does not intend to sell, and it is not more likely than not that the Company will be required to sell, debt securities temporarily impaired prior to maturity or recovery of the recorded value. First Financial had no other than temporary impairment related to its investment securities portfolio as of March 31, ~~2019~~2020 or December 31, ~~2018.~~2019.

As of March 31, ~~2019,~~2020, the Company's investment securities portfolio consisted of ~~1,395~~1,276 securities, of which ~~303~~194 were in an unrealized loss position. As of December 31, ~~2018,~~2019, the Company's investment securities portfolio consisted of ~~1,417~~1,273 securities, of which ~~504~~140 were in an unrealized loss position.

Primarily all of First Financial’s HTM debt securities are issued by U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. The remainder of the Company's HTM securities are non-agency collateralized mortgage obligations and obligations of state and other political subdivisions which currently carry ratings no lower than A+. There were no HTM securities on nonaccrual status or past due as of March 31, 2020. Therefore, the Company did not record an allowance for credit losses for these securities as of March 31, 2020.

The following tables provide the fair value and gross unrealized losses on investment securities in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by investment category and the length of time the individual securities have been in a continuous loss position:


	March 31, 2019															March 31, 2020
	Less than 12 months					12 months or more					Total					Less than 12 months					12 months or more					Total
(Dollars in thousands)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
U.S. Treasuries	$	0	$	0		$	98	$	(1	)	$	98	$	(1	)	$	0	$	0		$	0	$	0		$	0	$	0
Securities of U.S. Government agencies and corporations	6,046		(77		)	13,946		(278		)	19,992		(355		)	0		0			0		0			0		0
Mortgage-backed securities - residential	12,585		(322		)	239,305		(3,798		)	251,890		(4,120		)	37,185		(219		)	0		0			37,185		(219		)
Mortgage-backed securities - commercial	140,670		(264		)	195,282		(7,138		)	335,952		(7,402		)	188,990		(4,567		)	62,083		(4,890		)	251,073		(9,457		)
Collateralized mortgage obligations	90,610		(431		)	212,286		(3,065		)	302,896		(3,496		)	115,697		(1,847		)	8,267		(632		)	123,964		(2,479		)
Obligations of state and other political subdivisions	12,080		(30		)	42,954		(702		)	55,034		(732		)	33,083		(148		)	1,681		(4		)	34,764		(152		)
Asset-backed securities	224,565		(1,325		)	48,376		(465		)	272,941		(1,790		)	279,980		(16,048		)	59,852		(2,793		)	339,832		(18,841		)
Other securities	8,636		(78		)	7,545		(246		)	16,181		(324		)	46,746		(3,081		)	4,010		(805		)	50,756		(3,886		)
Total	$	495,192	$	(2,527	)	$	759,792	$	(15,693	)	$	1,254,984	$	(18,220	)	$	701,681	$	(25,910	)	$	135,893	$	(9,124	)	$	837,574	$	(35,034	)


	December 31, 2018															December 31, 2019
	Less than 12 months					12 months or more					Total					Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	value		loss			value		loss			value		loss			value		loss			value		loss			value		loss
U.S. Treasuries	$	0	$	0		$	97	$	(2	)	$	97	$	(2	)	$	0	$	0		$	0	$	0		$	0	$	0
Securities of U.S. Government agencies and corporations	0		0			16,777		(233		)	16,777		(233		)	0		0			0		0			0		0
Mortgage-backed securities - residential	186,029		(935		)	264,795		(7,273		)	450,824		(8,208		)	40,190		(209		)	11,063		(64		)	51,253		(273		)
Mortgage-backed securities - commercial	147,754		(369		)	232,363		(7,597		)	380,117		(7,966		)	111,658		(298		)	104,069		(3,571		)	215,727		(3,869		)
Collateralized mortgage obligations	194,795		(1,546		)	240,514		(5,245		)	435,309		(6,791		)	85,248		(297		)	30,628		(196		)	115,876		(493		)
Obligations of state and other political subdivisions	62,805		(299		)	86,644		(2,489		)	149,449		(2,788		)	118,623		(457		)	7,950		(36		)	126,573		(493		)
Asset-backed securities	336,437		(2,312		)	37,105		(498		)	373,542		(2,810		)	125,889		(553		)	54,963		(511		)	180,852		(1,064		)
Other securities	33,752		(884		)	4,570		(220		)	38,322		(1,104		)	0		0			5,649		(115		)	5,649		(115		)
Total	$	961,572	$	(6,345	)	$	882,865	$	(23,557	)	$	1,844,437	$	(29,902	)	$	481,608	$	(1,814	)	$	214,322	$	(4,493	)	$	695,930	$	(6,307	)

For further detail on the fair value of investment securities, see Note 16 – Fair Value Disclosures.

NOTE 4: LOANS AND LEASES

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 primarily provides loans that are secured by commissions and cash collateral to insurance agents and brokers.

Credit Quality. To facilitate the monitoring of credit quality for commercial loans ~~and for purposes of determining an appropriate ALLL,~~ 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 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.

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. Additionally, consumer loans that have been modified in a TDR are classified as nonperforming. ~~Purchased impaired loans are not classified as nonperforming as~~

The following table sets forth the ~~loans are considered to be performing under FASB ASC Topic 310-30.~~Company's loan portfolio at March 31, 2020 by risk attribute and origination date:



(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Term Total		Revolving		Total
Commercial & industrial
Pass	$	112,198	$	541,313	$	463,439	$	296,040	$	195,719	$	166,485	$	1,775,194	$	582,562	$	2,357,756
Special mention	0		7,524		11,814		8,206		3,057		3,835		34,436		26,287		60,723
Substandard	281		830		11,555		26,492		8,449		2,027		49,634		9,660		59,294
Doubtful	0		0		0		0		0		0		0		0		0
Total	$	112,479	$	549,667	$	486,808	$	330,738	$	207,225	$	172,347	$	1,859,264	$	618,509	$	2,477,773
Lease financing
Pass	$	2,422	$	30,362	$	15,240	$	12,482	$	8,474	$	11,374	$	80,354	$	0	$	80,354
Special mention	0		0		0		0		0		6		6		0		6
Substandard	0		0		1,379		257		588		18		2,242		0		2,242
Doubtful	0		0		0		0		0		0		0		0		0
Total	$	2,422	$	30,362	$	16,619	$	12,739	$	9,062	$	11,398	$	82,602	$	0	$	82,602
Construction real estate
Pass	$	4,582	$	127,531	$	164,885	$	79,198	$	52,550	$	56,575	$	485,321	$	14,990	$	500,311
Special mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Doubtful	0		0		0		0		0		0		0		0		0
Total	$	4,582	$	127,531	$	164,885	$	79,198	$	52,550	$	56,575	$	485,321	$	14,990	$	500,311
Commercial real estate - investor
Pass	$	121,429	$	1,052,858	$	485,310	$	455,332	$	357,074	$	578,729	$	3,050,732	$	64,503	$	3,115,235
Special mention	966		59		957		18,881		19,243		3,261		43,367		174		43,541
Substandard	0		4,334		6,831		6,150		112		3,834		21,261		0		21,261
Doubtful	0		0		0		0		0		0		0		0		0
Total	$	122,395	$	1,057,251	$	493,098	$	480,363	$	376,429	$	585,824	$	3,115,360	$	64,677	$	3,180,037
Commercial real estate - owner
Pass	$	64,121	$	188,827	$	178,010	$	162,309	$	173,052	$	260,262	$	1,026,581	$	32,492	$	1,059,073
Special mention	0		696		4,112		289		2,549		16,456		24,102		331		24,433
Substandard	0		2,092		2,259		4,612		1,786		3,965		14,714		0		14,714
Doubtful	0		0		0		0		0		0		0		0		0
Total	$	64,121	$	191,615	$	184,381	$	167,210	$	177,387	$	280,683	$	1,065,397	$	32,823	$	1,098,220
Residential real estate
Performing	$	61,423	$	319,956	$	168,242	$	95,898	$	83,240	$	326,053	$	1,054,812	$	0	$	1,054,812
Nonperforming	0		261		221		677		363		5,458		6,980		0		6,980
Total	$	61,423	$	320,217	$	168,463	$	96,575	$	83,603	$	331,511	$	1,061,792	$	0	$	1,061,792
Home equity
Performing	$	9,019	$	27,294	$	23,829	$	15,066	$	13,639	$	62,117	$	150,964	$	625,581	$	776,545
Nonperforming	0		79		96		39		95		435		744		3,954		4,698
Total	$	9,019	$	27,373	$	23,925	$	15,105	$	13,734	$	62,552	$	151,708	$	629,535	$	781,243
Installment
Performing	$	7,267	$	24,153	$	17,227	$	14,093	$	4,260	$	4,370	$	71,370	$	8,524	$	79,894
Nonperforming	0		28		44		9		15		95		191		0		191



(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Term Total		Revolving		Total
Total	$	7,267	$	24,181	$	17,271	$	14,102	$	4,275	$	4,465	$	71,561	$	8,524	$	80,085
Credit cards
Performing	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	44,920	$	44,920
Nonperforming	0		0		0		0		0		0		0		836		836
Total	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	45,756	$	45,756
Grand Total	$	383,709	$	2,328,197	$	1,609,712	$	1,196,029	$	924,268	$	1,451,089	$	7,893,004	$	1,414,815	$	9,307,819

Commercial and consumer credit exposure by risk attribute as of December 31, 2019 was as follows:



	As of December 31, 2019
	Commercial		Real Estate				Lease
(Dollars in thousands)	& industrial		Construction		Commercial		financing		Total
Pass	$	2,324,021	$	493,182	$	4,108,752	$	85,262	$	7,011,217
Special Mention	100,954		0		59,383		488		160,825
Substandard	40,902		0		26,516		2,614		70,032
Doubtful	0		0		0		0		0
Total	$	2,465,877	$	493,182	$	4,194,651	$	88,364	$	7,242,074

As of March 31, 2019
Commercial Real Estate Lease
(Dollars in thousands) & industrial Construction Commercial financing Total
Pass $ 2,443,488
$ 457,508
$ 3,720,197
$ 92,527
$ 6,713,720
Special Mention 36,936
0
25,935
365
63,236
Substandard 63,003
605
56,047
2,681
122,336
Doubtful 0
0
0
0
0
Total $ 2,543,427
$ 458,113
$ 3,802,179
$ 95,573
$ 6,899,292

(Dollars in thousands)
Residential
real estate
Home equity Installment Credit card Total
Performing $ 958,185
$ 790,893
$ 90,515
$ 46,827
$ 1,886,420
Nonperforming 16,935
6,225
174
155
23,489
Total $ 975,120
$ 797,118
$ 90,689
$ 46,982
$ 1,909,909

As of December 31, 2018
Commercial Real Estate Lease
(Dollars in thousands) & industrial Construction Commercial financing Total
Pass $ 2,432,834
$ 548,323
$ 3,664,434
$ 90,902
$ 6,736,493
Special Mention 24,594
603
38,653
0
63,850
Substandard 57,233
9
51,594
2,513
111,349
Doubtful 0
0
0
0
0
Total $ 2,514,661
$ 548,935
$ 3,754,681
$ 93,415
$ 6,911,692


(Dollars in thousands)	Residential real estate		Home equity		Installment		Credit card		Total		Residential real estate		Home equity		Installment		Credit card		Total
Performing	$	939,936	$	811,108	$	93,038	$	46,382	$	1,890,464	$	1,040,787	$	766,169	$	82,385	$	48,983	$	1,938,324
Nonperforming	15,710		6,174		174		0		22,058		15,162		5,700		204		201		21,267
Total	$	955,646	$	817,282	$	93,212	$	46,382	$	1,912,522	$	1,055,949	$	771,869	$	82,589	$	49,184	$	1,959,591

Delinquency. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the date of the scheduled payment.

Loan delinquency, including loans classified as nonaccrual, was as follows:


	As of March 31, 2019																		As of March 31, 2020
(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		30 – 59 days past due		60 – 89 days past due		> 90 days past due		Total past due		Current		Total		> 90 days past due and still accruing
Loans
Commercial & industrial	$	917	$	7,797	$	8,255	$	16,969	$	2,521,040	$	2,538,009	$	5,418	$	2,543,427	$	23	$	2,305	$	267	$	16,322	$	18,894	$	2,458,879	$	2,477,773	$	0
Lease financing	0		0		0		0		95,573		95,573		0		95,573		0		0		0		0		0		82,602		82,602		0
Construction real estate	0		598		0		598		457,323		457,921		192		458,113		0		0		0		0		0		500,311		500,311		0
Commercial real estate	1,695		1,103		13,462		16,260		3,738,962		3,755,222		46,957		3,802,179		0
Commercial real estate-investor																			7,225		346		1,864		9,435		3,170,602		3,180,037		0
Commercial real estate-owner																			1,106		0		2,782		3,888		1,094,332		1,098,220		0
Residential real estate	3,329		1,495		4,326		9,150		933,896		943,046		32,074		975,120		0		1,710		990		4,280		6,980		1,054,812		1,061,792		0
Home equity	2,960		1,046		2,702		6,708		787,129		793,837		3,281		797,118		0		1,428		852		2,419		4,699		776,544		781,243		0
Installment	317		30		84		431		89,837		90,268		421		90,689		0		73		5		112		190		79,895		80,085		0
Credit card	193		206		155		554		46,428		46,982		0		46,982		155		383		330		122		835		44,921		45,756		120
Total	$	9,411	$	12,275	$	28,984	$	50,670	$	8,670,188	$	8,720,858	$	88,343	$	8,809,201	$	178	$	14,230	$	2,790	$	27,901	$	44,921	$	9,262,898	$	9,307,819	$	120


	As of December 31, 2018																		As of December 31, 2019
(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		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	$	13,369	$	41	$	7,423	$	20,833	$	2,488,450	$	2,509,283	$	5,378	$	2,514,661	$	0	$	1,266	$	3,332	$	14,518	$	19,116	$	2,443,680	$	2,462,796	$	3,081	$	2,465,877	$	0
Lease financing	352		0		0		352		93,063		93,415		0		93,415		0		0		0		0		0		88,364		88,364		0		88,364		0
Construction real estate	0		0		0		0		548,687		548,687		248		548,935		0		0		0		0		0		493,167		493,167		15		493,182		0
Commercial real estate	6,279		1,158		12,644		20,081		3,682,455		3,702,536		52,145		3,754,681		0		776		857		5,613		7,246		4,151,513		4,158,759		35,892		4,194,651		0
Residential real estate	11,060		2,976		4,535		18,571		902,404		920,975		34,671		955,646		0		8,032		1,928		5,031		14,991		1,014,138		1,029,129		26,820		1,055,949		0
Home equity	5,245		1,228		2,578		9,051		804,835		813,886		3,396		817,282		0		2,530		1,083		2,795		6,408		762,863		769,271		2,598		771,869		0
Installment	420		37		145		602		92,128		92,730		482		93,212		0		111		50		148		309		82,022		82,331		258		82,589		0
Credit card	541		96		63		700		45,682		46,382		0		46,382		63		208		75		201		484		48,700		49,184		0		49,184		201
Total	$	37,266	$	5,536	$	27,388	$	70,190	$	8,657,704	$	8,727,894	$	96,320	$	8,824,214	$	63	$	12,923	$	7,325	$	28,306	$	48,554	$	9,084,447	$	9,133,001	$	68,664	$	9,201,665	$	201

For PCD assets, the delinquency status was determined individually for each loan in accordance with the individual loan's contractual repayment terms. Prior to the adoption of CECL in the first quarter of 2020, PCI loans were classified as performing, even though they may have been contractually past due, as any nonpayment of contractual principal or interest was considered in the periodic re-estimation of expected cash flows and was included in the resulting recognition of current period provision for credit losses or prospective yield adjustments.

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.

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~~a concession is 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. In accordance with the the Coronavirus Aid, Relief, and Economic Security (CARES) Act, performing loans that demonstrated limited signs of credit deterioration, but were modified to provide borrowers relief during the COVID-19 pandemic were not considered to be TDR as of March 31, 2020.

TDRs are generally classified as nonaccrual for a minimum period of six months and may qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement.

First Financial had ~~201~~171 TDRs totaling $~~35.9~~40.6 million at March 31, ~~2019,~~2020, including ~~$22.8~~$22.2 million on accrual status and ~~$13.1~~$18.4 million classified as nonaccrual. First Financial had no$1.0 million of commitments outstanding to lend additional funds to borrowers whose loan terms have been modified through TDRs, and the ALLL included reserves of ~~$1.4~~$3.6 million related to TDRs at March 31, ~~2019.~~2020. Additionally, as of March 31, ~~2019,~~2020, $~~7.5~~4.5 million of accruing TDRs have been performing in accordance with the restructured terms for more than one year.

First Financial had ~~196~~157 TDRs totaling $~~38.5~~30.0 million at December 31, ~~2018,~~2019, including ~~$16.1~~$11.4 million of loans on accrual status and ~~$22.4~~$18.5 million classified as nonaccrual. First Financial had no$2.5 million commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs. At December 31, ~~2018,~~2019, the ALLL included reserves of $~~1.5~~2.5 million related to TDRs, and $~~7.9~~4.7 million of the accruing TDRs had been performing in accordance with the restructured terms for more than one year.

The following tables provide information on loan modifications classified as TDRs during the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:



	Three months ended
	March 31, 2020					March 31, 2019
(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	2	$	11,383	$	11,383	5	$	7,637	$	7,661
Construction real estate	0	0		0		0	0		0
Commercial real estate	0	0		0		6	1,323		1,232
Residential real estate	14	1,129		1,073		5	458		458
Home equity	4	186		186		1	17		17
Installment	1	26		15		0	0		0
Total	21	$	12,724	$	12,657	17	$	9,435	$	9,368

Three months ended
March 31, 2019 March 31, 2018
(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 5
$ 7,637
$ 7,661
4
$ 928
$ 913
Construction real estate 0
0
0
0
0
0
Commercial real estate 6
1,323
1,232
2
72
72
Residential real estate 5
458
458
2
93
93
Home equity 1
17
17
0
0
0
Installment 0
0
0
0
0
0
Total 17
$ 9,435
$ 9,368
8
$ 1,093
$ 1,078

For TDRs identified during the three months ended March 31, ~~2019 and 2018,~~2020, there were no$0.4 million of chargeoffs for the portion of TDRs determined to be uncollectible. For TDRs identified during the three months ended March 31, 2019, there were 0 chargeoffs for the portion of TDRs determined to be uncollectible.

The following table provides information on how TDRs were modified during the three months ended March 31, ~~2019~~2020 and ~~2018:~~2019:


	Three months ended				Three months ended
	March 31,				March 31,
(Dollars in thousands)	2019		2018		2020		2019
Extended maturities	$	2,877	$	888	$	0	$	2,877
Adjusted interest rates	5,284		52		0		5,284
Combination of rate and maturity changes	508		0		0		508
Forbearance	557		0		1,008		557
Other ⁽¹⁾	142		138		11,649		142
Total	$	9,368	$	1,078	$	12,657	$	9,368

⁽¹⁾ Includes covenant modifications and other concessions, or combination of concessions, that do not consist of interest rate adjustments, forbearance and maturity extensions

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 off 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 three months ended March 31, 2020, there were 0 TDR relationships for which there was a payment default during the period that occurred within twelve months of the loan modifications. For the three month period ended March 31, 2019, there were ~~two~~2 TDR relationships for $6.9 million 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~~

As stated in the CARES Act, loan modifications in response to COVID-19 that are executed on a loan that was ~~a payment default during~~not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020, and the ~~period that occurred within twelve months~~earlier of 60 days after the date of termination of the ~~loan modification for~~National Emergency or December 31, 2020 are not required to be reported as TDR. Through April 30, 2020, the ~~three months ended March 31, 2018.~~Company modified 1,055 commercial loans with balances of $1.6 billion and 979 consumer loans with balances of $129.5 million in response to COVID-19 that are not considered TDRs.

~~Impaired~~Nonperforming Loans. Loans classified as nonaccrual and loans modified as TDRs are considered ~~impaired.~~nonperforming for 2020 and impaired as of December 31, 2019. The following table provides information on ~~impaired loans, excluding purchased impaired~~nonperforming loans:


					March 31, 2020						December 31, 2019
(Dollars in thousands)	March 31, 2019		December 31, 2018		Nonaccrual loans with a related ACL		Nonaccrual loans with no related ACL		Total nonaccrual		Total nonaccrual
Impaired loans
Nonaccrual loans⁽¹⁾
Commercial & industrial	$	19,263	$	30,925	$	10,754	$	10,372	$	21,126	$	24,346
Lease financing	301		22		0		222		222		223
Construction real estate	7		9		0		0		0		0
Commercial real estate	21,082		20,500		4,206		5,844		10,050		7,295
Residential real estate	13,052		13,495		0		11,163		11,163		10,892
Home equity	5,581		5,580		0		5,821		5,821		5,242
Installment	170		169		0		145		145		167
Nonaccrual loans	59,456		70,700
Accruing troubled debt restructurings	22,817		16,109
Total impaired loans	$	82,273	$	86,809
Total nonaccrual loans					$	14,960	$	33,567	$	48,527	$	48,165

⁽¹⁾ Nonaccrual loans include nonaccrual TDRs of ~~$13.1~~$18.4 million and ~~$22.4~~$18.5 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.


	Three months ended				Three months ended
	March 31,				March 31,
(Dollars in thousands)	2019		2018		2020		2019
Interest income effect on impaired loans
Interest income effect on nonperforming loans
Gross amount of interest that would have been recorded under original terms	$	1,613	$	802	$	1,306	$	1,613
Interest included in income
Nonaccrual loans	335		80		167		335
Troubled debt restructurings	236		124		235		236
Total interest included in income	571		204		402		571
Net impact on interest income	$	1,042	$	598	$	904	$	1,042

First Financial individually reviews all ~~impaired~~nonperforming commercial loan relationships, as well as consumer loan TDRs greater than ~~$250,000~~,$250,000, to determine if ~~a specific~~an individually evaluated allowance is necessary based on the borrower’s overall financial condition, resources and payment record, support from guarantors and the realizable value of any collateral. ~~Specific~~Individually evaluated 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.

First Financial's investment in impaired loans as of December 31, 2019 was as follows:



	As of December 31, 2019
(Dollars in thousands)	Current balance		Contractual principal balance		Related allowance
Loans with no related allowance recorded
Commercial & industrial	$	16,726	$	19,709	$	0
Lease financing	223		223		0
Construction real estate	0		0		0
Commercial real estate	10,160		17,897		0
Residential real estate	14,868		17,368		0
Home equity	5,700		6,462		0
Installment	204		341		0
Total	47,881		62,000		0

Loans with an allowance recorded
Commercial & industrial	10,754		21,513		2,044
Lease financing	0		0		0
Construction real estate	0		0		0
Commercial real estate	671		675		113
Residential real estate	294		294		18
Home equity	0		0		0
Installment	0		0		0
Total	11,719		22,482		2,175

Total
Commercial & industrial	27,480		41,222		2,044
Lease financing	223		223		0
Construction real estate	0		0		0
Commercial real estate	10,831		18,572		113
Residential real estate	15,162		17,662		18
Home equity	5,700		6,462		0
Installment	204		341		0
Total	$	59,600	$	84,482	$	2,175

As of March 31, 2019 As of December 31, 2018
(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 $ 30,142
$ 46,215
$ 0
$ 36,694
$ 42,561
$ 0
Lease financing 301
301
0
22
22
0
Construction real estate 8
25
0
9
26
0
Commercial real estate 22,708
29,530
0
23,513
31,375
0
Residential real estate 16,637
19,237
0
17,297
19,975
0
Home equity 6,225
7,232
0
6,351
7,461
0
Installment 174
310
0
174
563
0
Total 76,195
102,850
0
84,060
101,983
0

Loans with an allowance recorded
Commercial & industrial 3,282
3,282
738
939
939
667
Lease financing 0
0
0
0
0
0
Construction real estate 0
0
0
0
0
0
Commercial real estate 2,498
3,579
651
1,509
1,509
461
Residential real estate 298
298
31
301
301
32
Home equity 0
0
0
0
0
0
Installment 0
0
0
0
0
0
Total 6,078
7,159
1,420
2,749
2,749
1,160

Total

Commercial & industrial 33,424
49,497
738
37,633
43,500
667
Lease financing 301
301
0
22
22
0
Construction real estate 8
25
0
9
26
0
Commercial real estate 25,206
33,109
651
25,022
32,884
461
Residential real estate 16,935
19,535
31
17,598
20,276
32
Home equity 6,225
7,232
0
6,351
7,461
0
Installment 174
310
0
174
563
0
Total $ 82,273
$ 110,009
$ 1,420
$ 86,809
$ 104,732
$ 1,160

~~First Financial's average impaired loans by class and interest income recognized by class was as follows:~~

Three months ended
March 31, 2019 March 31, 2018
(Dollars in thousands) Average
Recorded
Investment Interest
Income
Recognized Average
Recorded
Investment Interest
Income
Recognized
Loans with no related allowance recorded
Commercial & industrial $ 33,418
$ 279
$ 7,867
$ 26
Lease financing 162
0
41
0
Construction real estate 9
0
28
1
Commercial real estate 23,111
103
21,400
99
Residential real estate 16,967
86
6,503
47
Home equity 6,288
38
4,214
20
Installment 174
1
281
0
Total 80,129
507
40,334
193

Loans with an allowance recorded
Commercial & industrial 2,111
43
204
0
Lease financing 0
0
0
0
Construction real estate 0
0
0
0
Commercial real estate 2,004
19
1,739
3
Residential real estate 300
2
1,051
7
Home equity 0
0
101
1
Installment 0
0
0
0
Total 4,415
64
3,095
11

Total
Commercial & industrial 35,529
322
8,071
26
Lease financing 162
0
41
0
Construction real estate 9
0
28
1
Commercial real estate 25,115
122
23,139
102
Residential real estate 17,267
88
7,554
54
Home equity 6,288
38
4,315
21
Installment 174
1
281
0
Total $ 84,544
$ 571
$ 43,429
$ 204

First Financial's average impaired loans and interest income recognized by class for the three months ended March 31, 2019 were as follows:



	Three months ended
	March 31, 2019
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized
Loans with no related allowance recorded
Commercial & industrial	$	33,418	$	279
Lease financing	162		0
Construction real estate	9		0
Commercial real estate	23,111		103
Residential real estate	16,967		86
Home equity	6,288		38
Installment	174		1
Total	80,129		507

Loans with an allowance recorded
Commercial & industrial	2,111		43
Lease financing	0		0
Construction real estate	0		0
Commercial real estate	2,004		19
Residential real estate	300		2
Home equity	0		0
Installment	0		0
Total	4,415		64

Total
Commercial & industrial	35,529		322
Lease financing	162		0
Construction real estate	9		0
Commercial real estate	25,115		122
Residential real estate	17,267		88
Home equity	6,288		38
Installment	174		1
Total	$	84,544	$	571

The following table provides collateral information by class of loan for collateral-dependent loans with a specific reserve. 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.



	As of March 31, 2020
	Type of Collateral
(Dollar in thousands)	Commercial real estate		Equipment		Residential real estate		Total
Class of loan
Commercial & industrial	$	0	$	10,755	$	0	$	10,755
Commercial real estate-investor	4,205		0		0		4,205
Commercial real estate-owner	333		0		0		333
Residential real estate	0		0		1,005		1,005
Total	$	4,538	$	10,755	$	1,005	$	16,298

Lease financing. The Company prospectively applied FASB ASC Topic 842 in the first quarter of 2019. First Financial originates both sales-type and direct financing leases, and the Company manages and reviews lease residuals in accordance with its credit policies. 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. Income recognized in first ~~quarter~~three months of 2020 and 2019 related to the implementation of FASB ASC Topic 842 was insignificant.

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

Changes in OREO were as follows:


	Three months ended						Three months ended
	March 31,						March 31,
(Dollars in thousands)	2019			2018			2020			2019
Balance at beginning of period	$	1,401		$	2,781		$	2,033		$	1,401
Additions
Commercial & industrial	0			170			247			0
Residential real estate	504			459			146			504
Total additions	504			629			393			504
Disposals
Commercial & industrial	(22		)	(2,104		)	(179		)	(22		)
Residential real estate	(161		)	(118		)	(721		)	(161		)
Total disposals	(183		)	(2,222		)	(900		)	(183		)
Valuation adjustment
Commercial & industrial	0			(97		)	0			0
Residential real estate	(57		)	(26		)	(59		)	(57		)
Total valuation adjustment	(57		)	(123		)	(59		)	(57		)
Balance at end of period	$	1,665		$	1,065		$	1,467		$	1,665

NOTE 5: ALLOWANCE FOR ~~LOAN AND LEASE~~CREDIT LOSSES

~~Management maintains the ALLL at a level that it considers sufficient to absorb probable incurred loan and lease~~Allowance for credit 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~~leases. The allowance for credit losses is a valuation account that ~~may affect a specific borrower's ability~~is deducted from the loans’ amortized cost basis to ~~repay, including~~present the ~~timing of future payments.~~

net amount expected to be collected on the loans. The ~~ALLL~~ACL 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 a guarantor or from the liquidation of collateral.Expected recoveries do not

exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable on loans and leases, which totaled $27.4 million as of March 31, 2020, is excluded from the estimate of credit losses.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the ACL using the following methods:

Commercial and industrial – C&I loans include revolving lines of credit and term loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, leasehold improvements or other projects. C&I loans are generally underwritten individually and secured with the assets of the Company and/or the personal guarantee of the business owners. C&I loans also include ABL, equipment and leasehold improvement financing for franchisees in the quick service and casual dining restaurant sector and commission-based loans to insurance agents and brokers. ABL transactions typically involve larger commercial clients and are secured by specific assets, such as inventory, accounts receivable, machinery and equipment. In the franchise lending space, First Financial focuses on a limited number of restaurant concepts that have sound economics, low closure rates and strong brand awareness within specified local, regional or national markets. Within the insurance lending platform, First Financial serves insurance agents and brokers that are looking to maximize their book-of-business value and grow their agency business.

Current period default rates are utilized in the modeling of the ACL for C&I loans, and are adjusted for forecasted changes in the treasury term spread and market volatility index. Changes in current period defaults or forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

Lease financing – Lease financing consists of lease transactions for the acquisition of both new and used business equipment for commercial clients. Lease products may include tax leases, finance leases, lease lines of credit and interim funding. The credit underwriting for lease transactions includes detailed analysis of the lessee's industry and business model, nature of the equipment, equipment resale values, historical and projected cash flow analysis, secondary sources of repayment and guarantor in addition to other considerations.

The ACL model for leases sources expected default rates from the C&I portfolio model. Therefore, changes in forecasted expectations for the treasury term spread and market volatility index could result in volatility in the Company's ACL in future periods.

Construction real estate – Real estate construction loans are term loans to individuals, companies or developers used for the construction or development of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Generally, these loans are for construction projects that have been pre-sold, pre-leased or have secured permanent financing, as well as loans to real estate companies with significant equity invested in the project. An independent credit team underwrites construction real estate loans, which are managed by experienced lending officers and monitored through the construction phase by a centralized funding desk that manages loan disbursements.

The construction ACL model is adjusted for forecasted changes in rental vacancy rates in the Bank's geographic footprint and the housing price index. Changes in forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

Commercial real estate - owner & investor – Commercial real estate loans consist of term loans secured by a mortgage lien on real estate properties such as apartment buildings, office and industrial buildings and retail shopping centers. Additionally, the Company's franchise lending activities discussed in the "Commercial and Industrial" section often include the financing of real estate in addition to equipment. The credit underwriting for both owner-occupied and investor income producing real estate loans includes detailed market analysis, historical and projected cash flow analysis, appropriate equity margins, assessment of lessees and lessors, environmental risks and the type, age, condition and location of real estate, among other factors.

First Financial models owner-occupied and investor CRE separately when determining the ACL. For owner occupied CRE, current period default rates are utilized in the modeling, and are adjusted for forecasted changes in the BAA bond spread, national rental vacancy rates and the consumer confidence index. Current period default rates are also utilized in the modeling of investor CRE loans, and are adjusted for forecasted changes in the BAA bond spread, multifamily building permits within

the Bank’s geographic footprint, and national rental vacancy rates. Changes in current period defaults and forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

Residential real estate – Residential real estate loans represent loans to consumers for the financing of a residence. These loans generally have a 15 to 30 year term and a fixed interest rate, but may have a shorter term to maturity with an adjustable interest rate. In most cases, these loans are extended to borrowers to finance their primary residence. First Financial sells residential real estate loan originations into the secondary market on both servicing retained and servicing released bases. Residential real estate loans are generally underwritten to secondary market lending standards, utilizing underwriting processes that rely on empirical data to assess credit risk as well as analysis of the borrower's ability to repay their obligations, credit history, the amount of any down payment and the market value or other characteristics of the property. First Financial also offers a residential mortgage product that features similar borrower credit characteristics but a more streamlined underwriting process than typically required to sell to government-sponsored enterprises and thus is retained on the Consolidated Balance Sheets.

The retail real estate ACL model is adjusted for forecasted changes in the housing price index, housing starts within the Bank’s geographic footprint and national single-family existing home sales. Changes in forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

Home equity – Home equity lending includes both home equity loans and revolving lines of credit secured by a first or second lien on the borrower’s residence. Home equity lending underwriting considerations include the borrower's credit history as well as to debt-to-income and loan-to-value policy limits.

The home equity ACL model is adjusted for forecasted changes in the consumer credit growth rate within the Bank’s geographic footprint and the working-age labor participation rate. Changes in forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

Installment – Installment lending consists of consumer loans not secured by real estate, including loans secured by automobiles and unsecured personal loans.

The ACL model for installment loans sources expected default rates from the residential real estate and home equity portfolio models and is paired with installment specific LGD rates. Changes in forecasted expectations for the consumer credit growth rate within the Bank’s geographic footprint, the working-age labor participation rate, the housing price index, housing starts within the Bank’s geographic footprint and national existing single-family existing home sales could result in volatility in the Company's ACL in future periods.

Credit card – Credit card lending consists of secured and unsecured revolving lines of credit to consumer and business customers. Credit card lines are generally available for an indefinite period of time as long as the borrower's credit characteristics do not materially or adversely change, but lines are unconditionally cancellable by the Company at any time.

The ACL model for credit card loans sources expected default rates from the residential real estate and home equity portfolio models and is paired with credit card specific LGD rates. Changes in forecasted expectations for the consumer credit growth rate within the Bank’s geographic footprint, the working-age labor participation rate, the housing price index, housing starts within the Bank’s geographic footprint and national existing single-family existing home sales could result in volatility in the Company's ACL in future periods.

First Financial's ACL is influenced by loan volumes, risk rating migration or delinquency status, and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions. For the three months ended March 31, 2020 the ACL increased primarily due to First Financial's expectation of higher credit losses resulting from the COVID-19 pandemic.

The Company utilized the final Moody's March baseline forecast as its R&S forecast in the quantitative model, which included consideration of the impact from both the COVID-19 pandemic and the related government stimulus response. For reasonableness, the Company also considered the impact to the model from alternative, more adverse economic forecasts, slower prepayment speeds and increased default rates. These alternative analyses were utilized to inform the Company's qualitative adjustments. Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future credit stress related to the COVID-19 pandemic, such as franchise, hotel and investor commercial real estate lending when making qualitative adjustments to the first quarter 2020 ACL model.

Changes in the ~~ALLL~~allowance by loan category were as follows:

Three months ended March 31, 2019
Real Estate
(Dollars in thousands) Commercial and industrial Lease financing Construction Commercial Residential Home Equity Installment Credit card Total
Allowance for loan and lease losses:
Balance at beginning of period $ 18,746
$ 1,130
$ 3,413
$ 21,048
$ 4,964
$ 5,348
$ 362
$ 1,531
$ 56,542
Provision for loan and lease losses 13,268
343
(683 ) 493
125
185
19
333
14,083
Gross charge-offs (12,328 ) (100 ) 0
(1,214 ) (82 ) (468 ) (49 ) (341 ) (14,582 )
Recoveries 240
0
63
73
36
185
48
34
679
Total net charge-offs (12,088 ) (100 ) 63
(1,141 ) (46 ) (283 ) (1 ) (307 ) (13,903 )
Ending allowance for loan and lease losses $ 19,926
$ 1,373
$ 2,793
$ 20,400
$ 5,043
$ 5,250
$ 380
$ 1,557
$ 56,722



	Three months ended March 31, 2020
						Real Estate
(Dollars in thousands)	Commercial & industrial			Lease financing		Construction real estate			Commercial real estate			Residential real estate			Home Equity			Installment			Credit card			Total
Allowance for credit losses:
Balance at beginning of period	$	18,584		$	971	$	2,381		$	23,579		$	5,299		$	4,787		$	392		$	1,657		$	57,650
Impact of adopting ASC 326	9,901			118		11,579			24,118			5,490			8,430			801			1,068			61,505
Provision for credit losses	16,016			405		(449		)	5,227			558			1,538			75			510			23,880
Gross charge-offs	(1,091		)	0		0			(4		)	(115		)	(267		)	(61		)	(311		)	(1,849		)
Recoveries	2,000			0		0			234			52			339			31			43			2,699
Total net charge-offs	909			0		0			230			(63		)	72			(30		)	(268		)	850
Ending allowance for credit losses	$	45,410		$	1,494	$	13,511		$	53,154		$	11,284		$	14,827		$	1,238		$	2,967		$	143,885



	Three months ended March 31, 2019
(Dollars in thousands)	Commercial & industrial			Lease financing			Construction real estate			Commercial real estate			Residential real estate			Home Equity			Installment			Credit card			Total
Allowance for credit losses:
Balance at beginning of period	$	18,746		$	1,130		$	3,413		$	21,048		$	4,964		$	5,348		$	362		$	1,531		$	56,542
Provision for credit losses	13,268			343			(683		)	493			125			185			19			333			14,083
Loans charged off	(12,328		)	(100		)	0			(1,214		)	(82		)	(468		)	(49		)	(341		)	(14,582		)
Recoveries	240			0			63			73			36			185			48			34			679
Total net charge-offs	(12,088		)	(100		)	63			(1,141		)	(46		)	(283		)	(1		)	(307		)	(13,903		)
Ending allowance for credit losses	$	19,926		$	1,373		$	2,793		$	20,400		$	5,043		$	5,250		$	380		$	1,557		$	56,722

The ACL balance and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2019 was as follows:


		Three months ended March 31, 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 period		$	17,598		$	675		$	3,577	$	20,930		$	4,683		$	4,935		$	307		$	1,316		$	54,021
Provision for loan and lease losses		889			(49		)	690		815			114			(294		)	(49		)	187			2,303
Loans charged off		(885		)	0			0		(2,176		)	(96		)	(242		)	(16		)	(254		)	(3,669		)
Recoveries		436			0			0		752			26			429			48			34			1,725
Total net charge-offs		(449		)	0			0		(1,424		)	(70		)	187			32			(220		)	(1,944		)
Ending allowance for loan and lease losses		$	18,038		$	626		$	4,267	$	20,321		$	4,727		$	4,828		$	290		$	1,283		$	54,380

		As of March 31, 2019
								Real Estate																					As of December 31, 2019
(Dollars in thousands)		Commercial & industrial			Lease financing			Construction		Commercial			Residential			Home equity			Installment			Credit card			Total				Commercial & industrial		Lease financing		Construction real estate		Commercial real estate		Residential real estate		Home equity		Installment		Credit card		Total
Ending allowance balance attributable to loans	Ending allowance balance attributable to loans																											Ending allowance balance attributable to loans
Individually evaluated for impairment		$	738		$	0		$	0	$	651		$	31		$	0		$	0		$	0		$	1,420			$	2,044	$	0	$	0	$	113	$	18	$	0	$	0	$	0	$	2,175
Collectively evaluated for impairment		19,188			1,373			2,793		19,749			5,012			5,250			380			1,557			55,302				16,540		971		2,381		23,466		5,281		4,787		392		1,657		55,475
Ending allowance for loan and lease losses		$	19,926		$	1,373		$	2,793	$	20,400		$	5,043		$	5,250		$	380		$	1,557		$	56,722
Ending allowance for credit losses																													$	18,584	$	971	$	2,381	$	23,579	$	5,299	$	4,787	$	392	$	1,657	$	57,650

Loans
Individually evaluated for impairment		$	33,424		$	301		$	8	$	25,206		$	16,935		$	6,225		$	174		$	0		$	82,273			$	27,480	$	223	$	0	$	10,831	$	15,162	$	5,700	$	204	$	0	$	59,600
Collectively evaluated for impairment		2,510,003			95,272			458,105		3,776,973			958,185			790,893			90,515			46,982			8,726,928				2,438,397		88,141		493,182		4,183,820		1,040,787		766,169		82,385		49,184		9,142,065
Total loans		$	2,543,427		$	95,573		$	458,113	$	3,802,179		$	975,120		$	797,118		$	90,689		$	46,982		$	8,809,201			$	2,465,877	$	88,364	$	493,182	$	4,194,651	$	1,055,949	$	771,869	$	82,589	$	49,184	$	9,201,665

Allowance for credit losses - unfunded commitments. First Financial estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the Company's ACL methodology for loans and leases.

As of December 31, 2018
Real Estate
(Dollars in thousands) Commercial & industrial Lease financing Construction Commercial Residential Home equity Installment Credit card Total
Ending allowance balance attributable to loans
Individually evaluated for impairment $ 667
$ 0
$ 0
$ 461
$ 32
$ 0
$ 0
$ 0
$ 1,160
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

Individually evaluated for impairment $ 37,633
$ 22
$ 9
$ 25,022
$ 17,598
$ 6,351
$ 174
$ 0
$ 86,809
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

NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill. Assets and liabilities acquired in a business combination are recorded at their estimated fair values as of the acquisition date. The excess ~~cost~~of the purchase price of the acquisition over the fair value of net assets acquired is recorded as goodwill.

Changes in the carrying amount of goodwill for the three months ended March 31, ~~2019~~2020 and the year ended December 31, ~~2018~~2019 were as follows:


(Dollars in thousands)	March 31, 2019			December 31, 2018		March 31, 2020		March 31, 2019
Balance at beginning of year	$	880,251		$	204,084	$	937,771	$	880,251
Goodwill resulting from business combinations	(524		)	676,167		0		(524		)
Balance at end of period	$	879,727		$	880,251	$	937,771	$	879,727

During ~~2018,~~the third quarter of 2019, First Financial recorded $58.0 million of additions to goodwill resulting from the ~~merger with MSFG of $676.2 million, and in~~Bannockburn acquisition. In the first quarter of 2019, First Financial recorded its final adjustments to goodwill ~~associated~~ related to the 2018 MSFG merger. For further detail on the ~~merger with MSFG,~~acquisition of Bannockburn, see Note 17 - Business Combinations.

Goodwill is evaluated for impairment on an annual basis as of October 1 of each year, or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. In response to the COVID-19 pandemic and the related deterioration in general economic conditions, First Financial performed an interim impairment test as of March 31, 2020. As of March 31, 2020, First Financial does not believe that there is a sustained decrease in its share price in either absolute terms or in relation to peers. Therefore, First Financial did not record an impairment in the first quarter of 2020, but will continue to monitor the status of its goodwill and intangible assets in the coming periods for signs of further deterioration and potential impairment. First Financial performed its ~~most recent~~ annual impairment test as of October 1, ~~2018~~2019 and no impairment was ~~indicated. As of March 31, 2019, no events or changes in circumstances~~ indicated at that ~~the fair value of a reporting unit was below its carrying value.~~time.

Other intangible assets. ~~As of March 31, 2019 and December 31, 2018, First Financial had $38.6 million and $40.8 million, respectively, of other~~Other intangible assets ~~included in Other intangibles in the Consolidated Balance Sheets, which~~consist primarily ~~consist~~ of core deposit, customer list and other miscellaneous intangibles.

Core deposit intangibles represent the estimated fair value of acquired customer deposit relationships on the date of acquisition and are amortized on an accelerated basis over their estimated useful lives. ~~Core deposit intangibles were~~ ~~$35.8 million~~ ~~and~~ ~~$37.9 million~~ ~~as of March 31, 2019 and December 31, 2018, respectively.~~ First Financial's core deposit intangibles have an estimated weighted average remaining life of ~~8.9~~7.7 years.

First Financial recorded a $39.4 million customer list intangible asset in conjunction with the Bannockburn merger to account for the obligation or advantage on the part of either the Company or the customer to continue the pre-existing relationship subsequent to the merger. The customer list intangible asset is amortized on a straight-line basis over its estimated useful life of 11 years.

Other miscellaneous intangibles include purchase commissions, non-compete agreements and trade name intangibles. Other intangible assets are included in Other intangibles in the Consolidated Balance Sheets.

Amortization expense recognized on intangible assets for the three months ended March 31, 2020 and 2019 was $2.8 million and ~~2018 was~~ $2.0 million, respectively.

The gross carrying amount and ~~$0.3 million, respectively.~~accumulated amortization of other intangible assets at March 31, 2020 and December 31, 2019 were as follows:



(Dollars in thousands)	March 31, 2020					December 31, 2019
	Gross carrying amount		Accumulated amortization			Gross carrying amount		Accumulated amortization
Amortized intangible assets
Core deposit intangibles	$	51,031	$	(22,743	)	$	51,031	$	(21,149	)
Customer list	39,420		(2,090		)	39,420		(1,195		)
Other	10,093		(2,453		)	10,093		(1,999		)
Total	$	100,544	$	(27,286	)	$	100,544	$	(24,343	)

NOTE 7: LEASES

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. First Financial is primarily the lessee in its leasing agreements, and substantially all of those agreements are for real estate property for branches, ATM locations and office space.

On January 1, 2019, the Company adopted Topic 842 and all subsequent ~~updates that modified Topic 842.~~modifications. For First Financial, this ~~update~~adoption primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

~~With the adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated balance sheets as an ROU asset and a corresponding lease liability.~~ Substantially all of the Company's leases are classified as operating leases, and therefore, were previously not recognized on the Company’s ~~consolidated balance sheets.~~Consolidated Balance Sheets.

With the adoption of Topic 842, operating lease agreements were required to be recognized on the Consolidated Balance Sheets as an ROU asset and a corresponding lease liability. The Company's right to use an asset over the life of a lease is recorded as a "right of use" asset in Accrued interest and other assets on the Consolidated Balance Sheet and was ~~$59.0~~$65.7 million and $58.6 million at March 31, ~~2019.~~2020 and December 31, 2019, respectively. Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives received. First Financial recorded a ~~$64.6~~$71.9 million and $64.3 million lease liability in Accrued interest and other liabilities on the Consolidated Balance Sheet at March 31, ~~2019.~~2020 and December 31, 2019, respectively.

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For operating leases existing prior to January 1, 2019, the rate ~~for~~was based upon the remaining lease term as of ~~January 1, 2019 was used.~~that date.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and First Financial recognizes lease expense for these leases on a straight-line basis over the term of the lease. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of renewal options on operating leases is at the Company's sole discretion, and certain leases may include options to purchase the leased property. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. First Financial does not enter into lease agreements which contain material residual value guarantees or material restrictive covenants.

Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements and leases generally also include real estate taxes and ~~CAM~~common area maintenance charges in the annual rental payments.

The components of lease expense were as follows:


	Three months ended		Three months ended
(dollars in thousands)	March 31, 2019
			March 31,
(Dollars in thousands)			2020		2019
Operating lease cost	$	1,826	$	2,020	$	1,826
Short-term lease cost	1		41		1
Variable lease cost	597		641		597
Total operating lease cost	$	2,424	$	2,702	$	2,424

Future minimum commitments due under these lease agreements as of March 31, ~~2019~~2020 are as follows:


(dollars in thousands)	Operating leases
2019 (remaining nine months)	$	5,361
2020	7,070
(Dollars in thousands)			Operating leases
2020 (remaining nine months)			$	5,611
2021	6,569		7,213
2022	6,238		6,891
2023	6,248		6,856
2024			6,531
Thereafter	54,378		60,918
Total lease payments	85,864		94,020
Less imputed interest	21,255		22,072
Total	$	64,609	$	71,948

The weighted average remaining lease term and discount rate ~~at March 31, 2019~~for the Company's operating leases were as follows:




~~Operating leases~~
~~Weighted-average remaining lease term (years)~~	~~15.9~~
~~Weighted-average discount rate~~	~~3.5~~	%

Supplemental cash information at March 31, 2020 and 2019 related to leases was as follows:


	Three months ended		Three months ended
(dollars in thousands)	March 31, 2019
			March 31,
(Dollars in thousands)			2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,823	$	1,288	$	1,823
ROU assets obtained in exchange for lease obligations
Operating leases	60,249		8,862		60,249

NOTE 8: BORROWINGS

Short-term borrowings on the Consolidated Balance Sheets include repurchase agreements utilized for corporate sweep accounts with cash management account agreements in place, federal funds purchased, overnight advances from the FHLB and a short-term line of credit. All repurchase agreements are subject to terms and conditions agreed to by the Bank and the client. To secure its liability to the client, the Bank is authorized to sell or repurchase U.S. Treasury, government agency and mortgage-backed securities.

The following shows the remaining contractual maturity of repurchase agreements by collateral pledged:


(Dollars in thousands)	Overnight and continuous		Overnight and continuous
Repurchase agreements
Mortgage-backed securities	$	15,243	$	10,279
Collateralized mortgage obligations	79,772		84,545
Total	$	95,015	$	94,824

Securities sold under agreements to repurchase ~~are~~were secured by securities with a carrying amount of ~~$95.5~~$94.8 million and ~~$85.5~~$90.2 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

First Financial had $121.0 million federal funds purchased at March 31, 2020 and $165.2 million as of December 31, 2019. The Company also had $~~952.4 million~~1.2 billion in short-term borrowings with the FHLB of at both March 31, ~~2019~~2020 and~~$857.1 million~~ ~~as of~~ December 31, ~~2018.~~2019. These short-term borrowings are used to manage normal liquidity needs and support the Company's asset and liability management strategies.

First Financial has a $30.0 million short-term credit facility with an unaffiliated bank that matures in September ~~2019.~~2020. This facility can have a variable or fixed interest rate and provides First Financial additional liquidity, if needed, for various corporate activities including the repurchase of First Financial common stock and the payment of dividends to shareholders. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, there was no0 outstanding balance. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality and capital levels, and First Financial was in compliance with all covenants associated with this facility as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

First Financial had ~~$546.4~~$325.6 million and ~~$570.7~~$414.4 million of long-term debt as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, which included subordinated notes, FHLB long term advances and an interest free loan with a municipality.

The following is a summary of First Financial's long-term debt:


	March 31, 2019					December 31, 2018					March 31, 2020					December 31, 2019
(Dollars in thousands)	Amount			Average rate		Amount			Average rate		Amount			Average rate		Amount			Average rate
FHLB borrowings											$	152,787		1.75	%	$	242,428		1.94	%
Subordinated notes	$	170,654		5.21	%	$	170,550		5.28	%	171,071			4.70	%	170,967			4.97	%
Unamortized debt issuance costs	(1,140		)	N/A		(1,185		)	N/A		(963		)	N/A		(1,007		)	N/A
FHLB borrowings	376,134			2.14	%	400,599			2.08	%
Lease liability											1,896			3.81	%	1,213			4.48	%
Capital loan with municipality	775			0.00	%	775			0.00	%	775			0.00	%	775			0.00	%
Total long-term debt	$	546,423		3.10	%	$	570,739		3.04	%	$	325,566		3.31	%	$	414,376		3.20	%

In 2015, First Financial issued $120.0 million of subordinated notes, which have a fixed interest rate of 5.125% payable semiannually and ~~mature~~maturing in August 2025. These notes are not redeemable by the Company, or callable by the holders of the notes prior to maturity. In addition, First Financial acquired $49.5 million of variable rate subordinated notes in the MSFG merger that were issued to previously formed trusts in exchange for the trust proceeds. Interest on the acquired subordinated notes is payable quarterly, in arrears, and the Company has the option to defer interest payments for a period not to exceed 20 consecutive quarters. ~~The~~These acquired subordinated notes mature 30 years after the date of original issuance and may be called at par following the 5 year anniversary of issuance. First Financial also acquired $8.4 million of ~~7.40%~~6.00% fixed rate private placement subordinated debt in conjunction with the MSFG merger that was issued in 2015 and matures in 2025. These notes are redeemable by the Company at par following the 5 year anniversary of issuance. The subordinated notes are treated as Tier 2 capital for regulatory capital purposes and are included in Long-term debt on the Consolidated Balance Sheets.

In addition to subordinated notes, long-term debt included ~~$376.1~~$152.8 million and ~~$400.6~~$242.4 million of fixed rate FHLB long-term advances as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. As of March 31, ~~2019,~~2020, long-term FHLB advances had a weighted average interest rate of ~~2.14%.~~1.75% These instruments are primarily utilized to reduce overnight liquidity risk and to mitigate interest rate sensitivity on the Consolidated Balance Sheets.

NOTE 9: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Shareholders’ equity is affected by transactions and valuations of asset and liability positions that require adjustments to accumulated other comprehensive income (loss). The related tax effects allocated to other comprehensive income and

~~reclassifications out of accumulated other comprehensive income (loss) are as follows:~~

Three months ended March 31, 2019
Total other comprehensive income
Total accumulated
other comprehensive income (loss)
(Dollars in thousands) Prior to
reclass Reclass
from Pre-tax Tax effect Net of tax Beginning balance Net activity Cumulative effect of new standard Ending balance
Unrealized gain (loss) on debt securities $ 29,725
$ (178 ) $ 29,903
$ (6,398 ) $ 23,505
$ (11,601 ) $ 23,505
$ 906
$ 12,810
Unrealized gain (loss) on derivatives 93
0
93
(21 ) 72
(217 ) 72
0
(145 )
Retirement obligation 0
(375 ) 375
(85 ) 290
(32,590 ) 290
0
(32,300 )
Total $ 29,818
$ (553 ) $ 30,371
$ (6,504 ) $ 23,867
$ (44,408 ) $ 23,867
$ 906
$ (19,635 )



	Three months ended March 31, 2020
	Total other comprehensive income (loss)															Total accumulated other comprehensive income (loss)
(Dollars in thousands)	Prior to reclass			Reclass from			Pre-tax			Tax effect			Net of tax			Beginning balance			Net activity			Ending balance
Unrealized gain (loss) on debt securities	$	(2,434	)	$	(59	)	$	(2,375	)	$	512		$	(1,863	)	$	41,264		$	(1,863	)	$	39,401
Retirement obligation	0			(425		)	425			(97		)	328			(27,941		)	328			(27,613		)
Total	$	(2,434	)	$	(484	)	$	(1,950	)	$	415		$	(1,535	)	$	13,323		$	(1,535	)	$	11,788


	Three months ended March 31, 2018																											Three months ended March 31, 2019
	Total other comprehensive income															Total accumulated other comprehensive income (loss)												Total other comprehensive income (loss)												Total accumulated other comprehensive income (loss)
(Dollars in thousands)	Prior to reclass			Reclass from			Pre-tax			Tax effect			Net of tax			Beginning balance			Net activity			Cumulative effect of new standard			Ending balance			Prior to reclass		Reclass from			Pre-tax		Tax effect			Net of tax		Beginning balance			Net activity		Cumulative effect of new standard		Ending balance
Unrealized gain (loss) on debt securities	$	(12,536	)	$	0		$	(12,536	)	$	2,706		$	(9,830	)	$	(182	)	$	(9,830	)	$	(190	)	$	(10,202	)	$	29,725	$	(178	)	$	29,903	$	(6,398	)	$	23,505	$	(11,601	)	$	23,505	$	906	$	12,810
Unrealized gain (loss) on derivatives	202			0			202			(46		)	156			(577		)	156			(124		)	(545		)	93		0			93		(21		)	72		(217		)	72		0		(145		)
Retirement obligation	0			(419		)	419			(96		)	323			(19,631		)	323			(4,779		)	(24,087		)	0		(375		)	375		(85		)	290		(32,590		)	290		0		(32,300		)
Total	$	(12,334	)	$	(419	)	$	(11,915	)	$	2,564		$	(9,351	)	$	(20,390	)	$	(9,351	)	$	(5,093	)	$	(34,834	)	$	29,818	$	(553	)	$	30,371	$	(6,504	)	$	23,867	$	(44,408	)	$	23,867	$	906	$	(19,635	)

The following table presents the activity reclassified from accumulated other comprehensive income into income during the three month periods ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively:


		Amount reclassified from accumulated other comprehensive income ⁽¹⁾								Amount reclassified from accumulated other comprehensive income (loss)
		Three months ended								Three months ended
		March 31,								March 31,
(Dollars in thousands)		2019			2018			Affected Line Item in the Consolidated Statements of Income		2020			2019			Affected Line Item in the Consolidated Statements of Income
Realized gain (loss) on securities available-for-sale		$	(178	)	$	0		Net gain (loss) on sales of investments securities		$	(59	)	$	(178	)	Net gain (loss) on sales of investments securities
Defined benefit pension plan	Defined benefit pension plan								Defined benefit pension plan
Amortization of prior service cost ⁽²⁾⁽¹⁾		100			103			Other noninterest expense		100			100			Other noninterest expense
Recognized net actuarial loss⁽²⁾⁽¹⁾		(475		)	(522		)	Other noninterest expense		(525		)	(475		)	Other noninterest expense
Defined benefit pension plan total		(375		)	(419		)			(425		)	(375		)
Total reclassifications for the period, before tax		$	(553	)	$	(419	)			$	(484	)	$	(553	)

⁽¹⁾ ~~Negative amounts are reductions to net income.~~

⁽²⁾ Included in the computation of net periodic pension cost (see Note 13 - Employee Benefit Plans for additional details).

NOTE 10: DERIVATIVES

First Financial uses certain derivative instruments, including interest rate caps, floors, swaps and ~~swaps,~~foreign exchange contracts, to meet the needs of its clients while managing the interest and currency 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 does not use derivatives for speculative purposes.

First Financial manages market value credit risk through counterparty credit policies ~~which require the Company to maintain~~including a review of total derivative notional position ~~of less than~~ ~~35%~~ ofto total assets, total credit exposure ~~of less than~~ 3% ofto total capital and ~~no single~~ counterparty credit ~~risk~~ exposure ~~greater than~~ ~~$20.0 million. The Company is currently below all single counterparty and portfolio limits.~~risk.

Client ~~Derivatives.~~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,~~2020, for the interest rate derivatives, the Company had a total counterparty notional amount outstanding of ~~$1.4~~$2.1 billion, spread among ~~thirteen~~19 counterparties, with an ~~outstanding liability from these contracts~~estimated fair value of ~~$27.1~~$191.0 million. At December 31, ~~2018,~~2019, the Company had interest rate derivatives with a total counterparty notional amount outstanding of ~~$1.4~~$1.9 billion, spread among ~~thirteen~~18 counterparties, with an ~~outstanding liability from these contracts~~estimated fair value of ~~$4.9~~$67.5 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~~ACL Committee monitors derivative credit risk exposure related to problem loans through the Company's ~~ALLL~~ACL 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.

Foreign exchange contracts. First Financial ~~classifies~~may enter into foreign exchange derivative contracts for the ~~derivative cash collateral outstanding with its counterparties as an adjustment~~benefit of commercial customers to hedge their exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from interest rate derivative contracts, First Financial also enters into foreign exchange contracts with major financial institutions to economically hedge a substantial portion of the exposure from client driven foreign exchange activity. These derivatives are classified as free-standing instruments with the revaluation gain or loss recorded in Foreign exchange income in the Consolidated Statements of Income. The Bancorp has risk limits and internal controls in place to help ensure excessive risk is not being taken in providing this service to customers. These controls include an independent determination of currency volatility and credit equivalent exposure on these contracts, counterparty credit approvals and country limits performed by independent risk management. At March 31, 2020, the Company had total counterparty notional amount outstanding of $2.1 billion spread among 6 counterparties, with an estimated fair value of $19.8 million. At December 31, 2019, the Company had total counterparty notional amounts outstanding of $1.9 billion spread among 6 counterparties, with an estimated fair value of $18.3 million.

In connection with its use of foreign exchange contracts, 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.

The following table details the classification and amounts of client derivatives and foreign exchange contracts ~~within Accrued interest and other assets or Accrued interest and other liabilities~~recognized in the Consolidated Balance ~~Sheets.~~Sheets:



		March 31, 2020							December 31, 2019
				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	$	2,094,136	$	197,886	$	(6,306	)	$	1,923,375	$	70,799	$	(2,636	)
Matched interest rate swaps with counterparty	Accrued interest and other liabilities	2,094,136		6,306		(197,955		)	1,923,375		2,636		(70,808		)
Foreign exchange contracts
Matched foreign exchange contracts with customers	Accrued interest and other assets	2,107,052		42,411		(62,216		)	1,869,934		28,739		(10,433		)
Match foreign exchange contracts with counterparty	Accrued interest and other liabilities	2,107,052		62,216		(42,411		)	1,869,934		10,433		(28,739		)
Total		$	8,402,376	$	308,819	$	(308,888	)	$	7,586,618	$	112,607	$	(112,616	)

The following table discloses the gross and net amounts of client ~~derivative liabilities~~derivatives and foreign exchange contacts recognized in the Consolidated Balance Sheets:


	March 31, 2019							December 31, 2018							March 31, 2020								December 31, 2019
(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		Gross amounts of recognized liabilities		Gross amounts offset in the Consolidated Balance Sheets			Net amounts of liabilities (assets) presented in the Consolidated Balance Sheets			Gross amounts of recognized liabilities		Gross amounts offset in the Consolidated Balance Sheets			Net amounts of liabilities (assets) 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	$	204,261	$	(406,685	)	$	(202,424	)	$	73,444	$	(147,193	)	$	(73,749	)
Foreign exchange contracts with counterparty															104,627		(93,015		)	11,612			39,172		(41,202		)	(2,030		)
Total															$	308,888	$	(499,700	)	$	(190,812	)	$	112,616	$	(188,395	)	$	(75,779	)

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:~~2020:


							Weighted-average rate
(Dollars in thousands)	Notional amount		Average maturity (years)	Fair value			Receive		Pay		Notional amount		Average maturity (years)	Fair value
Client derivatives
Client derivatives-interest rate contracts
Receive fixed, matched interest rate swaps with borrower	$	1,406,914	6.1	$	27,641		4.70	%	4.80	%	$	2,094,136	5.7	$	191,580
Pay fixed, matched interest rate swaps with counterparty	1,406,914		6.1	(27,648		)	4.80	%	4.70	%	2,094,136		5.7	(191,649		)
Client derivatives-foreign exchange contracts
Foreign exchange contracts-pay USD											$	2,107,052	0.5	(19,805		)
Foreign exchange contracts-receive USD											$	2,107,052	0.5	19,805
Total client derivatives	$	2,813,828	6.1	$	(7	)	4.75	%	4.75	%	$	8,402,376	3.1	$	(69	)

Credit ~~Derivatives.~~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~~$234.0 million as of March 31, ~~2019~~2020 and ~~$138.4~~$216.2 million as of December 31, ~~2018.~~2019. The fair value of these agreements is recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets and was ~~$0.1~~$0.4 million at ~~both~~ March 31, ~~2019~~2020 and $0.2 million at December 31, ~~2018.~~2019.

Mortgage ~~Derivatives.~~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~~IRLCs with First Financial and the ~~loan is~~loans are 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,~~2020, the notional amount of the IRLCs was ~~$32.8~~$189.5 million and the notional amount of forward commitments was ~~$32.8~~$147.0 million. As of December 31, ~~2018,~~2019, the notional amount of IRLCs was ~~$20.8~~$33.4 million and the notional amount of forward commitments was ~~$12.3~~$37.8 million. The fair value of these agreements was ~~$0.1~~a loss of $1.8 million and $0.9 million at March 31, ~~2019~~2020 and ~~insignificant at~~ December 31, ~~2018~~2019, respectively, and ~~was~~were recorded in ~~Accrued~~accrued interest and other assets on the Consolidated Balance Sheets.

NOTE 11: COMMITMENTS AND CONTINGENCIES

First Financial offers a variety of financial instruments including loan commitments and letters of ~~credit and outstanding commitments to extend~~ credit to assist clients in meeting their requirement for liquidity and credit enhancement. GAAP does not require these financial instruments to be recorded in the Consolidated Financial Statements.

First Financial utilizes the same credit policies in issuing commitments and conditional obligations as it does for credit instruments recorded on the Consolidated Balance Sheets. First Financial’s exposure to credit loss in the event of non-performance by the counterparty iswas represented by the contractual amounts of those instruments. Effective January 1, 2020, First Financial ~~utilizes~~adopted ASC 326, at which time First Financial estimated expected credit losses over the ~~ALLL~~contractual period in

which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the Company's ACL methodology for loans and leases. Adjustments to ~~maintain a~~the reserve ~~that it considers sufficient to absorb probable incurred~~for unfunded commitments are recorded in Provision for credit losses ~~incurred~~- unfunded commitments in ~~letters~~the Consolidated Statements of ~~credit and outstanding loan commitments.~~ Income. First Financial had ~~$0.8 million and $0.7~~$14.3 million of ~~reserves~~ACL for unfunded commitments recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets as of March 31, ~~2019~~2020.

Loan commitments. Loan commitments are agreements to extend credit to a client, absent any violation of conditions established in the commitment agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments ~~are expected to~~will expire without being fully drawn upon, the total

commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by First Financial upon extension of credit, is based on management’s credit evaluation of the client. The collateral held varies, but may include securities, real estate, inventory, plant or equipment. First Financial had commitments outstanding to extend credit totaling $~~3.1~~3.3 billion ~~and $3.0 billion~~ at both March 31, ~~2019~~2020 and December 31, ~~2018, respectively.~~2019. As of March 31, 2020, loan commitments with a fixed interest rate totaled $154.4 million while commitments with variable interest rates totaled $3.1 billion. At December 31, 2019, loan commitments with a fixed interest rate totaled ~~$182.5~~$123.7 million while commitments with variable interest rates totaled ~~$2.9 billion. At December 31, 2018, loan commitments with a fixed interest rate totaled $174.0 million while commitments with variable interest rates totaled $2.9~~$3.2 billion. First Financial's fixed rate loan commitments have interest rates ranging from 0.00% to 21.00% for both March 31, 2020 and December 31, 2019 and have maturities ranging from less than 1 year to 3030.9 years for ~~both~~ March 31, ~~2019~~2020 and less than 1.0 year to 31.6 years for December 31, ~~2018.~~2019.

The following table presents First Financial's loan balances and contractual obligations to extend credit, excluding obligations that are unconditionally cancellable, by type, as of March 31, 2020.



(dollars in thousands)	Unfunded commitment		Loan balance
Commercial & industrial	$	1,090,309	$	2,477,773
Lease financing	0		82,602
Construction real estate	462,460		500,311
Commercial real estate-investor	152,602		3,180,037
Commercial real estate-owner	45,889		1,098,220
Residential real estate	30,807		1,061,792
Home equity	717,625		781,243
Installment	21,457		80,085
Credit card	185,606		45,756
Total	$	2,706,755	$	9,307,819

Letters of credit. Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party. First Financial’s letters of credit consist of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services. The risk to First Financial arises from its obligation to make payment in the event of the client's contractual default to produce the contracted good or service to a third party. First Financial issued letters of credit aggregating $~~33.4~~32.7 million and $~~32.7~~33.4 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Management conducts regular reviews of these instruments on an individual client basis.

Investments in affordable housing tax credits. First Financial has made investments in certain qualified affordable housing tax credits. These credits are an indirect federal subsidy that provide tax incentives to encourage investment in the acquisition, development, ~~acquisition~~ and rehabilitation of affordable rental housing, and allow investors to claim tax credits and other tax benefits (such as deductions from taxable income for operating losses) on their federal income tax returns. The principal risk associated with qualified affordable housing investments is the potential for noncompliance with the tax code requirements, such as failure to rent property to qualified tenants, resulting in the unavailability or recapture of the tax credits and other tax benefits.

Investments in affordable housing projects are accounted for under the proportional amortization method and are included in Accrued interest and other assets in the Consolidated Balance Sheets.

First Financial's affordable housing commitments totaled ~~$36.2~~$35.6 million and ~~$39.4~~$38.5 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The Company recognized tax credits of ~~$1.6~~$1.9 million and ~~$1.1~~$1.6 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The Company recognized amortization expense which was included in income tax expense of ~~$1.6~~$2.1 million and ~~$1.3~~$1.6 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. First Financial had no0 affordable housing contingent commitments as of March 31, ~~2019~~2020 or December 31, ~~2018.~~2019.

Investments in historic tax credits. First Financial has noncontrolling financial investments in private investment funds and partnerships which are not consolidated. These investments may generate a return through the realization of federal and state income tax credits, as well as other tax benefits, such as tax deductions from net operating losses of the investments over a period of time. Investments in historic tax credits are accounted for under the equity method of accounting and are carried in Accrued interest and other assets on the Consolidated Balance Sheets. The Company’s recorded investment in these entities was approximately ~~$3.7~~$3.8 million at March 31, ~~2019~~2020 and ~~$3.9~~$3.1 million at December 31, ~~2018.~~2019. The maximum exposure to loss related to these investments was ~~$3.7~~$6.7 million at March 31, ~~2019~~2020 and ~~$3.9~~$5.1 million at December 31, ~~2018,~~2019, representing the Company’s investment balance and its unfunded commitments to invest additional amounts. Investments in historic tax credits resulted in ~~insignificant~~$0.1 million of tax credits for the three months ended March 31, ~~2019~~2020 and ~~$0.1 million~~were insignificant for the three months ended March 31, ~~2018.~~2019.

Contingencies/Litigation. First Financial and its subsidiaries are engaged in various matters of litigation from time to time, and have a number of unresolved claims pending. Additionally, as part of the ordinary course of business, First Financial and its subsidiaries are parties to litigation involving claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral and foreclosure interests that are incidental to our regular business activities. While the ultimate liability with respect to these litigation matters and claims cannot be determined at this time, First Financial believes that damages, if any, and other amounts relating to pending matters are not probable or cannot be reasonably estimated as of March 31, ~~2019.~~2020. Reserves are established for these various matters of litigation when appropriate under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel. First Financial had no0 reserves related to litigation matters as of March 31, ~~2019~~2020 or December 31, ~~2018.~~2019.

NOTE 12: INCOME TAXES

For the first ~~quarter 2019,~~three months of 2020, income tax expense was ~~$9.9~~$5.9 million, resulting in an effective tax rate of ~~17.8%~~17.1% compared with income tax expense of ~~$7.7~~$9.9 million and an effective tax rate of ~~20.1%~~17.8% for the comparable period in ~~2018.~~2019. The decrease in the effective tax rate is primarily due to ~~favorable resolution~~lower pre-tax income in the first quarter of ~~a state uncertain tax position, favorable tax reform guidance~~2020 and the carryback of certain net operating losses as allowed under the CARES Act. These adjustments were partially offset by an unfavorable impact related to ~~the treatment of acquired bank owned life insurance and~~ stock compensation activity.

At both March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, First Financial had $2.4 million ~~and $2.9 million, respectively,~~ of unrecognized tax benefits, as determined inunder FASB ASC Topic 740-10, Income Taxes, that if recognized would favorably ~~affect~~impact the effective income tax rate in future periods. The unrecognized tax benefits relate to state income tax exposures from taking tax positions 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 March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had no0 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 ~~2014~~2016 have been closed and are no longer subject to U.S. federal income tax examinations. Tax years ~~2014~~2016 through ~~2018~~2019 remain open to examination by the federal taxing authority.

First Financial is no longer subject to state and local income tax examinations for years prior to 2011. Tax years 2011 through ~~2018~~2019 remain open to state and local examination in various jurisdictions.

NOTE 13: EMPLOYEE BENEFIT PLANS

First Financial sponsors a non-contributory defined benefit pension plan ~~covering~~which covers substantially all employees and uses a December 31 measurement date for the plan. Plan assets ~~were~~are primarily invested in fixed income and publicly traded equity mutual funds. The pension plan does not directly own any shares of First Financial common stock or any other First Financial security or product.

First Financial made no0 cash contributions to fund the pension plan during the three months ended March 31, ~~2019,~~2020, or the year ended December 31, ~~2018,~~2019, and does not expect to make cash contributions to the plan through the remainder of ~~2019.~~ 2020.

As a result of the plan’s actuarial projections, ~~which included consideration of the impact of the merger with MSFG,~~ First Financial recorded expense ~~of $0.4 million for~~as set forth in the ~~three months ended March 31, 2019. Conversely, First Financial recorded income of $0.2 million for the three months ended March 31, 2018.~~

following table. The ~~following table sets forth information concerning~~ amounts are recognized in First Financial’s Consolidated Statements of Income related to the Company's pension ~~plan:~~plan.


	Three months ended						Three months ended
	March 31,						March 31,
(Dollars in thousands)	2019			2018			2020			2019
Service cost	$	1,750		$	1,295		$	1,850		$	1,750
Interest cost	700			590			600			700
Expected return on assets	(2,450		)	(2,460		)	(2,475		)	(2,450		)
Amortization of prior service cost	(100		)	(103		)	(100		)	(100		)
Net actuarial loss	475			522			525			475
Net periodic benefit cost (income)	$	375		$	(156	)	$	400		$	375

NOTE 14: REVENUE RECOGNITION

The majority of the Company's revenues come from interest income and other sources, including loans, leases, securities, derivatives and ~~derivatives,~~foreign exchange, that are outside the scope of ASU No. 2014-09, Revenue from Contracts with Customers. The Company's services that fall within the scope of ASU 2019-09 are presented within Noninterest income and are recognized as revenue aswhen the Company satisfies its obligation to the customer. Services within the scope of this guidance include service charges on deposits, trust and wealth management fees, bankcard income, gain/loss on the sale of OREO and investment brokerage fees.

Service charges on deposit accounts. The Company earns ~~fees~~revenues from its deposit customers for transaction-based fees, account maintenance fees and overdraft ~~services.~~fees. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Similarly,

overdraft fees are recognized at the point in time that the overdraft occurs as this corresponds with the Company's performance obligation. Service charges on deposit accounts are withdrawn from the customer's ~~account balance.~~deposit account.

Trust and wealth management fees. Trust and wealth management fees are primarily asset-based, but can also include flat fees based upon a specific service rendered, such as tax preparation services. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fees. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and wealth management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, as incurred.

Bankcard income. The Company earns interchange fees from cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized concurrent with the transaction processing services provided to the cardholder. Interchange income is presented on the Consolidated Statements of Income net of expenses. Gross interchange income for the first ~~three months~~quarter of ~~2019~~2020 was ~~$8.5~~$5.7 million, which was partially offset by ~~$2.9~~$3.0 million of expenses within Noninterest income. Gross interchange income for the first ~~three months~~quarter of ~~2018~~2019 was ~~$5.4~~$8.5 million, which was partially offset by ~~$2.0~~$2.9 million of expenses.

Other. Other noninterest income consists of other recurring revenue streams such as transaction fees, safe deposit rental income, insurance commissions, merchant referral income, gain (loss) on sale of OREO and brokerage revenue. Transaction

fees primarily include check printing sales commissions, collection fees and wire transfer fees which arise from in-branch transactions. Safe deposit rental income arises from ~~services~~fees charged to the customer on an annual basis and recognized upon receipt of payment. Insurance commissions are agent commissions earned by the Company and earned upon the effective date of the bound coverage. Merchant referral income is associated with a program whereby the Company receives a share of processing revenue that is generated from clients that were referred by First Financial to the service provider. Revenue is recognized at the point in time when the transaction occurs.

The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of the executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectibility of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer.

Brokerage revenue represents fees from investment brokerage services provided to customers by a third party provider. The Company receives commissions from the third-party service provider on a monthly basis based upon customer activity for the month. The fees are recognized monthly and a receivable is recorded until commissions are paid the following month. Because the Company (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers, investment brokerage fees are presented net of related costs.

NOTE 15: EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per common share:


	Three months ended				Three months ended
	March 31,				March 31,
(Dollars in thousands, except per share data)	2019		2018		2020		2019
Numerator
Net income available to common shareholders	$	45,839	$	30,506	$	28,628	$	45,839

Denominator
Basic earnings per common share - weighted average shares	97,926,088		61,654,686
Weighted average shares outstanding for basic earnings per common share					97,736,690		97,926,088
Effect of dilutive securities
Employee stock awards	510,223		464,254		619,524		510,223
Warrants	0		61,804
Diluted earnings per common share - adjusted weighted average shares	98,436,311		62,180,744
Adjusted weighted average shares for diluted earnings per common share					98,356,214		98,436,311

Earnings per share available to common shareholders
Basic	$	0.47	$	0.49	$	0.29	$	0.47
Diluted	$	0.47	$	0.49	$	0.29	$	0.47

First Financial had no warrants outstanding to purchase the Company's common stock as of March 31, 2019. Warrants acquired in the MSFG merger were outstanding as of December 31, 2018 and were exercised in January 2019. At March 31, 2018, First Financial had warrants outstanding representing the right to purchase 101,808 shares of common stock at an exercise price of $12.11 per share and all unexercised warrants expired in December 2018.

Stock options and warrants with exercise prices greater than the average market price of the common shares were not included in the computation of net income per diluted share, as they would have been antidilutive. Using the end of period price of the Company's common shares, there were no0 antidilutive options at March 31, ~~2019~~2020 and March 31, ~~2018.~~2019.

NOTE 16: FAIR VALUE DISCLOSURES

The fair value framework as disclosed in the Fair Value Topic includes a hierarchy which focuses on prioritizing the inputs used in valuation techniques. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), a lower priority to observable inputs other than quoted prices in active markets for identical assets and liabilities (Level 2) and the lowest priority to unobservable inputs (Level 3). When determining the fair value measurements for assets and liabilities, First Financial looks to active markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are not traded in active markets, First Financial looks to observable market data for similar assets and liabilities and classifies such items as Level 2. Certain assets and liabilities are not actively traded in observable markets and First Financial must use alternative techniques, based on unobservable inputs, to determine the fair value and classifies such items as Level 3. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement.

The estimated fair values of First Financial’s financial instruments not measured at fair value on a recurring or nonrecurring basis in the consolidated financial statements were as follows:


	Carrying		Estimated fair value								Carrying		Estimated fair value
(Dollars in thousands)	value		Total		Level 1		Level 2		Level 3		value		Total		Level 1		Level 2		Level 3
March 31, 2019
March 31, 2020
Financial assets
Cash and short-term investments	$	219,228	$	219,228	$	219,228	$	0	$	0	$	332,963	$	332,963	$	332,963	$	0	$	0
Investment securities held-to-maturity	158,305		153,075		0		153,075		0		136,744		140,065		0		140,065		0
Other investments	115,731		N/A		N/A		N/A		N/A		143,581		N/A		N/A		N/A		N/A
Loans held for sale	8,217		8,217		0		8,217		0		27,334		27,334		0		27,334		0
Loans and leases	8,752,479		8,651,343		0		0		8,651,343		9,163,934		8,877,637		0		0		8,877,637
Accrued interest receivable	44,171		44,171		0		14,230		29,941		40,386		40,386		0		12,937		27,449

Financial liabilities
Deposits	10,133,897		10,117,317		0		10,117,317		0		10,635,558		10,644,873		0		10,644,873		0
Short-term borrowings	1,047,415		1,047,415		1,047,415		0		0		1,397,724		1,397,724		1,397,724		0		0
Long-term debt	546,423		538,743		0		538,743		0		325,566		338,778		0		338,778		0
Accrued interest payable	12,449		12,449		2,907		9,542		0		11,474		11,474		2,347		9,127		0


	Carrying		Estimated fair value								Carrying		Estimated fair value
(Dollars in thousands)	value		Total		Level 1		Level 2		Level 3		value		Total		Level 1		Level 2		Level 3
December 31, 2018
December 31, 2019
Financial assets
Cash and short-term investments	$	273,959	$	273,959	$	273,959	$	0	$	0	$	257,639	$	257,639	$	257,639	$	0	$	0
Investment securities held-to-maturity	429,328		424,118		0		424,118		0		142,862		142,821		0		142,821		0
Other investments	115,660		N/A		N/A		N/A		N/A		125,020		N/A		N/A		N/A		N/A
Loans held for sale	4,372		4,372		0		4,372		0		13,680		13,680		0		13,680		0
Loans and leases	8,767,672		8,662,868		0		0		8,662,868		9,144,015		9,134,215		0		0		9,134,215
Accrued interest receivable	41,816		41,816		0		13,819		27,997		39,591		39,591		0		12,743		26,848

Financial liabilities
Deposits	10,140,394		10,113,475		0		10,113,475		0		10,210,229		10,209,790		0		10,209,790		0
Short-term borrowings	1,040,691		1,040,691		1,040,691		0		0		1,316,181		1,316,181		1,316,181		0		0
Long-term debt	570,739		557,933		0		557,933		0		414,376		414,937		0		414,937		0
Accrued interest payable	12,126		12,126		2,035		10,091		0		13,671		13,671		1,899		11,772		0

In accordance with our adoption of ASU 2016-01 in 2018, the methods utilized to measure the fair value of financial instruments at March 31, 2019 and December 31, 2018 represent an approximation of exit price, however, an actual exit price may differ.

The following methods, assumptions and valuation techniques were used by First Financial to measure different financial assets and liabilities at fair value on a recurring or nonrecurring basis.

Investment securities. Investment securities classified as available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar investment securities. First Financial compiles prices from various sources who may apply such techniques as matrix pricing to determine the value of identical or similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for the specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. Any investment securities not valued based upon the methods previously described are considered Level 3.

First Financial utilizes values provided by third-party pricing vendors to price the investment securities portfolio in accordance with the fair value hierarchy of the Fair Value Topic and reviews the pricing methodologies utilized by the pricing vendors to ensure that the fair value determination is consistent with the applicable accounting guidance. First Financial’s pricing process includes a series of quality assurance activities where prices are compared to recent market conditions, historical prices and other independent pricing services. Further, the Company periodically validates the fair value of a sample of securities in the portfolio by comparing the fair values to prices from other independent sources for the same or similar securities. First Financial analyzes unusual or significant variances, conducts additional research with the pricing vendor, and if necessary, takes appropriate action based on its findings. The results of the quality assurance process are incorporated into the selection of pricing providers by the portfolio manager.

~~Impaired~~Derivatives. The fair values of derivative instruments are based primarily on a net present value calculation of the cash flows related to the interest rate swaps and foreign exchange contracts at the reporting date, using primarily observable market inputs such as interest rate yield curves which represents the cost to terminate the swap if First Financial should choose to do so. Additionally, First Financial utilizes an internally-developed model to value the credit risk component of derivative assets and liabilities, which is recorded as an adjustment to the fair value of the derivative asset or liability on the reporting date. Derivative instruments are classified as Level 2 in the fair value hierarchy.

Nonperforming loans. The fair value of ~~impaired~~nonperforming loans are specifically reviewed for purposes of determining the appropriate amount of impairment to be allocated to the ~~ALLL.~~ACL. Fair value is generally measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed third-party appraiser (Level 3). The value of business equipment is based on an outside appraisal, if deemed significant, or the net book value on the applicable borrower financial statements. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). ~~Impaired~~Nonperforming loans are measured at fair value on a

nonrecurring basis. Any fair value adjustments are recorded in the period ~~incurred~~expected to occur as provision for ~~loan and lease~~credit losses on the Consolidated Statements of Income.

OREO. Assets acquired through loan foreclosure are recorded at fair value less costs to sell, with any difference between the fair value of the property and the carrying value of the loan recorded as a charge-off. If the fair value is higher than the carrying amount of the loan, the excess is recognized first as a recovery and then as noninterest income. Subsequent changes in value are reported as adjustments to the carrying amount and are recorded in noninterest expense. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying value differs from the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated at least annually. The Company classifies OREO in level 3 of the fair value hierarchy.

~~Derivatives.~~ The fair values of derivative instruments are based primarily on a net present value calculation of the cash flows related to the interest rate swaps at the reporting date, using primarily observable market inputs such as interest rate yield curves which represents the cost to terminate the swap if First Financial should choose to do so. Additionally, First Financial utilizes an internally-developed model to value the credit risk component of derivative assets and liabilities, which is recorded as an adjustment to the fair value of the derivative asset or liability on the reporting date. Derivative instruments are classified as Level 2 in the fair value hierarchy.

The financial assets and liabilities measured at fair value on a recurring basis in the consolidated financial statements were as follows:


	Fair value measurements using								Fair value measurements using
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/liabilities at fair value		Level 1		Level 2		Level 3		Assets/liabilities at fair value
March 31, 2019
March 31, 2020
Assets
Derivatives	$	0	$	39,062	$	0	$	39,062
Investment securities available-for-sale	98		3,100,358		13,355		3,113,811		$	104	$	2,864,334	$	44,250	$	2,908,688
Interest rate derivative contracts									0		204,351		0		204,351
Foreign exchange derivative contracts									0		104,627		0		104,627
Total	$	98	$	3,139,420	$	13,355	$	3,152,873	$	104	$	3,173,312	$	44,250	$	3,217,666

Liabilities
Derivatives	$	0	$	38,985	$	0	$	38,985
Interest rate derivative contracts									$	0	$	205,505	$	0	$	205,505
Foreign exchange derivative contracts									0		104,627		0		104,627
Total									$	0	$	310,132	$	0	$	310,132


	Fair value measurements using								Fair value measurements using
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/liabilities at fair value		Level 1		Level 2		Level 3		Assets/liabilities at fair value
December 31, 2018
December 31, 2019
Assets
Derivatives	$	0	$	29,543	$	0	$	29,543
Investment securities available-for-sale	97		2,764,443		14,715		2,779,255		$	100	$	2,842,794	$	9,190	$	2,852,084
Interest rate derivative contracts									0		73,558		0		73,558
Foreign exchange derivative contracts									0		39,172		0		39,172
Total	$	97	$	2,793,986	$	14,715	$	2,808,798	$	100	$	2,955,524	$	9,190	$	2,964,814

Liabilities
Derivatives	$	0	$	29,336	$	0	$	29,336
Interest rate derivative contracts									$	0	$	73,750	$	0	$	73,750
Foreign exchange derivative contracts									$	0	$	39,172	$	0	$	39,172
Total									$	0	$	112,922	$	0	$	112,922

The following table presents a reconciliation for certain AFS securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, ~~2019. No AFS securities were measured at fair value on a recurring basis for the three months ended~~2020 and March 31, ~~2018.~~2019.


	Three months ended			Three months ended
(dollars in thousands)	March 31, 2019			March 31, 2020			March 31, 2019
Beginning balance	$	14,715		$	9,190		$	14,715
Accretion (amortization)	7			16			7
Increase (decrease) in fair value	21			(30		)	21
Settlements	(1,388		)	35,074			(1,388		)
Ending balance	$	13,355		$	44,250		$	13,355

Certain financial assets and liabilities are measured at fair value on a nonrecurring basis. Adjustments to the fair market value of these assets usually result from the application of fair value accounting or write-downs of individual assets. The following table summarizes financial assets and liabilities measured at fair value on a nonrecurring basis.


	Fair value measurements using						Fair value measurements using
(Dollars in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
March 31, 2019
March 31, 2020
Assets
Impaired loans	$	0	$	0	$	4,391	$	0	$	0	$	13,180
OREO	0		0		1,046		0		0		554


	Fair value measurements using						Fair value measurements using
(Dollars in thousands)	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
December 31, 2018
December 31, 2019
Assets
Impaired loans	$	0	$	0	$	1,320	$	0	$	0	$	9,268
OREO	0		0		1,089		0		0		1,088

NOTE 17: BUSINESS COMBINATIONS

~~On April 1, 2018,~~In August, 2019, the Company completed ~~its~~the acquisition of ~~MainSource~~Bannockburn Global Forex, LLC. Pursuant to the acquisition agreement, First Financial ~~Group, Inc. and its banking subsidiary, MainSource Bank. Therefore, results of MSFG have been included in the results of operations beginning on April 1, 2018. Under the terms~~agreed to acquire all of the ~~merger agreement, shareholders~~issued and outstanding membership interests of ~~MSFG received 1.3875 common shares~~BGF for aggregate consideration of approximately $114.6 million consisting of $53.7 million in cash and $60.9 million of First Financial common ~~stock~~stock. BGF was a privately held capital markets trading firm specializing in foreign currency advisory, hedge analytics, and transaction processing for each share of MSFG common stock, with cash paid in lieu of fractional shares. Including outstanding options and warrants to purchase MSFG common stock, the total purchase consideration was $1.1 billion and resulted in goodwill of $675.6 million. The goodwill arising from the acquisition largely reflected synergies and cost savings resulting from combining the operationsclosely held enterprises. Upon completion of the ~~companies. First Financial incurred merger related expenses related~~transaction, Bannockburn became a division of the Bank, but continues to operate as Bannockburn Global Forex, taking advantage of its existing brand recognition within the ~~acquisition of MSFG of $1.7 million for the first quarter of 2019 and $37.8 million during the year ended December 31, 2018.~~foreign exchange industry.

The acquisition provides additional revenue growth and diversification. The goodwill is not deductible for income tax purposes as the transaction was accounted for as a tax-free exchange. For further detail, see Note 6 – Goodwill and Other Intangible Assets.

~~The MainSource~~Bannockburn transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date, in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed were $74.9 million and $18.4 million, respectively, and are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values became available. The ~~fair values of assets acquired~~measurement period ends in August 2020. Goodwill arising from the BGF acquisition was $58.0 million and ~~liabilities assumed are considered final as of March 31, 2019.~~

~~The following table provides~~reflects the ~~purchase price calculation as of~~business’s high growth potential and the expectation that the acquisition ~~date, identifiable assets purchased~~will provide additional revenue growth and ~~liabilities assumed at their estimated fair value. As~~diversification. The goodwill is deductible for income tax purposes as the transaction is considered a ~~condition of the merger, certain acquired assets~~taxable exchange. For further detail, see Note 6 – Goodwill and ~~liabilities held for sale were divested subsequent to the closing of the merger. There was no gain or loss recorded in the Consolidated Statement of Income in conjunction with this divestiture.~~Other Intangible Assets.

(Dollars in thousands) MainSource
Purchase consideration
Cash consideration $ 43
Stock consideration 1,043,424
Warrant consideration 14,460
Options consideration 1,577
Total purchase consideration 1,059,504

Assets acquired
Cash 71,806
Investment securities available-for-sale 900,935
Investment securities held-to-maturity 171,423
Other investments 28,763
Loans 2,792,572
Premises and equipment 98,814
Intangible assets 42,887
Other assets 167,829
Assets held for sale 127,775
Total assets acquired 4,402,804

Liabilities assumed
Deposits 3,263,920
Subordinated notes 49,027
FHLB advances 291,887
Other borrowings 205,620
Other liabilities 32,649
Liabilities held for sale 175,840
Total liabilities assumed 4,018,943

Net identifiable assets 383,861
Goodwill $ 675,643

NOTE 18: SUBSEQUENT EVENT

In April 2020, First Financial issued $150.0 million of fixed to floating rate subordinated notes. The ~~fair value~~subordinated notes have an initial fixed interest rate of ~~net assets acquired includes fair value adjustments~~5.25% to, ~~certain loans that were not considered impaired as of~~but excluding, May 15, 2025, payable semi-annually in arrears. From, and including, May 15, 2025, the ~~acquisition date as~~interest rate on the subordinated notes will reset quarterly to a floating rate per annum equal to a benchmark rate, which is expected to be the then-current three-month term SOFR, plus 509 basis points, payable quarterly in arrears. The subordinated notes mature on May 15, 2030. These notes are redeemable by the Company ~~believes that all contractual cash flows~~in whole or in part beginning with

the interest payment date of May 15, 2025. The subordinated notes are treated as Tier 2 capital for regulatory capital purposes and will be collected. The fair value adjustments were determined using discounted cash flows. In conjunction with the MSFG merger, First Financial acquired non-impaired loans with a fair value and gross contractual amounts receivable of $2.8 billion and $2.9 billionincluded in Long-term debt on the ~~date of acquisition.~~Consolidated Balance Sheets.

The following table presents supplemental pro forma information as if the MSFG acquisition had occurred at the beginning of 2017. The pro forma information includes adjustments for interest income on acquired loans, amortization of intangible assets arising from the transaction, depreciation expense on property acquired, interest expense on deposits acquired, merger-related expenses incurred and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effected on the assumed date. The disclosures regarding the results of operations for MSFG subsequent to its acquisition date are omitted as this information is not practical to obtain.

Twelve months ended
December 31,
(Dollars in thousands, except per share data) 2018 2017
Pro Forma Condensed Combined Income Statement Information
Net interest income $ 484,915
$ 454,579
Net income 221,122
130,402
Basic earnings per share 2.27
1.34
Diluted earnings per share 2.25
1.33

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS (MD&A)

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

(Unaudited)

All reclassifications of prior period amounts, if applicable, have been made to conform to the current period’s presentation and had no effect on the Company's previously reported net income or financial condition. Additionally, due to impact from the merger with MSFG in the second quarter of 2018, certain prior period comparisons may not be discussed in these statements as historical points of comparison are not presented on a combined pro forma basis unless otherwise noted.

EXECUTIVE SUMMARY

First Financial Bancorp. is a ~~$14.1~~$15.1 billion financial holding company headquartered in Cincinnati, Ohio, ~~that~~which operates through its subsidiaries primarily in Ohio, Indiana, Kentucky and ~~Illinois through its subsidiaries.~~Illinois. These subsidiaries include ~~the~~First Financial Bank, an

Ohio-chartered commercial bank, which operated ~~159~~145 full service banking centers ~~and 192 ATMs at~~as of March 31, ~~2019.~~2020. First Financial

provides banking and financial services products to business and retail clients through its six lines of business: Commercial,

Retail Banking, Mortgage Banking, Wealth Management, Investment Commercial Real Estate and Commercial Finance.

Commercial Finance provides equipment and leasehold improvement financing for franchisees in the quick service and casual

dining restaurant sector and commission-based financing, primarily to insurance agents and brokers, throughout the United

States. Wealth ~~management~~Management had $2.6 billion in assets under management as of March 31, ~~2019~~2020 and provides the following

services: ~~wealth~~financial planning, ~~portfolio~~investment management, trust ~~and~~administration, estate settlement, brokerage services and retirement planning.

MARKET STRATEGY

First Financial aims to develop a competitive advantage by utilizing a local market focus to provide superior service and build long-term relationships with clients while helping them achieve greater financial success. First Financial serves a combination of metropolitan and community markets in Ohio, Indiana, Kentucky and Illinois through its full-service banking centers, and provides financing to franchise owners and clients within the financial services industry throughout the United States. First Financial’s market selection process includes a number of factors, but markets are primarily chosen for their potential for growth and long-term profitability. First Financial intends to concentrate plans for future growth and capital investment within its current metropolitan markets, and will continue to evaluate additional growth opportunities in metropolitan markets located within, or in close proximity to, the Company's current geographic footprint. Additionally, First Financial may assess strategic acquisitions that provide product line extensions or additional industry verticals that compliment its existing business and diversify its product suite and revenue streams. First Financial's investment in community markets is an important part of the Bank's core funding base and has historically provided stable, low-cost funding sources. ~~Additionally, First Financial may assess strategic acquisitions that provide product line extensions or additional industry verticals that compliment our existing business.~~

BUSINESS COMBINATIONS

In ~~April 2018,~~August 2019, the Company ~~completed its acquisition of MainSource Financial Group, Inc.~~acquired Bannockburn Global Forex, LLC, an industry-leading capital markets firm. The Cincinnati-based company provides transactional currency payments, foreign exchange hedging and ~~its banking subsidiary, MainSource Bank. The merger positioned~~other advisory products to closely held enterprises, financial sponsors and financial institutions across the ~~combined company to better serve the complementary geographies of Ohio, Indiana, Kentucky and Illinois by creating~~United States. Bannockburn became a ~~higher performing bank with greater scale and capabilities. Under the terms~~division of the ~~merger agreement, shareholders~~Bank and continues to operate as Bannockburn Global Forex, taking advantage of ~~MainSource received 1.3875 common shares of First Financial common stock for each share of MainSource common stock. Including outstanding options and warrants on MainSource common stock,~~its existing brand recognition within the foreign exchange industry. The total purchase consideration was ~~$1.1 billion. In the merger,~~$114.6 million, consisting of $53.7 million in cash and $60.9 million in First Financial ~~acquired total assets~~common stock. The transaction resulted in First Financial recording $58.0 million of ~~$4.4 billion, loans of $2.8 billion~~goodwill on the Consolidated Balance Sheet, which reflects the business’s high growth potential, and ~~deposits of $3.3 billion, resulting in~~the expectation that the acquisition will provide additional revenue growth and diversification. The goodwill ~~of $675.6 million.~~is deductible for income tax purposes as the transaction is considered a taxable exchange.

The ~~MainSource~~BGF transaction was accounted for using the acquisition method of ~~accounting and accordingly,~~accounting. Accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date, in accordance with FASB ASC Topic 805, Business Combinations.

See Note 17 – Business Combinations in the Notes to Consolidated Financial Statements for further discussion of ~~the merger with MSFG.~~these transactions.

COVID-19 CONSIDERATIONS

The Company's operations and first quarter financial results were substantially influenced by the COVID-19 pandemic. The Company updated operating protocols to continuously provide virtually all banking services while protecting the health of both our clients and our associates. Over 96% of our banking centers remained open and the Company offered drive-through

capabilities in almost all locations. In addition, sales associates, support teams and management effectively transitioned to working remotely resulting in the majority of First Financial associates working from home. In addition, the Company continues to focus on enhancing remote, mobile and online processes to better support a bank anytime, anywhere environment.

The Company quickly implemented distinct COVID-19 relief programs to provide comprehensive financial assistance to clients through payment deferrals, fee waivers, and suspension of vehicle repossessions and residential property foreclosures, among others. In addition, the Company actively monitored the actions of federal and state governments and proactively assisted clients to ensure that they were aware of each financial assistance program available to them.

The Bank underwent a significant level of cross training and redeployment of associate resources to rapidly meet the influx of client requests in response to the passage of the CARES Act, and the establishment of the Payroll Protection Program ("PPP"). The Company's response to the PPP resulted in early successes in providing customer relief. As of April 30, 2020, the Company had received 6,603 PPP loan requests representing $1.0 billion dollars, ultimately securing SBA funding for 6,085 loans representing $917.4 million dollars.

Through April 30, 2020, the Company modified 1,055 commercial loans with balances of $1.6 billion and 979 consumer loans with balances of $129.5 million in response to COVID-19. As stated in the CARES Act, these loan modifications are not required to be reported as TDR as they were executed after March 1, 2020, and in response to COVID-19 for borrowers that were not more than 30 days past due as of December 31, 2019.

Additionally, First Financial contributed $1.0 million to help fund agencies providing COVID-19 relief efforts in the communities throughout its footprint.

OVERVIEW OF OPERATIONS

First quarter ~~2019~~2020 net income was $28.6 million and earnings per diluted common share were $0.29. This compares with net income of $45.8 million and earnings per diluted common share ~~were $0.47. This compares with~~of $0.47 for the first ~~quarter 2018 net income~~three months of ~~$30.5 million and earnings per diluted common share of $0.49.~~2019.

Return on average assets for the first quarter ~~2019~~2020 was ~~1.33%~~0.79% compared to ~~1.40%~~1.33% for the same period in ~~2018~~2019, and return on average shareholders’ equity for the first quarter ~~2019~~2020 was ~~8.88%~~5.21% compared to ~~13.31%~~8.88% for the first quarter ~~2018.~~2019.

A discussion of First Financial's operating results ~~of operations~~ for the three months ended March 31, ~~2019~~2020 follows.

NET INTEREST INCOME

~~Net interest income,~~ First Financial’s principal source of income is net interest income, which is the excess of interest received from earning assets, including loan-related fees and purchase accounting accretion, less interest paid on interest-bearing liabilities. The amount of net interest income is determined by the volume and mix of earning assets, the rates earned on ~~these earning~~such assets and the volume, mix and rates paid for the deposits and borrowed money that support the earning assets. Earning assets consist of interest-bearing loans to customers as well as marketable investment securities.

For analytical purposes, net interest income is also presented in the table that follows, adjusted to a tax equivalent basis assuming a 21% marginal tax rate. Net interest income is presented on a tax equivalent basis to consistently reflect income from tax-exempt assets, such as municipal loans and investments, in order to facilitate a comparison between taxable and tax-exempt amounts. Management believes ~~that~~ it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax equivalent basis as these measures provide useful information to make peer comparisons.


	Three months ended						Three months ended
	March 31,						March 31,
(Dollars in thousands)	2019			2018			2020			2019
Net interest income	$	121,515		$	75,812		$	114,282		$	121,515
Tax equivalent adjustment	1,523			718			1,624			1,523
Net interest income - tax equivalent	$	123,038		$	76,530		$	115,906		$	123,038

Average earning assets	$	12,163,751		$	8,087,848		$	12,375,698		$	12,163,751

Net interest margin ⁽¹⁾	4.05		%	3.80		%	3.71		%	4.05		%
Net interest margin (fully tax equivalent) ⁽¹⁾	4.10		%	3.84		%	3.77		%	4.10		%

⁽¹⁾ Calculated using annualized net interest income divided by average earning assets.

Net interest income for the first quarter ~~2019~~2020 was ~~$121.5~~$114.3 million, ~~and increased $45.7~~a decrease of $7.2 million, or ~~60.3%~~6.0%, from first quarter ~~2018~~2019 net interest income of ~~$75.8~~$121.5 million. This ~~increase~~change was primarily driven by a ~~$61.4~~$12.3 million, or ~~68.0%~~8.1%, ~~increase~~decrease in interest income, ~~which was~~ partially offset by a ~~$15.7~~$5.0 million, or ~~108.0%~~16.6%, ~~increase~~decrease in interest expense. Net interest income on a fully tax equivalent basis for the first quarter ~~2019~~2020 was ~~$123.0~~$115.9 million compared to ~~$76.5~~$123.0 million for the first quarter ~~2018.~~2019.

Net interest margin on a fully tax equivalent basis ~~increased 26~~decreased 33 bps to ~~4.10%~~3.77% for the first quarter ~~2019~~2020 compared to ~~3.84%~~4.10% for the comparable quarter in ~~2018. The increase in net interest margin was driven by higher earning asset yields, which more than offset higher funding costs. Higher earning asset yields resulted from higher~~2019 as interest rates declined and ~~the impact from purchase accounting~~ accretion ~~while rising rates and shifts in funding mix drove higher funding costs during the period.~~on acquired loans moderated.

~~Higher interest~~Interest income ~~primarily resulted from a merger related increase in average earning assets from $8.1 billion~~decreased $12.3 million, or 8.1%, in the first quarter ~~2018~~of 2020 when compared to ~~$12.2 billion~~the same quarter in ~~the first quarter~~ 2019 as ~~well as an increase~~a decrease in the yield on earning assets to 4.52% from ~~4.53% to~~ 5.06% ~~over those same periods.~~more than offset the impact of higher earning asset balances. The increase in average earning assets included an increase in average loan balances of $2.8 billion, or 45.8%, and a $1.3 billion, or 64.3% increase in average investment security balances in the first quarter 2019 compared to the first quarter 2018. Thedeclining yield on earning assets reflected ~~recent increases~~a 225 basis point reduction in ~~interest rates,~~ the ~~impact~~fed funds target rate from ~~purchase accounting and slower~~March 31, 2019. Average earning assets increased to $12.4 billion in the first quarter 2020 from $12.2 billion in the same quarter of 2019 as higher loan balances offset lower investment ~~prepayment speeds.~~security balances.

Interest expense ~~increased as a result~~decreased $5.0 million, or 16.6%, in the first quarter of ~~higher interest-bearing liability balances, as well as higher~~2020 when compared to the comparable quarter in 2019 due to lower rates paid on deposits and ~~borrowed funds~~short-term borrowings in addition to a favorable shift in funding mix during the period. Higher interest-bearing liabilities were driven by a $2.3 billion, or 42.7%, increase in average interest-bearing deposits from the first quarter 2018 as the merger-related increase in deposits and long-term debt coupled with the implementation of funding strategies aligned with the Company's post-merger balance sheet. The cost of interest-bearing deposits was ~~103 bps~~0.86% in first quarter of ~~2019~~2020 compared to ~~78 bps~~1.03% for the same period in the prior year as a result of ~~rising~~falling interest rates and the ~~post-merger~~Company's ability to successfully manage deposit ~~mix.~~costs. The cost of borrowed funds ~~increased~~decreased to 2.05% for the first quarter 2020 from ~~1.99%~~2.81% during the first quarter ~~2018 to 2.81% for~~2019, reflecting the ~~first quarter 2019 as rising~~decline in interest rates ~~offset the~~and a favorable ~~impact from a~~ mix shift ~~in borrowed funds.~~from longer term borrowings to more short-term funding.

CONSOLIDATED AVERAGE BALANCE SHEETS AND NET INTEREST INCOME ANALYSIS


	Quarterly Averages										Quarterly Averages
	March 31, 2019					March 31, 2018					March 31, 2020					March 31, 2019
(Dollars in thousands)	Balance			Yield		Balance			Yield		Balance			Yield		Balance			Yield
Earning assets
Investments
Investment securities	$	3,355,732		3.44	%	$	2,042,781		3.04	%	$	3,115,723		3.04	%	$	3,355,732		3.44	%
Interest-bearing deposits with other banks	34,709			2.45	%	27,073			1.60	%	39,332			1.45	%	34,709			2.45	%
Gross loans ⁽¹⁾	8,773,310			5.69	%	6,017,994			5.05	%	9,220,643			5.04	%	8,773,310			5.69	%
Total earning assets	12,163,751			5.06	%	8,087,848			4.53	%	12,375,698			4.52	%	12,163,751			5.06	%

Nonearning assets
Allowance for loan and lease losses	(57,088		)			(55,016		)			(121,126		)			(57,088		)
Cash and due from banks	181,695					116,095					235,696					181,695
Accrued interest and other assets	1,664,193					681,249					2,034,154					1,664,193
Total assets	$	13,952,551				$	8,830,176				$	14,524,422				$	13,952,551

Interest-bearing liabilities
Deposits
Interest-bearing demand	$	2,269,948		0.50	%	$	1,415,603		0.37	%	$	2,418,193		0.45	%	$	2,269,948		0.50	%
Savings	3,115,557			0.76	%	2,450,697			0.64	%	2,976,518			0.45	%	3,115,557			0.76	%
Time	2,224,587			1.94	%	1,466,440			1.41	%	2,196,080			1.88	%	2,224,587			1.94	%
Total interest-bearing deposits	7,610,092			1.03	%	5,332,740			0.78	%	7,590,791			0.86	%	7,610,092			1.03	%
Borrowed funds
Short-term borrowings	1,017,121			2.38	%	740,506			1.46	%	1,353,858			1.51	%	1,017,121			2.38	%
Long-term debt	569,947			3.59	%	126,342			5.07	%	381,909			3.96	%	569,947			3.59	%
Total borrowed funds	1,587,068			2.81	%	866,848			1.99	%	1,735,767			2.05	%	1,587,068			2.81	%
Total interest-bearing liabilities	9,197,160			1.33	%	6,199,588			0.95	%	9,326,558			1.08	%	9,197,160			1.33	%

Noninterest-bearing liabilities
Noninterest-bearing demand deposits	2,457,587					1,570,572					2,643,240					2,457,587
Other liabilities	203,570					130,542					344,891					203,570
Shareholders' equity	2,094,234					929,474					2,209,733					2,094,234
Total liabilities and shareholders' equity	$	13,952,551				$	8,830,176				$	14,524,422				$	13,952,551

Net interest income	$	121,515				$	75,812				$	114,282				$	121,515

Net interest spread				3.73	%				3.58	%				3.44	%				3.73	%
Contribution of noninterest-bearing sources of funds				0.32	%				0.22	%				0.27	%				0.32	%
Net interest margin ⁽²⁾				4.05	%				3.80	%				3.71	%				4.05	%

Tax equivalent adjustment				0.05	%				0.04	%				0.06	%				0.05	%
Net interest margin (fully tax equivalent) ⁽²⁾				4.10	%				3.84	%				3.77	%				4.10	%

⁽¹⁾ Loans held for sale and nonaccrual loans are included in gross loans.

⁽²⁾ The net interest margin exceeds the interest spread as noninterest-bearing funding sources, demand deposits, other liabilities and shareholders' equity also support earning assets.

RATE/VOLUME ANALYSIS

The impact on net interest income from changes in interest rates as well as the volume of interest-earning assets and interest-bearing liabilities is illustrated in the table below:


	Changes for the three months ended March 31, 2019							Changes for the three months ended March 31, 2020
	Comparable quarter income variance							Comparable quarter income variance
(Dollars in thousands)	Rate			Volume		Total		Rate			Volume			Total
Earning assets
Investment securities	$	2,018		$	11,148	$	13,166	$	(3,368	)	$	(1,538	)	$	(4,906	)
Interest-bearing deposits with other banks	57			46		103		(86		)	18			(68		)
Gross loans ⁽¹⁾	9,489			38,647		48,136		(14,108		)	6,827			(7,281		)
Total earning assets	11,564			49,841		61,405		(17,562		)	5,307			(12,255		)
Interest-bearing liabilities
Total interest-bearing deposits	3,186			5,759		8,945		(3,017		)	139			(2,878		)
Borrowed funds
Short-term borrowings	1,676			1,621		3,297		(2,180		)	1,307			(873		)
Long-term debt	(464		)	3,924		3,460		523			(1,794		)	(1,271		)
Total borrowed funds	1,212			5,545		6,757		(1,657		)	(487		)	(2,144		)
Total interest-bearing liabilities	4,398			11,304		15,702		(4,674		)	(348		)	(5,022		)
Net interest income	$	7,166		$	38,537	$	45,703	$	(12,888	)	$	5,655		$	(7,233	)

⁽¹⁾Loans held for sale and nonaccrual loans are included in gross loans.

NONINTEREST INCOME

First quarter ~~2019~~2020 noninterest income was $35.4 million, increasing $8.6 million, or 31.9%, compared to $26.8 million ~~increasing $9.9~~for the comparable quarter of 2019. This increase was primarily attributed to higher foreign exchange income, client derivative fees and gain on sale of loans, which were partially offset by lower bankcard and other noninterest income. The increase in foreign exchange income was due to the BGF acquisition in August of 2019 as well as strong demand in the current quarter, leading to First Financial recording $10.0 million of foreign exchange income during the period. Commercial loan growth and the current interest rate environment led to an increase in customer demand for back to back swaps, resulting in a $1.4 million, or ~~58.4%~~82.2%, increase in client derivative fees compared to the same quarter in 2019. Net gains from ~~$16.9~~sales of loans increased $0.9 million, inor 49.8%, largely due to higher mortgage origination and sales activity. Bankcard income declined $2.9 million, or 51.7%, compared to the first quarter of ~~2018. This change resulted mostly from merger-driven increases. Service charges~~2019 due to the impact of the Durbin amendment cap on ~~deposit accounts increased $3.9 million, or 76.7%; other noninterest income increased $2.6 million, or 119.9%; bankcard income increased $2.2 million, or 64.6%; and net gains from~~interchange fees, which became applicable to First Financial in the ~~sale~~third quarter of ~~loans increased $1.3 million, or 221.4%.~~2019. Other noninterest income ~~includes brokerage commissions, BOLI income and insurance commissions. First~~decreased $0.9 million, or 18.8%, from the first quarter of 2019 ~~noninterest income was in line with management's expectations for~~primarily driven by a valuation adjustment to the Company's ~~performance subsequent~~mortgage servicing rights due to the ~~merger, although changes~~large decline in ~~mix are expected~~interest rates, as ~~certain~~well as lower income ~~streams are subject to seasonal variance.~~from limited partnership investments and smaller unrealized gains on equity securities.

NONINTEREST EXPENSE

First quarter ~~2019~~2020 noninterest expense was ~~$78.5~~$89.7 million, increasing $11.2 million, or 14.2%, compared to ~~$52.3~~$78.5 million for the ~~first quarter 2018. The $26.2 million increase from the~~ comparable quarter ~~in 2018 included increases across nearly all noninterest expense categories~~of 2019 due to ~~the scale created by the merger.~~higher salaries and benefits, data processing expenses, intangible asset amortization and other noninterest expenses. Salaries and employee benefits of $54.8 million increased ~~$16.8~~$6.9 million, or ~~54.0%; net occupancy~~14.4%, due to higher incentive payments driven by strong foreign exchange and client derivative fee income, in addition to higher healthcare costs and annual compensation adjustments. Data processing expenses increased ~~$2.1~~$1.3 million, or ~~47.4%; intangible assets expense increased $1.8~~24.6%, to $6.4 million ~~or 630.4%; data processing increased $1.5 million, or 39.6%; and furniture and equipment increased $1.4 million, or 67.5%. With~~in the ~~majority~~first quarter of ~~merger-related activity complete, management remains focused on efficiency while also making~~2020 as the Company continued to make strategic investments to ~~support~~enhance its digital capabilities. Intangible assets recorded in conjunction with the BGF acquisition resulted in higher intangible asset amortization during the first quarter of 2020. Other noninterest expenses rose $1.7 million, or 25.8%, largely due to a $1.0 million donation to the First Financial Foundation to fund COVID-19 relief in the Company's ~~future growth.~~geographic footprint.

INCOME TAXES

Income tax expense was ~~$9.9~~$5.9 million for the first quarter of ~~2019,~~2020, resulting in an effective tax rate of ~~17.8%~~17.1% compared to ~~$7.7~~$9.9 million and ~~20.1%~~17.8% for the comparable period in ~~2018.~~2019. The ~~lower~~decrease in the effective tax rate ~~during 2019~~ is primarily due to ~~favorable resolution~~lower pre-tax income in the first quarter of ~~a state uncertain tax position, favorable tax reform guidance~~2020 and the carryback of certain net operating losses as allowed under the CARES Act. These adjustments were partially offset by an unfavorable impact related to ~~the treatment of acquired bank owned life insurance and~~ stock compensation activity.

~~While the~~The Company's effective tax rate may fluctuate from quarter to quarter due to changes in tax ~~jurisdiction changes, the level of~~jurisdictions, tax-enhanced assets and tax credit ~~investments, the full year effective tax rate for 2019 is expected to be approximately 19.5%.~~investments.

LOANS

Loans, excluding ~~loans~~Loans held for sale, totaled ~~$8.8~~$9.3 billion as of March 31, ~~2019~~2020 and $9.2 billion as of December 31, ~~2018 as an 8.4%~~2019, representing a $106.2 million, or 1.2%, increase period over period. The increase in loan ~~production activity from December 31, 2018~~balances was driven by an increase in commercial real estate loans, which increased $83.6 million, or 2.0% to ~~March 31, 2019 was offset by prepayment activity.~~

$4.3 billion, and higher C&I loan balances, which increased $11.9 million, or 0.5%, to $2.5 billion. First quarter ~~2019~~2020 average loans, excluding loans held for sale, increased ~~$2.8 billion,~~$440.6 million, or ~~45.9%~~5.0%, from the first quarter 2018. Increases in average loan balances were primarily attributable to the merger as organic loan growth has slowed in recent periods with lower line utilization and elevated prepayments offsetting an increase in fundings.

Loans accounted for under FASB ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, are referred to as purchased impaired loans. First Financial had purchased impaired loans totaling $88.3 million at March 31, 2019 compared to $96.3 million at December 31, 2018. These balances exclude contractual interest not yet accrued.of 2019.

ASSET QUALITY

Nonperforming assets consist of nonaccrual loans, accruing TDRs (collectively, nonperforming loans) and OREO. 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 a borrower's continued failure 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.

Nonperforming assets were ~~$83.9~~$72.2 million, or ~~60 bps as a percentage~~0.48% of total assets, at March 31, ~~2019~~2020 compared to ~~$88.2~~$61.6 million, ~~and 63 bps as~~or 0.42% of total assets, at December 31, ~~2018. The $4.3~~2019. This $10.6 million, ~~decrease~~or 17.1%, increase was ~~due to an $11.2 million decrease in nonaccrual balances partially offset~~primarily driven by a ~~$6.7 million increase in accruing TDRs and a $0.3 million increase in OREO balances~~single specialty finance credit that was modified during the ~~period.~~period and classified as a TDR.

Loans are classified as TDRs when borrowers are experiencing financial difficulties and concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. TDRs are generally classified as nonaccrual for a minimum period of six months and may qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement. TDRs that are acquired are no longer classified as such. Generally, if the acquired loan is performing under the current restructured terms, and there is no indication the borrower will not be able to continue paying, it would be classified as a purchased performing loan. If the restructured loan is below a current market rate for a loan with similar credit risks, the loan is generally classified as a purchased impaired loan. TDRs totaled ~~$35.9~~$40.6 million at March 31, ~~2019, a decrease~~2020, which represents an increase of ~~$2.6~~$10.6 million, or ~~6.7%~~35.4%, from ~~$38.5~~$30.0 million at December 31, ~~2018.~~2019. This increase was attributed to the aforementioned specialty finance credit designated as a TDR during the quarter.

Classified assets, which are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse, ~~increased to $142.0~~totaled $124.5 million as of March 31, ~~2019~~2020 compared to ~~$131.7~~$89.3 million at December 31, ~~2018.~~2019. Classified assets increased $35.3 million, or 39.5%, as three large relationships, including the previously mentioned TDR, received risk rating downgrades during the period. Classified assets were 83 bps as a percentage of total assets ~~were 101 bps~~ at March 31, ~~2019~~2020, compared to 9462 bps as of December 31, ~~2018.~~2019.

The following table details nonperforming, underperforming and classified assets, in addition to related credit quality ratios as of March 31, ~~2019~~2020 and the four previous quarters.


		Three monhs ended																Three months ended
		2019			2018													2020			2019
(Dollars in thousands)		Mar. 31,			Dec. 31,			Sep. 30,			June 30,			Mar. 31,				Mar. 31,			Dec. 31,			Sep. 30,			June 30,				Mar. 31,
Nonperforming loans, nonperforming assets, and underperforming assets
Nonaccrual loans ⁽¹⁾
Commercial and industrial		$	19,263		$	30,925		$	4,310		$	3,448		$	6,275			$	21,126		$	24,346		$	28,358		$	18,502			$	19,263
Lease financing		301			22			0			0			0				222			223			284			295				301
Construction real estate		7			9			10			24			26				0			0			5			6				7
Commercial real estate		21,082			20,500			20,338			21,593			16,878				10,050			7,295			14,889			15,981				21,082
Residential real estate		13,052			13,495			11,365			9,278			3,324				11,163			10,892			11,655			11,627				13,052
Home equity		5,581			5,580			6,018			5,820			3,484				5,821			5,242			5,427			4,745				5,581
Installment		170			169			327			299			296				145			167			75			195				170
Nonaccrual loans		59,456			70,700			42,368			40,462			30,283				48,527			48,165			60,693			51,351				59,456
Accruing troubled debt restructurings		22,817			16,109			20,313			21,839			14,943				22,206			11,435			18,450			37,420				22,817
Total nonperforming loans		82,273			86,809			62,681			62,301			45,226				70,733			59,600			79,143			88,771				82,273
Other real estate owned		1,665			1,401			1,918			1,853			1,065				1,467			2,033			1,613			1,421			��	1,665
Total nonperforming assets		83,938			88,210			64,599			64,154			46,291				72,200			61,633			80,756			90,192				83,938
Accruing loans past due 90 days or more		178			63			144			327			529				120			201			287			107				178
Total underperforming assets		$	84,116		$	88,273		$	64,743		$	64,481		$	46,820			$	72,320		$	61,834		$	81,043		$	90,299			$	84,116
Total classified assets		$	142,014		$	131,668		$	138,868		$	139,317		$	87,577			$	124,510		$	89,250		$	132,500		$	147,753			$	142,014

Credit quality ratios
Allowance for loan and lease losses to	Allowance for loan and lease losses to																Allowance for loan and lease losses to
Nonaccrual loans		95.40		%	79.97		%	136.22		%	133.65		%	179.57		%		296.51		%	119.69		%	93.18		%	119.86		%		95.40		%
Nonperforming loans		68.94		%	65.13		%	92.08		%	86.80		%	120.24		%		203.42		%	96.73		%	71.46		%	69.33		%		68.94		%
Total ending loans		0.64		%	0.64		%	0.65		%	0.61		%	0.89		%		1.55		%	0.63		%	0.62		%	0.69		%		0.64		%
Nonperforming loans to total loans		0.93		%	0.98		%	0.71		%	0.70		%	0.74		%		0.76		%	0.65		%	0.87		%	0.99		%		0.93		%
Nonperforming assets to
Ending loans, plus OREO		0.95		%	1.00		%	0.73		%	0.72		%	0.76		%		0.78		%	0.67		%	0.89		%	1.00		%		0.95		%
Total assets		0.60		%	0.63		%	0.47		%	0.46		%	0.52		%		0.48		%	0.42		%	0.56		%	0.62		%		0.60		%
Nonperforming assets, excluding accruing TDRs to
Ending loans, plus OREO		0.69		%	0.82		%	0.50		%	0.48		%	0.51		%		0.54		%	0.55		%	0.69		%	0.59		%		0.69		%
Total assets		0.43		%	0.52		%	0.32		%	0.30		%	0.35		%		0.33		%	0.35		%	0.43		%	0.37		%		0.43		%
Classified assets to total assets		1.01		%	0.94		%	1.00		%	1.00		%	0.98		%		0.83		%	0.62		%	0.92		%	1.02		%		1.01		%
⁽¹⁾ Nonaccrual loans include nonaccrual TDRs of $13.1 million, $22.4 million, $4.7 million, $5.9 million and $6.0 million as of March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018 and March 31, 2018, respectively.
⁽¹⁾ Nonaccrual loans include nonaccrual TDRs of $18.4 million, $18.5 million, $21.5 million, $11.0 million, and $13.1 million as of March 31, 2020, December 31,2019, September 30, 2019, June 30, 2019, and March 31, 2019, respectively.																	⁽¹⁾ Nonaccrual loans include nonaccrual TDRs of $18.4 million, $18.5 million, $21.5 million, $11.0 million, and $13.1 million as of March 31, 2020, December 31,2019, September 30, 2019, June 30, 2019, and March 31, 2019, respectively.

INVESTMENTS

First Financial's investment portfolio totaled ~~$3.4~~$3.2 billion, or ~~24.1%~~21.2% of total assets, at March 31, ~~2019~~2020 and ~~$3.3~~$3.1 billion, or ~~23.8%~~21.5% of total assets, at December 31, ~~2018.~~2019. AFS securities totaled ~~$3.1~~$2.9 billion at both March 31, ~~2019~~2020 and ~~$2.8 billion at~~ December 31, ~~2018,~~2019, while HTM securities totaled ~~$158.3~~$136.7 million at March 31, ~~2019~~2020 and ~~$429.3~~$142.9 million at December 31, ~~2018.~~2019. The effective duration of the investment portfolio ~~was~~declined to 3.1 years as of March 31, ~~2019 and 3.3~~2020, compared to 3.4 years as of December 31, ~~2018. In conjunction with the adoption of ASU 2017-12,~~2019, as the Company ~~reclassified $268.7 million of HTM securities~~has positioned the investment portfolio to ~~AFS during the first quarter of 2019.~~optimize performance with a flattened yield curve.

The Company invests in certain securities whose realization is dependent on future principal and interest repayments, ~~and~~ thus ~~carry~~carrying credit risk. Prior to purchase, First Financial performs a detailed ~~pre-purchase~~ collateral and structural analysis on these securities and strategically invests in asset classes in which First Financial has expertise and experience, as well as a senior position in the capital structure. First Financial continuously monitors credit risk and geographic concentration risk in its evaluation of market opportunities that enhance the overall performance of the portfolio.

At March 31, ~~2019, First~~2020, the Company's Consolidated Financial ~~recorded~~Statements reflected a ~~$12.8~~$39.4 million unrealized after-tax gain on debt securities as a component of equity in accumulated other comprehensive income and a $0.1 million unrealized ~~gain~~loss on equity securities within other

noninterest income. ~~The total unrealized position on debt securities improved $24.4 million from an $11.6 million loss at December 31, 2018.~~

First Financial will continue to monitor loan demand and deposit ~~demand,~~activity, as well as balance sheet composition, capital sensitivity and the interest rate environment ~~as it manages~~when considering future investment ~~strategies in future periods.~~strategies.

DEPOSITS AND FUNDING

Total deposits were ~~$10.1~~$10.6 billion as of March 31, ~~2019~~2020 and $10.2 billion as of December 31, ~~2018. Noninterest-bearing~~2019. This increase was driven by a $195.4 million, or 8.7% increase in time deposits, a $133.2 million, or 5.6% increase in interest bearing demand deposits, ~~decreased $4.3~~a $79.4 million, or ~~0.2%~~3.0%, ~~interest-bearing~~increase in noninterest bearing demand ~~deposits decreased $72.0~~deposits; and a $17.3 million, or ~~3.1%~~0.6%, increase in savings deposits ~~decreased $66.4 million, or 2.1% and time deposits increased $136.2 million, or 6.3%,~~ compared to December 31, ~~2018. Growth in brokered and retail CD balances offset seasonal declines in business DDA and public funds.~~2019. Brokered CDs, which are periodically used by First Financial as an alternative to short and long-term ~~borrowings.~~borrowings, accounted for the majority of the increase in time deposits, while higher public fund deposit balances drove the increase in interest bearing demand deposits.

Average deposits for the first quarter ~~2019~~2020 increased ~~$3.2 billion,~~$166.4 million, or ~~45.8%~~1.7%, to ~~$10.1~~$10.2 billion from ~~$6.9~~$10.1 billion for the comparable quarter of ~~2018.~~2019. This increase was driven by ~~the addition of $3.3 billion of~~a $185.7 million, or 7.6%, increase in average noninterest-bearing and a $148.2 million, or 6.5%, increase in average interest-bearing demand deposits, ~~acquired~~which were partially offset by a $139.0 million, or 4.5%, decline in ~~conjunction with the Company's merger with MSFG, net of branch divestitures.~~savings deposits and a $28.5 million, or 1.3% decline in time deposit balances.

Borrowed funds were ~~$1.6~~$1.7 billion as of both March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. First Financial utilizes short-term borrowings and ~~longer-term~~long-term advances from the FHLB as wholesale funding sources. First Financial had ~~$952.4 million~~$1.2 billion in short-term borrowings with the FHLB at March 31, ~~2019~~2020 and ~~$857.1 million as of~~ December 31, ~~2018.~~2019. In addition to FHLB borrowings, short-term borrowings included fed funds purchased and repurchase agreements of ~~$95.0~~$215.8 million and ~~$183.6~~$165.2 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Long-term debt, which included subordinated notes, FHLB long term advances and an interest free loan with a municipality, was ~~$546.4~~$325.6 million and ~~$570.7~~$414.4 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Outstanding subordinated debt totaled ~~$169.5 million and $169.4~~$170.1 million as of March 31, ~~2019~~2020 and ~~December 31, 2018, respectively, which included unamortized discounts of $7.2 million and $7.3 million. FHLB long-term advances declined to $376.1 million at March 31, 2019 from $400.6~~$170.0 million as of December 31, ~~2018~~2019. FHLB long-term advances declined $89.6 million, or 37.0%, to $152.8 million at March 31, 2020 from $242.4 million as of December 31, 2019 as the Company implemented ~~post-merger~~ funding strategies to manage liquidity and interest rate risk. First Financial's total remaining borrowing capacity from the FHLB was ~~$520.8~~$778.9 million as of March 31, ~~2019.~~2020.

As discussed in Note 18 - Subsequent Event, in April 2020, First Financial issued $150.0 million of fixed to floating rate subordinated notes. The subordinated notes have an initial fixed interest rate of 5.25% to, but excluding May 15, 2025, payable semi-annually in arrears. From, and including, May 15, 2025, the interest rate on the subordinated notes will reset quarterly to a floating rate per annum equal to a benchmark rate, which is expected to be the then-current three-month term SOFR, plus 509 basis points, payable quarterly in arrears. The subordinated notes mature on May 15, 2030. These notes are redeemable by the Company in whole or in part beginning with the interest payment date of May 15, 2025. The subordinated notes are treated as Tier 2 capital for regulatory capital purposes and are included in Long-term debt on the Consolidated Balance Sheets.

See Note 8 – Borrowings in the Notes to Consolidated Financial Statements for further discussion of First Financial's borrowed funds.

LIQUIDITY

Liquidity management is the process by which First Financial manages the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost. These funding commitments include withdrawals by depositors, credit commitments to borrowers, shareholder dividends, share repurchases, operating expenses and capital expenditures. Liquidity is derived primarily from deposit growth, principal and interest payments on loans and investment securities, maturing loans and investment securities, and access to wholesale funding ~~sources and collateralized borrowings.~~sources.

First Financial’s most stable source of liability-funded liquidity for both long and short-term needs is deposit growth and retention of the core deposit base. In addition to core deposit funding, First Financial also utilizes a variety of other short and long-term funding sources, which include subordinated notes, longer-term advances from the FHLB and its short-term line of credit.

First Financial maintains a short-term credit facility with an unaffiliated bank for $30.0 million that matures in September 2020. This facility can have a variable or fixed interest rate and, if needed, provides First Financial additional liquidity for various corporate activities, including the repurchase of First Financial shares and payment of dividends to shareholders. As of March 31, 2020 and December 31, 2019, there was no outstanding balance. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality and capital levels, and First Financial was in compliance with all covenants associated with this facility as of March 31, 2020 and December 31, 2019.

Both First Financial and the Bank received investment grade credit ratings from Kroll Bond Rating Agency, Inc, an independent rating agency. These credit ratings impact the cost and availability of financing to First Financial, and a downgrade to these credit ratings could affect First Financial's or the Bank’s ability to access the credit markets and potentially increase borrowing costs, negatively impacting financial condition and liquidity. Key factors in maintaining high credit ratings include consistent and diverse earnings, strong credit quality and capital ratios, ~~varied~~diverse funding sources and disciplined liquidity monitoring procedures. The ratings of First Financial and the Bank at March 31, ~~2019~~2020 were as follows:



	First Financial Bancorp	First Financial Bank
Senior Unsecured Debt	BBB+	A-
Subordinated Debt	BBB	BBB+
Short-Term Debt	K2	K2
Deposit	N/A	A-
Short-Term Deposit	N/A	K2

For ease of borrowing execution, First Financial utilizes a blanket collateral agreement with the FHLB. First Financial pledged ~~$5.7~~$6.2 billion of certain eligible residential, commercial and farm real estate loans, home equity lines of credit and government, agency and CMBS securities as collateral for borrowings from the FHLB as of March 31, ~~2019.~~

First Financial maintains a short-term credit facility with an unaffiliated bank for $30.0 million that matures in September 2019. This facility can have a variable or fixed interest rate and, if needed, provides First Financial additional liquidity for various corporate activities, including the repurchase of First Financial shares and the payment of dividends to shareholders. As of March 31, 2019 and December 31, 2018, there was no outstanding balance. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality and capital levels, and First Financial was in compliance with all covenants associated with this facility as of March 31, 2019 and December 31, 2018.2020.

First Financial's principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. The market value of investment securities classified as AFS totaled ~~$3.1 billion and $2.8~~$2.9 billion at both March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. HTM securities that are maturing within a short period of time can be an additional source of liquidity. As of both March 31, 2020 and December 31, 2019, the Company had no HTM securities maturing within one year. ~~As of December 31, 2018, the Company had $0.8 million HTM securities maturing within one year.~~

Other sources of liquidity include cash and due from banks plus interest-bearing deposits with other ~~banks and loans maturing within one year.~~

banks. At March 31, ~~2019, in addition to liquidity on hand of $219.2 million,~~2020, these balances totaled $333.0 million. First Financial also had unused ~~and available overnight~~ wholesale funding of ~~$3.0~~$2.8 billion, or ~~21.3%~~18.4% of total assets, to fund loan and deposit activities in addition to other general corporate requirements.

Certain restrictions exist regarding the Bank's ability to transfer funds to First Financial in the form of cash dividends, loans, other assets or advances and the approval of the Bank's primary federal regulator is required to pay dividends in excess of regulatory limitations. Dividends paid to First Financial from the Bank totaled $50.0 million for the first three months of ~~2019.~~2020. As of March 31, ~~2019,~~2020, the Bank had retained earnings of ~~$641.0~~$587.5 million, of which ~~$136.7~~$86.1 million was available for distribution to First Financial without prior regulatory approval. ~~Additionally,~~As an additional source of liquidity, First Financial had ~~$107.5~~$74.4 million in cash at the parent company as of March 31, ~~2019, which approximates the Company’s regular annual shareholder dividend and operating expenses.~~2020.

Share repurchases ~~if any,~~ also impact First Financial's liquidity. For further information regarding share repurchases, see the Capital section that follows.

Capital expenditures, such as banking center expansions and technology investments, were ~~$1.3~~$5.8 million and ~~$5.0~~$1.3 million for the first three months of ~~2019~~2020 and ~~2018,~~2019, respectively. Management believes that sufficient liquidity exists to fund its future capital expenditure commitments.

Management is not aware of any other events or regulatory requirements that, if implemented, are likely to have a material effect on First Financial’s liquidity.

CAPITAL

~~Risk-Based Capital.~~Risk-based capital. The Board of Governors of the Federal Reserve System approved Basel III in order to strengthen the regulatory capital framework for all banking organizations, subject to a phase-in period for certain provisions. Basel III established and defined quantitative measures to ensure capital adequacy. These measures require First Financial to maintain minimum amounts and ratios of Common ~~Equity tier~~equity Tier 1 capital, ~~total~~Total and ~~tier~~Tier 1 capital to risk-weighted assets and ~~tier~~Tier 1 capital to average assets ~~(leverage~~(Leverage ratio).

Basel III includes a minimum ratio of ~~common~~Common equity ~~tier~~Tier 1 capital to risk-weighted assets of 7.0% at both March 31, 2020 and December 31, 2019 and ~~6.375% at December 31, 2018 and~~ a phased-in capital conservation buffer of 2.5% of risk-weighted assets that began on January 1, 2016 at 0.625% and was fully phased-in on January 1, 2019. Further, the minimum ratio of Tier 1 capital to risk-weighted assets increased ~~from 4.0%~~ to ~~6.0%~~8.5% at December 31, 2019 and all banks are subject to a 4.0% minimum leverage ratio. The required ~~total~~Total risk-based capital ratio is ~~unchanged.~~10.5%. Failure to maintain the required ~~common~~Common equity Tier 1 capital conservation buffer will result in potential restrictions on a bank’s ability to pay dividends, repurchase stock and pay discretionary compensation to its employees. The capital requirements also provide strict eligibility criteria for regulatory capital instruments and change the method for calculating risk-weighted assets in an effort to better identify riskier assets, such as highly volatile commercial real estate and nonaccrual loans.

~~Management believes,~~First Financial's tier 1 capital decreased to 11.27% at March 31, 2020 from 11.69% at December 31, 2019 as First Financial's total assets exceeded $15.0 billion as of March 31, 2020 and trust preferred securities that were previously included in the calculation of tier 1 capital were excluded and are now considered tier 2 as prescribed by Dodd-Frank. The total capital ratio increased slightly to 13.54% from 13.39% during the same period, while the leverage ratio decreased to 9.18% at March 31, 2020 compared to 9.58% as of December 31, 2019. The Company’s tangible common equity ratio decreased to 8.25% at March 31, 2020 from 9.07% at December 31, 2019 primarily due to the adoption of CECL during the period.

As of March 31, 2020, management believes that First Financial met all capital adequacy requirements to which it was subject. ~~To be categorized as well-capitalized, First Financial must maintain minimum Total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios as set forth in the table that follows.~~ The Company's most recent regulatory notifications categorized First Financial as "well-capitalized" under the regulatory framework for prompt corrective action. There have been no conditions or events since those notifications that management believes have changed the Company's categorization. Total regulatory capital exceeded the minimum requirement by ~~$387.0~~$335.2 million on a consolidated basis at March 31, ~~2019.~~2020.

The following tables present the actual and required capital amounts and ratios as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels based on the phase-in provisions of the Basel III Capital Rules as of the period ~~presented, and for 2018, the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules had been fully phased-in.~~presented. Capital levels required to be considered "well capitalized" are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.


		Actual				Minimum capital required - Basel III				PCA requirement to be considered well capitalized					Actual				Minimum capital required - Basel III				PCA requirement to be considered well capitalized
(Dollars in thousands)		Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio			Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
March 31, 2019
Common equity tier 1 capital to risk-weighted assets
March 31, 2020
Common equity Tier 1 capital to risk-weighted assets														Common equity Tier 1 capital to risk-weighted assets
Consolidated		$	1,246,004	12.03	%	$	725,116	7.00	%	N/A		N/A			$	1,243,152	11.27	%	$	771,914	7.00	%	N/A		N/A
First Financial Bank		1,284,985		12.42	%	724,485		7.00	%	$	672,736	6.50	%		1,324,111		12.01	%	771,670		7.00	%	$	716,551	6.50	%

Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets													Tier 1 capital to risk-weighted assets
Consolidated		1,287,757		12.43	%	880,498		8.50	%	N/A		N/A			1,243,256		11.27	%	937,324		8.50	%	N/A		N/A
First Financial Bank		1,285,089		12.42	%	879,732		8.50	%	827,983		8.00	%		1,324,215		12.01	%	937,028		8.50	%	881,909		8.00	%

Total capital to risk-weighted assets	Total capital to risk-weighted assets													Total capital to risk-weighted assets
Consolidated		1,474,723		14.24	%	1,087,675		10.50	%	N/A		N/A			1,493,100		13.54	%	1,157,871		10.50	%	N/A		N/A
First Financial Bank		1,350,067		13.04	%	1,086,728		10.50	%	1,034,979		10.00	%		1,409,673		12.79	%	1,157,506		10.50	%	1,102,386		10.00	%

Leverage ratio
Consolidated		1,287,757		9.84	%	523,530		4.00	%	N/A		N/A			1,243,256		9.18	%	541,654		4.00	%	N/A		N/A
First Financial Bank		1,285,089		9.83	%	523,086		4.00	%	653,857		5.00	%		1,324,215		9.79	%	541,219		4.00	%	676,524		5.00	%


		Actual				Minimum capital required - Basel III				Required to be considered well capitalized				Minimum capital required - Basel III fully phased-in					Actual				Minimum capital required - Basel III				PCA requirement to be considered well capitalized
(Dollars in thousands)		Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio			Capital amount		Ratio		Capital amount		Ratio		Capital amount		Ratio
December 31, 2018
December 31, 2019
Common equity tier 1 capital to risk-weighted assets	Common equity tier 1 capital to risk-weighted assets																	Common equity tier 1 capital to risk-weighted assets
Consolidated		$	1,215,613	11.87	%	$	652,874	6.38	%	N/A		N/A		$	716,881	7.00	%		$	1,245,746	11.30	%	$	771,666	7.00	%	N/A		N/A
First Financial Bank		1,279,492		12.50	%	652,590		6.38	%	$	665,386	6.50	%	716,570		7.00	%		1,333,978		12.11	%	770,997		7.00	%	$	715,926	6.50	%

Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets																	Tier 1 capital to risk-weighted assets
Consolidated		1,257,366		12.28	%	806,491		7.88	%	N/A		N/A		870,499		8.50	%		1,288,185		11.69	%	937,023		8.50	%	N/A		N/A
First Financial Bank		1,279,596		12.50	%	806,141		7.88	%	818,937		8.00	%	870,120		8.50	%		1,334,082		12.11	%	936,211		8.50	%	881,140		8.00	%

Total capital to risk-weighted assets	Total capital to risk-weighted assets																	Total capital to risk-weighted assets
Consolidated		1,444,146		14.10	%	1,011,314		9.88	%	N/A		N/A		1,075,322		10.50	%		1,475,813		13.39	%	1,157,498		10.50	%	N/A		N/A
First Financial Bank		1,344,388		13.13	%	1,010,875		9.88	%	1,023,671		10.00	%	1,074,855		10.50	%		1,399,817		12.71	%	1,156,496		10.50	%	1,101,425		10.00	%

Leverage ratio
Consolidated		1,257,366		9.71	%	517,958		4.00	%	N/A		N/A		517,958		4.00	%		1,288,185		9.58	%	537,606		4.00	%	N/A		N/A
First Financial Bank		1,279,596		9.89	%	517,710		4.00	%	647,138		5.00	%	517,710		4.00	%		1,334,082		9.93	%	537,299		4.00	%	671,623		5.00	%

First Financial generally seeks to balance the return of earnings to shareholders through shareholder dividends and share repurchases with capital retention, in order to maintain adequate levels of capital and support the Company's growth plans.

Shareholder ~~Dividends.~~dividends. First Financial paid a dividend of ~~$0.22~~$0.23 per common share on March ~~15, 2019~~16, 2020 to shareholders of record as of March ~~1, 2019.~~2, 2020. Additionally, First Financial's board of directors authorized a dividend of ~~$0.22~~$0.23 per common share, payable on June ~~17, 2019~~15, 2020 to shareholders of record as of June ~~3, 2019.~~1, 2020.

Share ~~Repurchases.~~repurchases. In January 2019, First Financial's board of directors approved a stock repurchase plan, ~~in replacement of~~replacing the plan approved in 2012. The 2019 plan authorizes the purchase of up to 5,000,000 shares of the Company's common stock. First Financial repurchased 880,000 shares at an average market price of $18.96 under this plan during the three month period ending March 31, 2020. First Financial did not repurchase any shares under this plan during the three month period ending March 31, 2019. ~~Therefore, at~~At March 31, ~~2019, all 5,000,000~~2020, 1,366,728 common shares remained available for repurchase under the 2019 plan.

ATM ~~Offering.~~offering. In March 2017, First Financial initiated an "at-the-market" equity offering program to provide flexibility with respect to capital planning and to support future growth. First Financial was not active through the ATM program during the current period.

Shareholders' ~~Equity.~~equity. Total shareholders’ equity was ~~$2.1~~$2.2 billion at both March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

For further detail, see the Consolidated Statements of Changes in Shareholders’ Equity.

RISK MANAGEMENT

First Financial manages risk through a structured ERM approach that routinely assesses the overall level of risk, identifies specific risks and evaluates specific actions to mitigate those risks. First Financial continues to enhance its risk management capabilities and has embedded risk awareness into the culture of the Company. First Financial has identified the following types of risk that it monitors in its ERM framework: credit, market, operational, compliance, strategic, reputation, information technology, cyber and legal.

For a full discussion of these risks, see the Enterprise Risk Management section in Management's Discussion and Analysis in First Financial’s ~~2018~~2019 Annual Report on Form 10-K. The sections that follow provide additional discussion related to credit risk and market risk.

CREDIT RISK

Credit risk represents the risk of loss due to failure of a customer or counterparty to meet its financial obligations in accordance with contractual terms. First Financial manages credit risk through its underwriting process, periodically reviewing and approving its credit exposures using credit policies and guidelines approved by the board of directors.

~~ALLL.~~ACL. The ~~ALLL~~ACL is a reserve accumulated on the Consolidated Balance Sheets through the recognition of the provision for loan and lease losses. First Financial records a provision for loan and lease losses in the Consolidated Statements of Income to maintain the ~~ALLL~~ACL at a level considered sufficient to absorb ~~probable incurred loan and lease losses inherent in the portfolio.~~expected credit losses.

The ~~ALLL~~ACL on loans and leases was ~~$56.7~~$143.9 million as of March 31, ~~2019~~2020 and ~~$56.5~~$57.7 million as of December 31, ~~2018.~~2019. As a percentage of period-end loans, the ~~ALLL~~ACL was ~~0.64%~~1.55% as of March 31, ~~2019~~2020 and 0.63% as of December 31, ~~2018.~~ 2019. As detailed in Note 2 - Accounting Standards Recently Adopted or Issued, $61.5 million of the increase in ACL was attributed to the adoption of CECL.

The ~~ALLL is consistent with~~Company utilized the revised Moody's March baseline forecast as its R&S forecast in the quantitative model, which included consideration of the impact from both the COVID-19 pandemic and the related government stimulus response. For reasonableness, the Company also considered the impact to the model from alternative, more adverse economic forecasts, slower prepayment speeds and increased default rates. These alternative analyses were utilized to inform the Company's ~~stable~~qualitative adjustments. Additionally, First Financial considered its credit ~~outlook~~exposure to certain industries believed to be at risk for future credit stress related to the COVID-19 pandemic, such as franchise, hotel and ~~classified asset balances. A lower ALLL as a percentage of period end loans is consistent with GAAP for acquired loans as these loans are recorded at estimated fair value at~~investor commercial real estate lending when making qualitative adjustments to the ~~acquisition date with no carryover of the related ALLL. At March 31, 2019, the fair value of acquired MSFG loans included a $25.6 million credit adjustment.~~first quarter 2020 ACL model.

The ~~ALLL~~ACL as a percentage of nonaccrual loans was ~~95.40%~~296.51% at March 31, ~~2019~~2020 and ~~79.97%~~119.69% at December 31, ~~2018.~~2019. The ~~ALLL~~ACL as a percentage of nonperforming loans, including accruing TDRs, rose to ~~68.94%~~203.42% as of March 31, ~~2019~~2020 from ~~65.13%~~96.73% as of December 31, ~~2018 largely due to a $4.5 million decrease~~2019. These increases were driven by the increase in ~~nonperforming loans.~~the ACL during the first quarter of 2020, which included the adoption of CECL and consideration of the impact from the COVID-19 pandemic on future credit losses.

The Company recorded net recoveries of $0.9 million, or 0.04% of average loans and leases on an annualized basis, in the first quarter 2020, compared to net charge-offs of $13.9 million, or 0.64% of average loans and leases on an annualized basis ~~in the first quarter 2019, compared to net charge-offs of $1.9 million, or 0.13% of average loans and leases on an annualized basis~~ for the comparable quarter in ~~2018. Higher~~2019. Elevated net charge-offs in the first quarter of 2019 were ~~driven by a $10.0 million charge-off during the period related~~attributed to a single franchise ~~lending relationship.~~credit.

Provision expense is a product of the Company's ~~ALLL~~ACL model combined with net charge-off activity during the period. First quarter ~~2019~~2020 provision expense was ~~$14.1~~$23.9 million compared to a provision of ~~$2.3~~$14.1 million during the first quarter in ~~2018.~~2019. Substantially all of the first quarter 2020 provision expense was related to the expected economic impact from COVID-19.

The ACL on unfunded commitments was $14.3 million as of March 31, 2020 and $0.6 million as of December 31, 2019. Additionally, First Financial recorded $1.6 million of provision for credit losses on unfunded commitments for the three months ended March 31, 2020, compared to an insignificant amount in the comparative period in 2019. Similar to the increase in ACL and provision expense on loans and leases, the increase in ACL and provision expense on unfunded commitments was related to the adoption of CECL and consideration of the impact from the COVID-19 pandemic on future credit losses.

See Note 5 – Allowance for ~~Loan and Lease~~Credit Losses in the Notes to Consolidated Financial Statements for further discussion of First Financial's ~~ALLL.~~ACL.

The table that follows includes the activity in the ~~ALLL~~ACL for the quarterly periods presented.


		Three months ended																Three months ended
		2019			2018													2020			2019
(Dollars in thousands)		Mar. 31,			Dec. 31,			Sep. 30,			June 30,			Mar. 31,				Mar. 31,			Dec. 31,			Sep. 30,			June 30,			Mar. 31,
Allowance for loan and lease loss activity
Allowance for credit loss activity																	Allowance for credit loss activity
Balance at beginning of period		$	56,542		$	57,715		$	54,076		$	54,380		$	54,021			$	57,650		$	56,552		$	61,549		$	56,722		$	56,542
Impact of adopting ASC 326																		61,505			0			0			0			0
Provision for loan losses		14,083			5,310			3,238			3,735			2,303				23,880			4,629			5,228			6,658			14,083
Gross charge-offs
Commercial and industrial		12,328			6,060			232			4,356			885				1,091			2,919			9,556			1,873			12,328
Lease financing		100			0			0			0			0				0			62			0			0			100
Construction real estate		0			0			0			0			0				0			0			0			0			0
Commercial real estate		1,214			1,679			902			78			2,176				4			1,854			535			86			1,214
Residential real estate		82			80			145			101			96				115			167			278			150			82
Home equity		468			747			351			385			242				267			807			627			689			468
Installment		49			158			43			218			16				61			31			65			78			49
Credit card		341			392			390			684			254				311			319			598			289			341
Total gross charge-offs		14,582			9,116			2,063			5,822			3,669				1,849			6,159			11,659			3,165			14,582
Recoveries
Commercial and industrial		240			485			627			518			436				2,000			1,796			556			291			240
Lease financing		0			0			0			1			0				0			0			0			0			0
Construction real estate		63			0			146			0			0				0			0			0			5			63
Commercial real estate		73			1,681			786			887			752				234			439			347			254			73
Residential real estate		36			44			71			70			26				52			72			64			101			36
Home equity		185			274			419			187			429				339			243			335			572			185
Installment		48			94			351			82			48				31			49			93			61			48
Credit card		34			55			64			38			34				43			29			39			50			34
Total recoveries		679			2,633			2,464			1,783			1,725				2,699			2,628			1,434			1,334			679
Total net charge-offs		13,903			6,483			(401		)	4,039			1,944				(850		)	3,531			10,225			1,831			13,903
Ending allowance for loan and lease losses		$	56,722		$	56,542		$	57,715		$	54,076		$	54,380
Ending allowance for credit losses																		$	143,885		$	57,650		$	56,552		$	61,549		$	56,722

Net charge-offs to average loans and leases (annualized)	Net charge-offs to average loans and leases (annualized)																Net charge-offs to average loans and leases (annualized)
Commercial and industrial		1.95		%	0.92		%	(0.07		)%	0.64		%	0.10		%		(0.15		)%	0.18		%	1.42		%	0.25		%	1.95		%
Lease financing		0.45		%	0.00		%	0.00		%	0.00		%	0.00		%		0.00		%	0.27		%	0.00		%	0.00		%	0.45		%
Construction real estate		(0.05		)%	0.00		%	(0.10		)%	0.00		%	0.00		%		0.00		%	0.00		%	0.00		%	0.00		%	(0.05		)%
Commercial real estate		0.12		%	0.00		%	0.01		%	(0.08		)%	0.23		%		(0.02		)%	0.14		%	0.02		%	(0.02		)%	0.12		%
Residential real estate		0.02		%	0.02		%	0.03		%	0.01		%	0.06		%		0.02		%	0.04		%	0.08		%	0.02		%	0.02		%
Home equity		0.14		%	0.23		%	(0.03		)%	0.10		%	(0.16		)%		(0.04		)%	0.29		%	0.15		%	0.06		%	0.14		%
Installment		0.00		%	0.27		%	(1.22		)%	0.55		%	(0.32		)%		0.15		%	(0.08		)%	(0.13		)%	0.08		%	0.00		%
Credit card		2.62		%	2.76		%	2.68		%	5.54		%	1.90		%		2.15		%	2.27		%	4.40		%	1.92		%	2.62		%
Total net charge-offs		0.64		%	0.29		%	(0.02		)%	0.18		%	0.13		%		(0.04		)%	0.15		%	0.45		%	0.08		%	0.64		%

MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, foreign exchange rates and equity prices. The primary source of market risk for First Financial is interest rate risk, which is the risk to earnings and the value of the Company's equity arising from changes in market interest rates. Interest rate risk arises in the normal course of business to the extent that there is a divergence between the amount of interest-earning assets and the amount of interest-bearing liabilities that are prepaid, withdrawn, re-priced or mature in specified periods. First Financial seeks to achieve consistent growth in net interest income and equity while managing volatility from shifts in market interest rates.

First Financial monitors ~~the Company's~~its interest rate risk position using income simulation models and EVE sensitivity analyses that capture both short-term and long-term interest rate risk exposure. Income simulation involves forecasting NII under a variety of interest rate scenarios. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest-rate scenarios. First Financial uses EVE sensitivity analysis to understand the impact of changes in interest rates on long-term cash flows, income and capital. For both NII and EVE modeling, First Financial leverages instantaneous parallel shocks to evaluate interest rate risk exposure across rising and falling rate scenarios. Additional scenarios evaluated include ~~implied market forward rate forecasts and~~ various non-parallel yield curve twists.

First Financial’s interest rate risk models are based on the contractual and assumed cash flows and repricing characteristics for the Company’s assets, liabilities and off-balance sheet exposure. A number of assumptions are also incorporated into the interest rate risk models, including prepayment behaviors and repricing spreads for assets in addition to attrition and repricing rates for liabilities. Assumptions are primarily derived from behavior studies of the Company’s historical client base and are continually refined. Modeling the sensitivity of NII and EVE to changes in market interest rates is highly dependent on the assumptions incorporated into the modeling process.

Non-maturity deposit modeling is particularly dependent on the assumption for repricing sensitivity known as a beta. Beta is the amount by which First Financial’s interest bearing non-maturity deposit rates will increase when short-term interest rates rise. The Company utilized a weighted average deposit beta of ~~37%~~36% in its interest rate risk modeling as of March 31, ~~2019.~~2020. First Financial also includes an assumption for the migration of non-maturity deposit balances into CDs for all upward rate scenarios beginning with the +100 bps scenario, thereby increasing deposit costs and reducing asset sensitivity.

Presented below is the estimated impact on First Financial’s NII and EVE position as of March 31, ~~2019,~~2020, assuming immediate, parallel shifts in interest rates:


	% Change from base case for immediate parallel changes in rates						% Change from base case for immediate parallel changes in rates
	-100 bps		+100 bps		+200 bps		-100 bps⁽¹⁾		+100 bps		+200 bps
NII-Year 1	(6.13	)%	3.63	%	6.24	%	(6.63	)%	4.70	%	8.56	%
NII-Year 2	(7.36	)%	3.59	%	6.19	%	(7.15	)%	5.71	%	10.73	%
EVE	(4.55	)%	2.20	%	3.66	%	(6.26	)%	4.18	%	8.20	%
⁽¹⁾ Because certain current interest rates are at or below 1.00%, the 100 basis point downward shock assumes that certain corresponding interest rates approach an implied floor that, in effect, reflects a decrease of less than the full 100 basis point downward shock.							⁽¹⁾ Because certain current interest rates are at or below 1.00%, the 100 basis point downward shock assumes that certain corresponding interest rates approach an implied floor that, in effect, reflects a decrease of less than the full 100 basis point downward shock.

“Risk-neutral” refers to the absence of a strong bias toward either asset or liability sensitivity. “Asset sensitivity” is when a company's interest-earning assets reprice more quickly or in greater quantities than interest-bearing liabilities. Conversely, “liability sensitivity” is when a company's interest-bearing liabilities reprice more quickly or in greater quantities than interest-earning assets. In a rising interest rate environment, asset sensitivity results in higher net interest income while liability sensitivity results in lower net interest income. In a declining interest rate environment, asset sensitivity results in lower net interest income while liability sensitivity results in higher net interest income.

First Financial was within policy limits set for the disclosed interest rate scenarios as of March 31, ~~2019.~~2020. The projected results for NII and EVE reflected ~~moderate~~an asset ~~sensitivity during the first quarter of 2019. The results reflect higher asset sensitivity compared~~sensitive position, which has increased in recent quarters due to the linked quarter as modeled deposit betas were adjusted lower to reflect recent deposit pricing trends, as well as a slight shift in funding composition away from transactional deposits to term funding.elevated variable rate loan production. First Financial continues to manage its balance sheet with a bias toward neutrality or slight asset sensitivity while simultaneously balancing the potential earnings impact of this strategy.

First Financial continually evaluates the sensitivity of its interest rate risk position to modeling assumptions. The following table reflects First Financial’s estimated NII sensitivity profile as of March 31, ~~2019~~2020 assuming a 25% increase and a 25% reduction to the beta assumption on managed rate deposits:


	Beta sensitivity (% change from base)								Beta sensitivity (% change from base)
	+100 BP				+200 BP				+100 BP				+200 BP
	Beta 25% lower		Beta 25% higher		Beta 25% lower		Beta 25% higher		Beta 25% lower		Beta 25% higher		Beta 25% lower		Beta 25% higher
NII-Year 1	4.51	%	2.75	%	7.09	%	5.39	%	5.68	%	3.72	%	9.51	%	7.61	%
NII-Year 2	4.46	%	2.72	%	7.02	%	5.36	%	6.67	%	4.75	%	11.66	%	9.80	%

See the Net Interest Income section of Management’s Discussion and Analysis for further discussion.

CRITICAL ACCOUNTING POLICIES

First Financial’s Consolidated Financial Statements are prepared based on the application of the Company's accounting policies. These policies require the reliance on estimates and ~~assumptions.~~assumptions which are inherently subjective and may be susceptible to significant change. Changes in underlying factors, assumptions or estimates could have a material impact on First Financial’s future financial condition and results of operations. In management’s opinion, certain accounting policies have a more significant impact than others on First Financial’s financial reporting. For First Financial, these policies currently include accounting for the ~~ALLL,~~ACL - loans and leases, goodwill, pension and income taxes. These accounting policies are discussed in detail in the Critical Accounting Policies section of Management’s Discussion and Analysis in First Financial’s ~~2018~~2019 Annual Report. There were no ~~material~~ changes to ~~these~~the accounting policies for goodwill, pension and income taxes during the three months ended March 31, ~~2019.~~2020. Subsequent to the adoption of ASC 326 in the first quarter of 2020, the Company's accounting policy for the ACL - loans and leases is now as follows:

Allowance for credit losses - loans and leases.The allowance for credit losses is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management's determination of the adequacy of the ACL is based on an assessment of the expected credit losses on loan and leases over the expected life of the loan. The ACL is generally increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. Loans are charged off when management believes that the collection of the principal amount owed in full, either through payments from the borrower or from the liquidation of collateral, is unlikely. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Any interest that is accrued but not collected is reversed against interest income when a loan is placed on nonaccrual status, which typically occurs prior to charging off all, or a portion, of a loan. Accrued interest receivable on loans and leases is excluded from the estimate of credit losses.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience paired with economic forecasts provides the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the Qualitative Framework.

First Financial quantitatively models expected credit loss using Probability of Default (“PD”), Loss Given Default (“LGD”), and Exposure at Default (“EAD”) over the Reasonable and Supportable (“R&S”) forecast, reversion and post-reversion periods.

First Financial is not required to develop forecasts over the full contractual term of the financial asset or group of financial assets. Rather, for periods beyond which the entity is able to make or obtain R&S forecasts of expected credit losses, the Company reverts in a straight line manner over a one year period to an average TTC loss level that is reflective of the prepayment adjusted contractual term of the financial asset or group of financial assets. The R&S forecast period, elected by the bank to be two years, is forecasted using econometric data sourced from an industry-leading independent third party.

To the extent actual outcomes differ from management's estimates, additional provision for credit losses may be required that would impact First Financial's operating results.

ACCOUNTING AND REGULATORY MATTERS

Note 2 - Recently Adopted and Issued Accounting Standards in the Notes to Consolidated Financial Statements discusses new accounting standards adopted by First Financial in ~~2019,~~2020, as well as the expected impact of accounting standards issued but not yet adopted. To the extent the adoption of new accounting standards materially affects financial condition, results of operations or liquidity, the impacts are discussed in the applicable Notes to the Consolidated Financial Statements and sections of Management’s Discussion and Analysis.

FORWARD-LOOKING STATEMENT

Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as ‘‘believes,’’ ‘‘anticipates,’’ “likely,” “expected,” “estimated,” ‘‘intends’’ and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to, statements we make about (i) our future operating or financial performance, including revenues, income or loss and earnings or loss per share, (ii) future common stock dividends, (iii) our capital structure, including future capital levels, (iv) our plans, objectives and strategies, and (v) the assumptions that underlie our forward-looking statements.

As with any forecast or projection, forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that may cause actual results to differ materially from those set forth in the forward-looking statements. Forward-looking statements are not historical facts but instead express only management’s beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management’s control. It is possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements. Important factors that could cause actual results to differ materially from those in our forward-looking statements include the following, without limitation: ~~(i)~~

economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company’s business; ~~(ii)~~

future credit quality and performance, including our expectations regarding future loan losses and our allowance for credit losses;

the effect of and changes in policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislation and regulation relating to the banking industry; ~~(iii)~~(iv) management’s ability to effectively execute its business plans; ~~(iv)~~

mergers and acquisitions, including costs or difficulties related to the integration of acquired companies; ~~(v)~~

the possibility that any of the anticipated benefits of the Company’s ~~merger with MainSource Financial Group, Inc.~~acquisitions will not be realized or will not be realized

within the expected time period; ~~(vi)~~

the effect of changes in accounting policies and practices; ~~(vii)~~

changes in consumer spending, borrowing and saving and changes in unemployment; ~~(viii)~~

changes in customers’ performance and creditworthiness; ~~and (ix)~~

the costs and effects of litigation and of unexpected or adverse outcomes in such ~~litigation.~~ litigation;

current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth;

the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which causes the Coronavirus disease 2019 (“COVID-19”), global pandemic, and the impact of a slowing U.S. economy and increased unemployment on the performance of our loan and lease portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products;

our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;

financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;

the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;

the effect of a fall in stock market prices on our brokerage, asset and wealth management businesses;

a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks;

the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; and

our ability to develop and execute effective business plans and strategies.

Additional factors that may cause our actual results to differ materially from those described in our forward-looking statements can be found in the Form 10-K for the year ended December 31, ~~2018,~~2019, as well as our other filings with the SEC, which are available on the SEC website at www.sec.gov.

All forward-looking statements included in this filing are made as of the date hereof and are based on information available at the time of the filing. Except as required by law, the Company does not assume any obligation to update any forward-looking statement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information contained in “Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations—Market Risk” of this report is incorporated herein by reference in response to this item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under

Rule 13a-15 of the Securities Exchange Act of 1934, that are designed to cause the material information required to be disclosed by First Financial in the reports it files or submits under the Securities Exchange Act of 1934 to be recorded, processed, summarized, and reported to the extent applicable within the time periods required by the Securities and Exchange Commission’s rules and forms. In designing and evaluating the disclosure controls and procedures, management recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

As of the end of the period covered by this report, First Financial performed an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

NoEffective January 1, 2020, First Financial adopted the CECL accounting standard. The Company designed new controls and modified existing controls in conjunction with its adoption. These additional controls over financial reporting included controls over model creation and design, model governance and model assumptions, among others. There were no other changes ~~were made to the Company's~~in First Financial's internal control over financial reporting ~~(as defined in Rule 13a-15 under the Securities Exchange Act of 1934)~~that occurred during the ~~last fiscal quarter~~period covered by this report that have materially affected, or are reasonably likely to materially affect, ~~the Corporation’s~~First Financial's internal control over financial reporting.

PART II-OTHER INFORMATION


Item 1.	Legal Proceedings.

There have been no material changes to the disclosure in response to "Part I - Item 3. Legal Proceedings" in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.


Item 1A.	Risk Factors.

There are a number of factors that may adversely affect the Company's business, financial results, or stock price. See "Risk Factors" as disclosed in response to "Item 1A. to Part I - Risk Factors" of Form 10-K for the year ended December 31, ~~2018.~~2019.

There have been no material changes from the risk factors previously disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, except as described below.

The COVID-19 pandemic is adversely affecting us and our customers, employees, and third-party service providers, and the adverse impacts on our business, financial position, results of operations, and prospects could be significant.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, increased unemployment levels and decreased consumer confidence generally. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. The pandemic could influence the recognition of credit losses in our loan portfolios and increase our allowance for credit losses, particularly as businesses remain closed and as more customers are expected to draw on their lines of credit or seek additional loans to help finance their businesses. Furthermore, the pandemic could affect the stability of our deposit base as well as our capital and liquidity position, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, result in lost revenue and cause us to incur additional expenses. Similarly, because of changing economic and market conditions affecting issuers, we may be required to recognize other-than-temporary impairments in future periods on the securities we hold as well as reductions in other comprehensive income.

The extent of the impact of the COVID-19 pandemic on our capital, liquidity, and other financial positions and on our business, results of operations, and prospects will depend on a number of evolving factors, including:


•	The duration, extent, and severity of the pandemic. COVID-19 has not been contained and could affect significantly more households and businesses. The duration and severity of the pandemic continue to be impossible to predict.

•

The response of governmental and nongovernmental authorities. Many of the actions taken by authorities have been directed at curtailing personal and business activity to contain COVID-19 while simultaneously deploying fiscal-and monetary-policy measures to assist in mitigating the adverse effects on individuals and businesses. These actions are not consistent across jurisdictions but, in general, have been rapidly expanding in scope and intensity.


•	The effect on our customers, counterparties, employees, and third-party service providers. COVID-19 and its associated consequences and uncertainties may affect individuals, households, and businesses differently and unevenly. In the near-term if not longer, however, our credit, operational, and other risks are generally expected to increase.


•	The effect on economies and markets. Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear. National, regional, and local economies and markets could suffer disruptions that are lasting.

•

The success of hardship relief efforts to bridge the gap to reopening the economy. The U.S. government has implemented programs to directly compensate individuals and grant or loan money to businesses in an effort to provide funding while the economy is shut down. Many banks, including the Bank, have implemented hardship relief programs that include payment deferral and short-term funding options. The success of these programs could mute the effect on the Company's credit losses, which may be difficult to determine.

The duration of these business interruptions and related impacts on our business and operations, which will depend on future developments, are highly uncertain and cannot be reasonably estimated at this time. The pandemic could cause us to experience higher credit losses in our lending portfolio, impairment of our goodwill and other financial assets, reduced demand for our products and services, and other negative impacts on our financial position, results of operations, and prospects. You should consider that the effects of COVID-19 could be particularly pronounced with respect to certain of our lending portfolios:


•	Commercial real estate-retail, including retail shopping centers, due to declining interest in such spaces by their users and declining interest in visiting large shared spaces. As of March 31, 2020, the retail portion of our ICRE portfolio was $846 million, or 11% of our loan portfolio.


•	Residential real estate, due to customers' potential loss of income. As of March 31, 2020, this portfolio was $1.1 billion, or 12% of our loan portfolio.


•	Franchise, which primarily includes quick service and casual dining, due to stay at home orders and requirements that restaurants provide carry-out only service. As of March 31, 2020, this portfolio was $455 million, or 4.9% of our loan portfolio.


•	Hospitality, including hotel and motel lending, due to travel limitations implemented by governments and businesses as well as declining interest in travel generally. As of March 31, 2020, this portfolio was $401 million, or 4.3% of our loan portfolio.

In March 2020, we announced programs to support customers, employees, and communities during the COVID-19 pandemic. A significant number of our borrowers have enrolled in one of our programs to defer all loan payments for up to 90 days. These programs may negatively impact our revenue and other results of operations in the near term and, if not effective in mitigating the effect of COVID-19 on our customers, may adversely affect our business and results of operations more substantially over a longer period of time.

The cumulative effects of COVID-19 and the measures implemented by governments to combat the pandemic on the mortgaged properties may cause borrowers to be unable to meet their payment obligations under mortgage loans that we hold and may result in significant losses. In addition, we have sold mortgage loans in the secondary market. When we sell loans, we are required to make customary representations and warranties about such loans to the loan purchaser. Our mortgage loan sale agreements may require us to repurchase or substitute loans or indemnify investors in the event we breach a representation or warranty given to the loan purchaser or in the event of an early payment default. Higher delinquencies as a result of COVID-19 may result in our having to repurchase a significantly larger amount of delinquent mortgage loans than are currently reserved for in our financial statements and result in them being placed on our books, subjecting us to the risk of a potential default.

The extent to which COVID-19 impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after COVID-19 has subsided, we may continue to experience materially adverse impacts to our business as a result of the virus's global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations and heighten many of our known risks described in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The outbreak of COVID-19, or an outbreak of other highly infectious or contagious diseases, could disrupt banking and other financial activity in the areas in which we operate and could potentially create widespread business continuity issues for us.

Our business is dependent upon the willingness and ability of our employees and customers to conduct banking and other financial transactions. We rely upon our third-party vendors to conduct business and to process, record, and monitor transactions. If any of these vendors are unable to continue to provide us with these services, it could negatively impact our ability to serve our customers. Furthermore, the outbreak could negatively impact the ability of our employees and customers to engage in banking and other financial transactions in the geographic areas in which we operate and could create widespread business continuity issues for us. We have already shifted a substantial portion of our workforce to work remotely and have restricted access to our branch lobbies. However, we could be adversely affected if key personnel or a significant number of employees were to become unavailable due to the effects and restrictions of a COVID-19 outbreak in one or more of our market areas. We also face heightened cybersecurity, information security and operational risks as a result of work-from-home arrangements.

Changes in market interest rates or capital markets, including volatility resulting from the COVID-19 pandemic, could affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital or liquidity.

The COVID-19 pandemic has significantly affected the financial markets and has resulted in a number of Federal Reserve actions. Market interest rates have declined significantly. On March 3, 2020, the 10-year Treasury yield fell below 1.00% for the first time, and the Federal Reserve reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%. On March 15, 2020, the Federal Reserve further reduced the target federal funds rate by 100 basis points to 0.00% to 0.25% and

announced a $700 billion quantitative easing program in response to the expected economic downturn caused by the COVID-19 pandemic. The Federal Reserve reduced the interest that it pays on excess reserves from 1.60% to 1.10% on March 3, 2020, and then to 0.10% on March 15, 2020. We expect that these reductions in interest rates, especially if prolonged, could adversely affect our net interest income and margins and our profitability.

Given our business mix, and the fact that most of our assets and liabilities are financial in nature, we tend to be sensitive to market interest rate movements and the performance of the financial markets. Our primary source of income is net interest income, which is the difference between the interest income generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the interest expense generated by our interest-bearing liabilities. Prevailing economic conditions, fiscal and monetary policies and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which, in turn, significantly affect financial institutions' net interest income. If the interest we pay on deposits and other borrowings increases at a faster rate than increases in the interest we receive on loans and investments, net interest income, and, therefore, our earnings, could be affected. Earnings could also be affected if the interest we receive on loans and other investments falls more quickly than the interest we pay on deposits and other borrowings.

In addition to the general impact of the economy, changes in interest rates or in valuations in the debt or equity markets could directly impact us in one or more of the following ways:

the yield on earning assets and rates paid on interest bearing liabilities may change in disproportionate ways;

the value of certain balance sheet and off-balance sheet financial instruments or the value of equity investments that we hold could decline;

the value of assets for which we provide processing services could decline;

the demand for loans and refinancings may decline, which could negatively impact income related to loan originations; or

to the extent we access capital markets to raise funds to support our business, such changes could affect the cost of such funds or the ability to raise such funds.

In addition, the continued spread of COVID-19 has also led to disruption and volatility in financial markets, which could increase our cost of capital and adversely affect our ability to access financial markets, which may in turn affect the value of the subordinated notes. In addition, in March 2020, Moody's Investor Services downgraded its outlook on U.S. banks to "negative" from "stable" due in part to the concerns presented by the coronavirus pandemic. This market volatility has resulted in a significant decline, and we may continue to experience further declines, in our stock price and market capitalization, which could result in goodwill impairment charges.

Declining values of real estate, increases in unemployment, insurance market disruptions and the related effects on local economies, including impacts related to the COVID-19 pandemic, may increase our credit losses, which would negatively affect our financial results.

We offer a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans. Many of our loans are secured by real estate (both residential and commercial) within our market area. A major change in the real estate market, such as deterioration in the value of collateral, or in the local or national economy, could affect our customers' ability to pay these loans, which in turn could impact our results of operations and financial condition. Additionally, increases in unemployment also may affect the ability of certain clients to repay loans and the financial results of commercial clients in localities with higher unemployment, may result in loan defaults and foreclosures and may impair the value of our collateral. Additionally, a concentration of natural disasters or a significant disruption in the insurance market could impact the risk relating to our insurance lending business. We cannot fully eliminate credit risk, and as a result, credit losses may increase in the future.

The sharp deterioration in the United States economy that has resulted from the COVID-19 virus and the actions taken by the federal and state governments to slow the spread of that virus have resulted in a significant increase in the unemployment rate throughout the United States, including in the local economies in which we conduct business. We anticipate that this increase in unemployment will affect the ability of some of our clients to repay their loans on a timely basis and will adversely affect the financial results of our commercial clients in localities with high unemployment, resulting in loan defaults and the possible impairments in the value of our collateral. These developments could adversely impact our results of operations and financial condition, although the extent of such impact cannot be determined at this time and may be muted by the Bank's implementation of hardship relief programs that include payment deferral and short-term funding options.

Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.

Like all financial institutions, we maintain an allowance for credit losses to provide for loans in our portfolio that may not be repaid in their entirety. Our allowance for credit losses may not be sufficient to cover actual loan losses, and future provision for credit losses could materially and affect our operating results. The accounting measurements related to impairment and the allowance for credit losses require significant estimates which are subject to uncertainty and change related to new information

and changing circumstances. Our estimates of the risk of loss and amount of loss on any loan are complicated by the significant uncertainties surrounding our borrowers' abilities to successfully execute their business models through changing economic environments, competitive challenges and other factors. Because of the degree of uncertainty and susceptibility of these factors to change, our actual losses may vary from our current estimates.

Our regulators, as an integral part of their examination process, periodically review our allowance for credit losses and may require us to increase our allowance for credit losses by recognizing additional provision for losses charged to expense, or to decrease our allowance for credit losses by recognizing loan charge-offs, net of recoveries. Any such additional provision for loan losses or charge-offs, as required by these regulatory agencies, could have a material effect on our financial condition and results of operations.

We adopted CECL in the first quarter of 2020, including the regulatory phase-in. As a result, credit loss allowances increased in the quarter ended March 31, 2020, by approximately $100.0 million, resulting in a corresponding decrease in retained earnings and a delayed impact to regulatory capital. CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to errors, financial misstatements or operational losses. As a result of CECL, our financial results may be negatively affected as soon as weak or deteriorating economic conditions are forecasted and alter our expectations for credit losses. As a result of COVID-19, we incurred a significant provision expense of $23.9 million in the first quarter of 2020 and may incur significant provision expense for credit losses in future periods as well.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds


(c)	The following table shows the total number of shares repurchased in the first quarter of ~~2019.~~2020.

Issuer Purchases of Equity Securities

(a) (b) (c) (d)
Period
Total Number
Of Shares
Purchased ⁽¹⁾

Average
Price Paid
Per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans ⁽²⁾

Maximum Number of
Shares that may yet
be purchased Under
the Plans
January 1 to January 31, 2019

Share repurchase program 0
$ 0.00
0
5,000,000
Stock Plans 15,769
26.69
N/A
N/A
February 1 to February 28, 2019

Share repurchase program 0
$ 0.00
0
5,000,000
Stock Plans 8,785
28.10
N/A
N/A
March 1 to March 31, 2019

Share repurchase program 0
$ 0.00
0
5,000,000
Stock Plans 0
0.00
N/A
N/A
Total

Share repurchase program 0
$ 0.00
0

Stock Plans 24,554
$ 27.19
N/A

~~(1)~~

The number of shares purchased in column (a) and the average price paid per share in column (b) include the purchase of shares other than through publicly announced plans. The shares purchased other than through publicly announced plans were purchased pursuant to First Financial’s Amended and Restated 2012 Stock Plan (collectively referred to hereafter as the Stock Plan). The table shows the number of shares purchased pursuant to the Stock Plan and the average price paid per share. Under the Stock Plan, shares were purchased from plan participants at the then current market value in satisfaction of stock option exercise prices.


~~(2)~~	First Financial has one previously announced stock repurchase plan under which it is authorized to purchase shares of its common stock. The plan will continue for 24 months following its adoption by the Board of Directors. The table that follows provides additional information regarding this plan.

Announcement
Date

Total Shares
Approved for
Repurchase

Total Shares
Repurchased
Under
the Plan

Expiration
Date
1/14/2019 5,000,000
0
None



	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Maximum Number of Shares that may yet be purchased Under the Plans
January 1 to January 31, 2020	0	$	0.00	0	2,246,728
February 1 to February 29, 2020	170,000	$	21.90	170,000	2,076,728
March 1 to March 31, 2020	710,000	$	18.26	710,000	1,366,728
Total	880,000	$	18.96	880,000

In January 2019, the First Financial Board of Directors approved a stock repurchase plan pursuant to which the Company is authorized to repurchase up to 5,000,000 shares of stock through December 31, 2021.

Item 6. Exhibits



(a)	Exhibits:

Exhibit Number
3.1		Amended Articles of Incorporation of First Financial Bancorp (reflecting all amendments filed with the Ohio Secretary of State) [for purposes of SEC reporting compliance only - not filed with the Ohio Secretary of State] (filed as Exhibit 3.2 to the Form S-3 on July 31, 2014 and incorporated herein by reference) (File No. 333-197771).

3.2		Amended and Restated Regulations of First Financial Bancorp, amended as of July 28, 2015 (filed as Exhibit 3.1 to the Form 8-K filed on July 29, 2015 and incorporated herein by reference).

31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

32.1		Certification of Periodic Financial Report by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.

32.2		Certification of Periodic Financial Report by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.

101.1		Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, ~~2019,~~2020, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, as blocks of text and in detail.*

First Financial will furnish, without charge, to a security holder upon request a copy of the documents and will furnish any other Exhibit upon payment of reproduction costs. Unless as otherwise noted, documents incorporated by reference involve File No. 001-34762.

* As provided in Rule 406T of Regulation S-T, this information shall not be deemed “filed” for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



		FIRST FINANCIAL BANCORP.
		(Registrant)

/s/ James M. Anderson		/s/ Scott T. Crawley
James M. Anderson		Scott T. Crawley
Executive Vice President and Chief Financial Officer		First Vice President and Controller
		(Principal Accounting Officer)


Date	5/~~7/2019~~8/2020	Date	5/~~7/2019~~8/2020

5365



(Dollars in thousands)	MainSource
Purchase consideration
Cash consideration	$	43
Stock consideration	1,043,424
Warrant consideration	14,460
Options consideration	1,577
Total purchase consideration	1,059,504

Assets acquired
Cash	71,806
Investment securities available-for-sale	900,935
Investment securities held-to-maturity	171,423
Other investments	28,763
Loans	2,792,572
Premises and equipment	98,814
Intangible assets	42,887
Other assets	167,829
Assets held for sale	127,775
Total assets acquired	4,402,804

Liabilities assumed
Deposits	3,263,920
Subordinated notes	49,027
FHLB advances	291,887
Other borrowings	205,620
Other liabilities	32,649
Liabilities held for sale	175,840
Total liabilities assumed	4,018,943

Net identifiable assets	383,861
Goodwill	$	675,643



	Twelve months ended
	December 31,
(Dollars in thousands, except per share data)	2018		2017
Pro Forma Condensed Combined Income Statement Information
Net interest income	$	484,915	$	454,579
Net income	221,122		130,402
Basic earnings per share	2.27		1.34
Diluted earnings per share	2.25		1.33



	(a)	(b)		(c)	(d)
Period	Total Number Of Shares Purchased ⁽¹⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans ⁽²⁾	Maximum Number of Shares that may yet be purchased Under the Plans
January 1 to January 31, 2019
Share repurchase program	0	$	0.00	0	5,000,000
Stock Plans	15,769	26.69		N/A	N/A
February 1 to February 28, 2019
Share repurchase program	0	$	0.00	0	5,000,000
Stock Plans	8,785	28.10		N/A	N/A
March 1 to March 31, 2019
Share repurchase program	0	$	0.00	0	5,000,000
Stock Plans	0	0.00		N/A	N/A
Total
Share repurchase program	0	$	0.00	0
Stock Plans	24,554	$	27.19	N/A



Announcement Date	Total Shares Approved for Repurchase	Total Shares Repurchased Under the Plan	Expiration Date
1/14/2019	5,000,000	0	None

March 31, 2020

December 31, 2019

Operating leases

Weighted-average remaining lease term

Weighted-average discount rate