First Financial (THFF) 10-Q 2024 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended September 30, 2024

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

For the transition period from                   to                   

Commission File Number 0-16759

FIRST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Indiana	35-1546989
(State or other jurisdiction	(I.R.S. Employer
incorporation or organization)	Identification No.)
One First Financial Plaza, Terre Haute, IN	47807
(Address of principal executive office)	(Zip Code)
(812)	238-6000
(Registrant’s telephone number, including area code)

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, par value $0.125 per share	THFF	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 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 ☑  No  ☐.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑   No  ☐.

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

Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☐
Emerging growth company	☐

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 7(a)(2)(B) of the Securities Act.  ☐

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

Yes ☐ No ☑.

As of November 1, 2024, the registrant had outstanding 11,808,304 shares of common stock, without par value.

FIRST FINANCIAL CORPORATION

FORM 10-Q

INDEX

	Page No.
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets	3
Consolidated Statements of Income and Comprehensive Income	4
Consolidated Statements of Shareholders’ Equity	5
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3. Quantitative and Qualitative Disclosures about Market Risk	36
Item 4. Controls and Procedures	42
PART II. Other Information:
Item 1. Legal Proceedings	43
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3. Defaults upon Senior Securities	43
Item 4. Mine Safety Disclosures	43
Item 5. Other Information	43
Item 6. Exhibits	44
Signatures	45

2

Part I – Financial Information

Item 1.Financial Statements

FIRST FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Dollar amounts in thousands, except per share data)

	September 30,		December 31,
	2024		2023
	(unaudited)
ASSETS
Cash and due from banks	$	77,312	$	76,759
Federal funds sold		1,356		282
Securities available-for-sale		1,271,992		1,259,137
Loans:
Commercial		2,112,738		1,817,526
Residential		924,276		695,788
Consumer		671,353		646,758
		3,708,367		3,160,072
(Less) plus:
Net deferred loan (fees)/costs		6,868		7,749
Allowance for credit losses		(46,169)		(39,767)
		3,669,066		3,128,054
Restricted stock		15,366		15,364
Accrued interest receivable		25,386		24,877
Premises and equipment, net		82,213		67,286
Bank-owned life insurance		128,242		114,122
Goodwill		97,295		86,985
Other intangible assets		23,131		5,586
Other real estate owned		169		107
Other assets		93,084		72,587
TOTAL ASSETS	$	5,484,612	$	4,851,146
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest-bearing	$	831,575	$	750,335
Interest-bearing:
Certificates of deposit exceeding the FDIC insurance limits		159,618		92,921
Other interest-bearing deposits		3,726,296		3,246,812
		4,717,489		4,090,068
Short-term borrowings		84,363		67,221
Other borrowings		30,456		108,577
Other liabilities		86,353		57,304
TOTAL LIABILITIES		4,918,661		4,323,170
Shareholders’ equity
Common stock, $0.125 stated value per share; Authorized shares - 40,000,000; Issued shares-16,165,023 in 2024 and 16,137,220 in 2023; Outstanding shares - 11,808,304 in 2024 and 11,795,024 in 2023		2,016		2,014
Additional paid-in capital		144,785		144,152
Retained earnings		677,155		663,726
Accumulated other comprehensive loss		(102,800)		(127,087)
Less: Treasury shares at cost - 4,356,719 in 2024 and 4,342,196 in 2023		(155,205)		(154,829)
TOTAL SHAREHOLDERS’ EQUITY		565,951		527,976
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,484,612	$	4,851,146

See accompanying notes.

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FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Dollar amounts in thousands, except per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
INTEREST INCOME:
Loans, including related fees	$	61,367	$	49,146	$	162,878	$	140,220
Securities:
Taxable		6,319		6,164		18,083		18,631
Tax-exempt		2,715		2,661		7,919		7,937
Other		1,294		752		2,989		2,864
TOTAL INTEREST INCOME		71,695		58,723		191,869		169,652
INTEREST EXPENSE:
Deposits		22,197		13,627		59,622		35,111
Short-term borrowings		993		1,923		2,928		4,025
Other borrowings		1,335		2,023		3,935		2,844
TOTAL INTEREST EXPENSE		24,525		17,573		66,485		41,980
NET INTEREST INCOME		47,170		41,150		125,384		127,672
Provision for credit losses		9,400		1,200		14,166		4,800
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		37,770		39,950		111,218		122,872
NON-INTEREST INCOME:
Trust and financial services		1,251		1,140		3,903		3,642
Service charges and fees on deposit accounts		8,139		7,099		21,576		20,971
Other service charges and fees		191		213		700		613
Securities gains (losses), net		103		—		104		—
Interchange income		177		—		490		47
Loan servicing fees		274		447		957		997
Gain on sales of mortgage loans		411		321		886		811
Other		677		2,407		1,943		4,374
TOTAL NON-INTEREST INCOME		11,223		11,627		30,559		31,455
NON-INTEREST EXPENSE:
Salaries and employee benefits		18,521		17,159		53,231		51,263
Occupancy expense		2,556		2,389		7,116		7,120
Equipment expense		4,280		3,580		12,736		10,404
FDIC Expense		558		613		1,721		1,977
Other		12,649		8,524		29,833		25,168
TOTAL NON-INTEREST EXPENSE		38,564		32,265		104,637		95,932
INCOME BEFORE INCOME TAXES		10,429		19,312		37,140		58,395
Provision for income taxes		1,688		3,027		6,106		10,143
NET INCOME		8,741		16,285		31,034		48,252
OTHER COMPREHENSIVE INCOME (LOSS)
Change in unrealized gains/(losses) on securities, net of reclassifications and taxes		31,628		(34,934)		24,067		(36,504)
Change in funded status of post retirement benefits, net of taxes		73		146		220		440
COMPREHENSIVE INCOME (LOSS)	$	40,442	$	(18,503)	$	55,321	$	12,188
PER SHARE DATA
Basic and Diluted Earnings per Share	$	0.74	$	1.37	$	2.63	$	4.02
Weighted average number of shares outstanding (in thousands)		11,808		11,901		11,809		11,993

See accompanying notes.

4

FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three Months Ended

September 30, 2024, and 2023

(Dollar amounts in thousands, except per share data)

(Unaudited)

							Accumulated
							Other
	Common		Additional		Retained		Comprehensive		Treasury
	Stock		Capital		Earnings		Income/(Loss)		Stock		Total
Balance, July 1, 2023	$	2,013	$	143,632	$	640,325	$	(141,250)	$	(147,832)	$	496,888
Net income		—		—		16,285		—		—		16,285
Other comprehensive income (loss)		—		—		—		(34,788)		—		(34,788)
Omnibus Equity Incentive Plan		1		223		—		—		—		224
Treasury shares purchased (228,457 shares)		—		—		—		—		(8,441)		(8,441)
Balance, September 30, 2023	$	2,014	$	143,855	$	656,610	$	(176,038)	$	(156,273)	$	470,168
Balance, July 1, 2024	$	2,016	$	144,632	$	673,728	$	(134,501)	$	(155,205)	$	530,670
Net income		—		—		8,741		—		—		8,741
Other comprehensive income (loss)		—		—		—		31,701		—		31,701
Omnibus Equity Incentive Plan		—		153		—		—		—		153
Cash dividends, $.45 per share		—		—		(5,314)		—		—		(5,314)
Balance, September 30, 2024	$	2,016	$	144,785	$	677,155	$	(102,800)	$	(155,205)	$	565,951

See accompanying notes.

5

FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Nine Months Ended

September 30, 2024, and 2023

(Dollar amounts in thousands, except per share data)

(Unaudited)

							Accumulated
							Other
	Common		Additional		Retained		Comprehensive		Treasury
	Stock		Capital		Earnings		Income/(Loss)		Stock		Total
Balance, January 1, 2023	$	2,012	$	143,185	$	614,829	$	(139,974)	$	(144,759)	$	475,293
Net income		—		—		48,252		—		—		48,252
Other comprehensive income (loss)		—		—		—		(36,064)		—		(36,064)
Omnibus Equity Incentive Plan		2		670		—		—		—		672
Treasury shares purchased (319,664 shares)		—		—		—		—		(11,514)		(11,514)
Cash dividends, $.54 per share		—		—		(6,471)		—		—		(6,471)
Balance, September 30, 2023	$	2,014	$	143,855	$	656,610	$	(176,038)	$	(156,273)	$	470,168
Balance, January 1, 2024	$	2,014	$	144,152	$	663,726	$	(127,087)	$	(154,829)	$	527,976
Cumulative change in accounting principle ASU 2023-02		—		—		(1,659)		—		—		(1,659)
Net income		—		—		31,034		—		—		31,034
Other comprehensive income (loss)		—		—		—		24,287		—		24,287
Omnibus Equity Incentive Plan		2		633		—		—		—		635
Treasury shares purchased (8,734 shares)		—		—		—		—		(376)		(376)
Cash dividends, $.90 per share		—		—		(15,946)		—		—		(15,946)
Balance, September 30, 2024	$	2,016	$	144,785	$	677,155	$	(102,800)	$	(155,205)	$	565,951

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FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands, except per share data)

	Nine Months Ended
	September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	31,034	$	48,252
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization (accretion) of premiums and discounts on investments		3,489		3,817
Provision for credit losses		14,166		4,800
Securities (gains)/losses		(104)		—
Depreciation and amortization		6,617		4,903
Restricted stock compensation		635		672
Gain on sale of mortgage loans		(886)		(811)
(Gain) Loss on sale of other real estate		(60)		26
Other, net		(10,376)		4,534
NET CASH FROM OPERATING ACTIVITIES		44,515		66,193
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available-for-sale		50,662		—
Calls, maturities and principal reductions on securities available-for-sale		82,204		83,640
Purchases of securities available-for-sale		(40,096)		(29,650)
Loans made to customers, net of repayment		(85,682)		(54,314)
Net change in federal funds sold		(1,074)		8,686
Redemption of restricted stock		745		—
Purchase of restricted stock		(21)		(20)
Cash received (disbursed) from acquisitions, net		28,152		—
Proceeds from sales of other real estate owned		316		270
Additions to premises and equipment		(5,070)		(5,282)
NET CASH FROM INVESTING ACTIVITIES		30,136		3,330
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits		4,947		(327,334)
Net change in short-term borrowings		17,142		61,859
Dividends paid		(15,934)		(15,383)
Purchase of treasury stock		(376)		(11,514)
Proceeds from other borrowings		1,525,000		1,430,000
Maturities of other borrowings		(1,604,877)		(1,355,000)
NET CASH FROM FINANCING ACTIVITIES		(74,098)		(217,372)
NET CHANGE IN CASH AND CASH EQUIVALENTS		553		(147,849)
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD		76,759		222,517
CASH AND DUE FROM BANKS, END OF PERIOD	$	77,312	$	74,668

See accompanying notes.

7

FIRST FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying September 30, 2024 and 2023 consolidated financial statements are unaudited. The December 31, 2023 consolidated financial statements are as reported in the First Financial Corporation (the “Corporation”) 2023 annual report. The information presented does not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The following notes should be read together with notes to the consolidated financial statements included in the 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2023.

1.    Significant Accounting Policies

The significant accounting policies followed by the Corporation and its subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods reported have been included in the accompanying consolidated financial statements and are of a normal recurring nature. The Corporation reports financial information for only one segment, banking. Some items in the prior year financials were reclassified to conform to the current presentation.

The Omnibus Equity Incentive Plan is a long-term incentive plan that was designed to align the interests of participants with the interests of shareholders. Under the plan, awards may be made based on certain performance measures. The grants are made in restricted stock units that are subject to a vesting schedule. These shares vest over 3 years in increments of 33%, 33%, and 34% respectively. For the nine months ended 2024 and 2023, 27,803 and 22,228 shares were awarded, respectively. These shares had a grant date value of $1.0 million and $1.0 million for 2024 and 2023, vest over three years, and their grant is not subject to future performance measures. Outstanding shares are increased at the award date for the total shares awarded.

On July 1, 2024, the Corporation completed its acquisition of SimplyBank. Therefore, the results of SimplyBank have been included in the results of operations beginning on July 1, 2024. See footnote 12, Acquisitions, for more information.

2.    New accounting standards

Accounting Pronouncements Adopted:

In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-03 “Fair Value Measurements (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022-03 is effective for the Corporation for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption is permitted. The Corporation adopted ASU 2022-03 January 1, 2024, and it had no impact on its consolidated financial statements and related disclosures.

In March 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards (ASU) No. 2023-02 “Investments Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. This guidance is effective for public business entities for fiscal years including interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted in any interim period. The Corporation adopted ASU 2023-02 January 1, 2024 on a modified retrospective basis. As a result of the adoption, other assets was increased $19 million, other liabilities was increased $21 million, and retained earnings was decreased $1.7 million.

Recent Accounting Pronouncements:

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” These amendments require, among other things, that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 208. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments

8

retrospectively to all periods presented in the financial statements. The Corporation is assessing ASU 2023-07 and its effect on its consolidated financial statements and related disclosures.

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” Among other things, these amendments require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate.) The amendments also require that all entities disclose on an annual basis the following information about income taxes paid: (1) the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than five percent of total income taxes paid (net of refunds received.) This guidance is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments should be applied on a prospective basis although retrospective application is permitted. The Corporation is assessing ASU 2023-09 and its effect on its consolidated financial statements and related disclosures.

9

3.    Allowance for Credit Losses

The following table presents the activity of the allowance for credit losses by portfolio segment for the three months ended September 30.

Allowance for Credit Losses:			September 30, 2024
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	12,015	$	14,324	$	11,986	$	9	$	38,334
PCD ACL on acquired loans		3,006		—		—		—		3,006
Provision for credit losses		4,246		2,766		2,113		275		9,400
Loans charged-off		(3,800)		(58)		(3,078)		—		(6,936)
Recoveries		1,197		93		1,075		—		2,365
Ending Balance	$	16,664	$	17,125	$	12,096	$	284	$	46,169

Allowance for Credit Losses:			September 30, 2023
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	12,450	$	15,268	$	11,653	$	536	$	39,907
Provision for credit losses		(199)		(747)		2,303		(157)		1,200
Loans charged-off		(187)		(50)		(3,364)		—		(3,601)
Recoveries		177		67		1,284		—		1,528
Ending Balance	$	12,241	$	14,538	$	11,876	$	379	$	39,034

The following table presents the activity of the allowance for credit losses by portfolio segment for the nine months ended September 30.

Allowance for Credit Losses:			September 30, 2024
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	13,264	$	14,327	$	11,797	$	379	$	39,767
PCD ACL on acquired loans		3,006		—		—		—		3,006
Provision for credit losses		6,328		2,686		5,247		(95)		14,166
Loans charged -off		(7,579)		(114)		(8,526)		—		(16,219)
Recoveries		1,645		226		3,578		—		5,449
Ending Balance	$	16,664	$	17,125	$	12,096	$	284	$	46,169

Allowance for Credit Losses:			September 30, 2023
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	12,949	$	14,568	$	12,104	$	158	$	39,779
Provision for credit losses		(630)		(81)		5,290		221		4,800
Loans charged -off		(702)		(192)		(10,626)		—		(11,520)
Recoveries		624		243		5,108		—		5,975
Ending Balance	$	12,241	$	14,538	$	11,876	$	379	$	39,034

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The tables below present the recorded investment in non-performing loans by class of loans.

	September 30, 2024
	Loans Past				Nonaccrual
	Due Over				With No
	90 Days Still				Allowance
(Dollar amounts in thousands)	Accruing		Nonaccrual		For Credit Loss
Commercial
Commercial & Industrial	$	41	$	2,771	$	555
Farmland		—		1,066		806
Non Farm, Non Residential		—		1,615		994
Agriculture		—		736		714
All Other Commercial		—		1,240		956
Residential
First Liens		893		1,404		446
Home Equity		361		125		—
Junior Liens		175		89		27
Multifamily		85		436		367
All Other Residential		—		470		348
Consumer
Motor Vehicle		—		2,403		—
All Other Consumer		3		262		—
TOTAL	$	1,558	$	12,617	$	5,213

	December 31, 2023
	Loans Past				Nonaccrual
	Due Over				With No
	90 Days Still				Allowance
(Dollar amounts in thousands)	Accruing		Nonaccrual		For Credit Loss
Commercial
Commercial & Industrial	$	5	$	13,971	$	860
Farmland		—		1,221		1,201
Non Farm, Non Residential		—		995		1,011
Agriculture		—		1,147		1,103
All Other Commercial		—		1,046		1,027
Residential
First Liens		620		960		—
Home Equity		32		68		—
Junior Liens		239		67		—
Multifamily		47		543		373
All Other Residential		—		427		—
Consumer
Motor Vehicle		45		2,933		—
All Other Consumer		—		218		—
TOTAL	$	988	$	23,596	$	5,575

11

The following tables present the amortized cost basis of collateral dependent loans by class of loans:

	September 30, 2024
	Collateral Type
(Dollar amounts in thousands)	Real Estate		Other
Commercial
Commercial & Industrial	$	597	$	7,111
Farmland		1,224		—
Non Farm, Non Residential		4,345		—
Agriculture		—		714
All Other Commercial		1,161		—
Residential
First Liens		616		—
Home Equity		—		—
Junior Liens		27		—
Multifamily		367		—
All Other Residential		414		—
Consumer
Motor Vehicle		—		—
All Other Consumer		—		—
Total	$	8,751	$	7,825

	December 31, 2023
	Collateral Type
(Dollar amounts in thousands)	Real Estate		Other
Commercial
Commercial & Industrial	$	1,454	$	12,056
Farmland		1,633		—
Non Farm, Non Residential		3,919		—
Agriculture		49		1,054
All Other Commercial		1,027		—
Residential
First Liens		32		—
Home Equity		—		—
Junior Liens		—		—
Multifamily		373		—
All Other Residential		349		—
Consumer
Motor Vehicle		—		—
All Other Consumer		—		—
Total	$	8,836	$	13,110

12

The following tables presents the aging of the recorded investment in loans by past due category and class of loans.

	September 30, 2024
					90 Days
	30-59 Days		60-89 Days		and Greater		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	633	$	902	$	1,553	$	3,088	$	592,702	$	595,790
Farmland		549		34		806		1,389		132,243		133,632
Non Farm, Non Residential		1,193		—		162		1,355		753,333		754,688
Agriculture		—		304		733		1,037		131,616		132,653
All Other Commercial		83		—		190		273		508,500		508,773
Residential
First Liens		2,297		682		1,529		4,508		442,827		447,335
Home Equity		831		414		459		1,704		84,715		86,419
Junior Liens		224		154		251		629		61,778		62,407
Multifamily		233		290		85		608		284,492		285,100
All Other Residential		—		45		426		471		45,756		46,227
Consumer
Motor Vehicle		7,635		1,126		891		9,652		632,007		641,659
All Other Consumer		431		122		101		654		31,966		32,620
TOTAL	$	14,109	$	4,073	$	7,186	$	25,368	$	3,701,935	$	3,727,303

	December 31, 2023
					90 Days
	30-59 Days		60-89 Days		and Greater		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	668	$	488	$	1,136	$	2,292	$	649,801	$	652,093
Farmland		58		—		1,201		1,259		132,147		133,406
Non Farm, Non Residential		—		—		—		—		439,009		439,009
Agriculture		—		—		1,141		1,141		139,900		141,041
All Other Commercial		—		—		—		—		464,776		464,776
Residential
First Liens		2,841		816		924		4,581		354,711		359,292
Home Equity		360		188		71		619		65,191		65,810
Junior Liens		462		124		262		848		57,985		58,833
Multifamily		117		140		373		630		191,104		191,734
All Other Residential		554		—		47		601		21,961		22,562
Consumer
Motor Vehicle		12,491		1,754		761		15,006		602,442		617,448
All Other Consumer		397		102		13		512		31,857		32,369
TOTAL	$	17,948	$	3,612	$	5,929	$	27,489	$	3,150,884	$	3,178,373

13

Loan Modifications Made to Borrowers Experiencing Financial Difficulty:

Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

The following table presents the amortized cost of loans and leases at September 30, 2024 that were both experiencing financial difficulty and modified during the twelve months ended September 30, 2024, by class and by type of modification. The percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each class of financial receivable is also presented below.

										Combination		Combination
										Term		Term		Total
										Extension and		Extension		Class of
	Principal		Payment		Term		Interest Rate			Principal		Interest Rate		Financing
(Dollar amounts in thousands)	Forgiveness		Delay		Extension		Reduction		Forgiveness		Reduction		Receivable
Residential
First Liens	$	—	$	—	$	—	$	—	$	—	$	25		0.01	%
Junior Liens		—		—		27		64		—		—		0.15	%
Multifamily		—		—		—		—		—		367		0.13	%
Consumer
Motor Vehicle		26		—		248		26		98		96		0.08	%
TOTAL	$	26	$	—	$	275	$	90	$	98	$	488		0.03	%

The Corporation has no commitments to lend additional amounts to the borrowers included in the table above.

The Corporation closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. All loans and leases that have been modified during the twelve months ended September 30, 2024 are in a current status of repayment.

The following table presents the financial effect of loan and lease modifications presented above to borrowers experiencing financial difficulty for the twelve months ended September 30, 2024.

			Weighted-			Weighted-
			Average			Average
	Principal		Interest Rate			Term
(Dollar amounts in thousands)	Forgiveness		Reduction			Extension
Residential
Junior Liens	$	—		1.38	%		36
Multifamily		—		1.25	%		276
Consumer
Motor Vehicle		57		3.05	%		21
TOTAL	$	57		1.66	%		142

14

The following table presents the amortized cost basis of loans that had a payment default during the twelve months ended September 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

	Principal		Payment		Term		Interest Rate
(Dollar amounts in thousands)	Forgiveness		Delay		Extension		Reduction
Consumer
Motor Vehicle	$	—	$		$	7	$	—
TOTAL	$	—	$	—	$	7	$	—

Upon the Corporation’s determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $100 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. The Corporation uses the following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values.

Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring.

15

The following tables present the commercial loan portfolio by risk category. These balances do not include accrued interest:

		September 30, 2024
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2024		2023		2022		2021		2020		Prior		Loans		Total
Commercial
Commercial and Industrial	Pass	$	72,582	$	39,119	$	138,029	$	78,560	$	36,878	$	100,287	$	83,865	$	549,320
	Special Mention		—		92		606		9,622		3,268		895		93	$	14,576
	Substandard		3,214		8,135		732		1,514		130		6,892		5,368	$	25,985
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		1,056		1,047		831		458		217		85		—	$	3,694
	Subtotal	$	76,852	$	48,393	$	140,198	$	90,154	$	40,493	$	108,159	$	89,326	$	593,575
	Current period gross charge-offs	$	-	$	-	$	1,982	$	4,716	$	54	$	48	$	-	$	6,800
Farmland	Pass	$	9,196	$	20,060	$	15,688	$	20,659	$	7,842	$	53,995	$	486	$	127,926
	Special Mention		—		—		—		—		—		1,007		—	$	1,007
	Substandard		—		—		36		246		40		1,512		—	$	1,834
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		—		—		14		—	$	14
	Subtotal	$	9,196	$	20,060	$	15,724	$	20,905	$	7,882	$	56,528	$	486	$	130,781
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Non Farm, Non Residential	Pass	$	72,876	$	85,192	$	164,821	$	183,541	$	41,400	$	173,560	$	19,247	$	740,637
	Special Mention		—		—		684		964		—		820		—	$	2,468
	Substandard		654		52		179		2,770		104		5,031		—	$	8,790
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		—		663		63		—	$	726
	Subtotal	$	73,530	$	85,244	$	165,684	$	187,275	$	42,167	$	179,474	$	19,247	$	752,621
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Agriculture	Pass	$	7,190	$	8,475	$	9,801	$	5,482	$	5,107	$	25,304	$	64,219	$	125,578
	Special Mention		—		—		84		—		5		506		2,395	$	2,990
	Substandard		—		—		—		—		—		742		—	$	742
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		13		—		30		24		17		4		—	$	88
	Subtotal	$	7,203	$	8,475	$	9,915	$	5,506	$	5,129	$	26,556	$	66,614	$	129,398
	Current period gross charge-offs	$	-	$	-	$	53	$	-	$	-	$	-	$	-	$	53
Other Commercial	Pass	$	28,973	$	49,417	$	104,025	$	110,152	$	94,226	$	106,102	$	10,959	$	503,854
	Special Mention		—		—		—		—		—		777		—	$	777
	Substandard		—		—		956		11		25		270		—	$	1,262
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		29		—		11		430		—	$	470
	Subtotal	$	28,973	$	49,417	$	105,010	$	110,163	$	94,262	$	107,579	$	10,959	$	506,363
	Current period gross charge-offs	$	626	$	100	$	-	$	-	$	-	$	-	$	-	$	726
Residential
Multifamily >5 Residential	Pass	$	23,934	$	65,706	$	63,063	$	56,596	$	23,180	$	27,783	$	2,110	$	262,372
	Special Mention		—		—		12,882		—		346		6,329		—	$	19,557
	Substandard		—		—		—		—		—		367		—	$	367
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		1,085		—		688		—	$	1,773
	Subtotal	$	23,934	$	65,706	$	75,945	$	57,681	$	23,526	$	35,167	$	2,110	$	284,069
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Total	Pass	$	214,751	$	267,969	$	495,427	$	454,990	$	208,633	$	487,031	$	180,886	$	2,309,687
	Special Mention		—		92		14,256		10,586		3,619		10,334		2,488	$	41,375
	Substandard		3,868		8,187		1,903		4,541		299		14,814		5,368	$	38,980
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		1,069		1,047		890		1,567		908		1,284		—	$	6,765
		$	219,688	$	277,295	$	512,476	$	471,684	$	213,459	$	513,463	$	188,742	$	2,396,807

16

		December 31, 2023
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2023		2022		2021		2020		2019		Prior		Loans		Total
Commercial
Commercial and Industrial	Pass	$	80,873	$	131,522	$	112,811	$	47,445	$	44,257	$	100,872	$	81,551	$	599,331
	Special Mention		6		221		10,025		3,442		323		866		2,715	$	17,598
	Substandard		3,620		4,734		1,842		981		1,789		5,354		7,932	$	26,252
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		3,476		1,352		847		431		144		93		—	$	6,343
	Subtotal	$	87,975	$	137,829	$	125,525	$	52,299	$	46,513	$	107,185	$	92,198	$	649,524
	Current period gross charge-offs	$	8	$	72	$	40	$	78	$	24	$	49	$	-	$	271
Farmland	Pass	$	21,232	$	16,025	$	20,794	$	8,310	$	8,790	$	52,357	$	287	$	127,795
	Special Mention		—		—		4		—		363		710		—	$	1,077
	Substandard		—		—		—		41		309		1,370		—	$	1,720
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		—		—		14		—	$	14
	Subtotal	$	21,232	$	16,025	$	20,798	$	8,351	$	9,462	$	54,451	$	287	$	130,606
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Non Farm, Non Residential	Pass	$	73,740	$	123,319	$	69,477	$	23,965	$	22,550	$	106,752	$	7,606	$	427,409
	Special Mention		—		732		995		—		845		—		—	$	2,572
	Substandard		102		—		—		—		479		6,356		—	$	6,937
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		678		—		65		—	$	743
	Subtotal	$	73,842	$	124,051	$	70,472	$	24,643	$	23,874	$	113,173	$	7,606	$	437,661
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Agriculture	Pass	$	10,764	$	11,299	$	6,614	$	6,118	$	7,443	$	25,678	$	64,476	$	132,392
	Special Mention		—		86		—		8		—		605		3,618	$	4,317
	Substandard		—		55		—		—		50		1,067		—	$	1,172
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		51		31		35		24		—		—	$	141
	Subtotal	$	10,764	$	11,491	$	6,645	$	6,161	$	7,517	$	27,350	$	68,094	$	138,022
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Other Commercial	Pass	$	27,401	$	105,046	$	104,307	$	94,029	$	4,774	$	112,159	$	9,177	$	456,893
	Special Mention		—		—		—		2,478		—		830		—	$	3,308
	Substandard		—		1,027		16		—		—		—		—	$	1,043
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		12		—		—		—		457		—	$	469
	Subtotal	$	27,401	$	106,085	$	104,323	$	96,507	$	4,774	$	113,446	$	9,177	$	461,713
	Current period gross charge-offs	$	675	$	-	$	-	$	-	$	20	$	-	$	-	$	695
Residential
Multifamily >5 Residential	Pass	$	34,551	$	62,845	$	32,273	$	22,590	$	6,397	$	23,215	$	382	$	182,253
	Special Mention		—		—		—		357		—		6,571		—	$	6,928
	Substandard		—		—		—		—		—		373		—	$	373
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		1,102		—		—		251		—	$	1,353
	Subtotal	$	34,551	$	62,845	$	33,375	$	22,947	$	6,397	$	30,410	$	382	$	190,907
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Total	Pass	$	248,561	$	450,056	$	346,276	$	202,457	$	94,211	$	421,033	$	163,479	$	1,926,073
	Special Mention		6		1,039		11,024		6,285		1,531		9,582		6,333	$	35,800
	Substandard		3,722		5,816		1,858		1,022		2,627		14,520		7,932	$	37,497
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		3,476		1,415		1,980		1,144		168		880		—	$	9,063
		$	255,765	$	458,326	$	361,138	$	210,908	$	98,537	$	446,015	$	177,744	$	2,008,433

17

The Corporation evaluates the credit quality of its other loan portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity. Accordingly, loans on non-accrual status and loans past due 90 days or more and still accruing interest are considered to be nonperforming for purposes of credit quality evaluation. The following table presents the other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming. These balances do not include accrued interest:

		September 30, 2024
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2024		2023		2022		2021		2020		Prior		Loans		Total
Residential
First Liens	Performing	$	46,141	$	51,929	$	91,555	$	70,498	$	39,216	$	141,406	$	2,465	$	443,210
	Non-performing		—		—		—		—		224		2,447		—	$	2,671
	Subtotal	$	46,141	$	51,929	$	91,555	$	70,498	$	39,440	$	143,853	$	2,465	$	445,881
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	57	$	-	$	57
Home Equity	Performing	$	194	$	928	$	327	$	28	$	45	$	1,349	$	82,724	$	85,595
	Non-performing		—		—		43		—		41		83		316	$	483
	Subtotal	$	194	$	928	$	370	$	28	$	86	$	1,432	$	83,040	$	86,078
	Current period gross charge-offs	$	-	$	-	$	22	$	-	$	-	$	-	$	35	$	57
Junior Liens	Performing	$	10,225	$	13,310	$	13,236	$	6,924	$	5,472	$	9,962	$	2,838	$	61,967
	Non-performing		—		39		—		41		62		123		—	$	265
	Subtotal	$	10,225	$	13,349	$	13,236	$	6,965	$	5,534	$	10,085	$	2,838	$	62,232
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Other Residential	Performing	$	15,182	$	15,724	$	7,597	$	4,485	$	639	$	1,723	$	178	$	45,528
	Non-performing		—		—		—		61		5		422		—	$	488
	Subtotal	$	15,182	$	15,724	$	7,597	$	4,546	$	644	$	2,145	$	178	$	46,016
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Consumer
Motor Vehicle	Performing	$	198,130	$	206,446	$	157,178	$	44,248	$	25,608	$	4,890	$	11	$	636,511
	Non-performing		52		426		1,059		385		346		111		—	$	2,379
	Subtotal	$	198,182	$	206,872	$	158,237	$	44,633	$	25,954	$	5,001	$	11	$	638,890
	Current period gross charge-offs	$	295	$	2,122	$	3,682	$	1,389	$	524	$	73	$	-	$	8,085
Other Consumer	Performing	$	9,802	$	8,204	$	4,062	$	2,475	$	1,382	$	826	$	5,403	$	32,154
	Non-performing		20		84		47		98		32		4		24	$	309
	Subtotal	$	9,822	$	8,288	$	4,109	$	2,573	$	1,414	$	830	$	5,427	$	32,463
	Current period gross charge-offs	$	16	$	147	$	111	$	8	$	7	$	23	$	129	$	441
Total	Performing	$	279,674	$	296,541	$	273,955	$	128,658	$	72,362	$	160,156	$	93,619	$	1,304,965
	Non-performing		72		549		1,149		585		710		3,190		340	$	6,595
Total other loans		$	279,746	$	297,090	$	275,104	$	129,243	$	73,072	$	163,346	$	93,959	$	1,311,560

18

		December 31, 2023
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2023		2022		2021		2020		2019		Prior		Loans		Total
Residential
First Liens	Performing	$	49,146	$	70,952	$	65,232	$	36,751	$	15,185	$	118,087	$	1,066	$	356,419
	Non-performing		—		121		—		65		57		1,504		—	$	1,747
	Subtotal	$	49,146	$	71,073	$	65,232	$	36,816	$	15,242	$	119,591	$	1,066	$	358,166
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	167	$	-	$	167
Home Equity	Performing	$	61	$	68	$	—	$	7	$	378	$	866	$	64,102	$	65,482
	Non-performing		—		22		—		17		—		60		—	$	99
	Subtotal	$	61	$	90	$	—	$	24	$	378	$	926	$	64,102	$	65,581
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Junior Liens	Performing	$	15,050	$	15,431	$	8,248	$	5,557	$	4,280	$	8,094	$	1,698	$	58,358
	Non-performing		—		53		45		104		—		103		—	$	305
	Subtotal	$	15,050	$	15,484	$	8,293	$	5,661	$	4,280	$	8,197	$	1,698	$	58,663
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	24	$	24	$	-	$	48
Other Residential	Performing	$	6,432	$	9,477	$	3,100	$	421	$	641	$	1,511	$	415	$	21,997
	Non-performing		—		—		46		—		390		38		—	$	474
	Subtotal	$	6,432	$	9,477	$	3,146	$	421	$	1,031	$	1,549	$	415	$	22,471
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	1	$	-	$	1
Consumer
Motor Vehicle	Performing	$	264,933	$	215,125	$	70,926	$	46,939	$	12,038	$	2,177	$	—	$	612,138
	Non-performing		232		973		520		532		134		30		—	$	2,421
	Subtotal	$	265,165	$	216,098	$	71,446	$	47,471	$	12,172	$	2,207	$	—	$	614,559
	Current period gross charge-offs	$	841	$	7,722	$	3,101	$	1,448	$	499	$	174	$	-	$	13,785
Other Consumer	Performing	$	12,561	$	6,895	$	3,778	$	2,189	$	659	$	692	$	5,203	$	31,977
	Non-performing		—		20		145		39		17		—		1	$	222
	Subtotal	$	12,561	$	6,915	$	3,923	$	2,228	$	676	$	692	$	5,204	$	32,199
	Current period gross charge-offs	$	61	$	213	$	61	$	37	$	3	$	5	$	149	$	529
Total	Performing	$	348,183	$	317,948	$	151,284	$	91,864	$	33,181	$	131,427	$	72,484	$	1,146,371
	Non-performing		232		1,189		756		757		598		1,735		1	$	5,268
Total other loans		$	348,415	$	319,137	$	152,040	$	92,621	$	33,779	$	133,162	$	72,485	$	1,151,639

19

4.    Securities

The amortized cost and fair value of the Corporation’s investments are shown below. All securities are classified as available-for-sale.

	September 30, 2024
	Amortized		Unrealized		Unrealized
(Dollar amounts in thousands)	Cost		Gains		Losses		Fair Value
U.S. Government agencies	$	94,500	$	59	$	(8,828)	$	85,731
Mortgage Backed Securities - residential		648,034		1,226		(65,958)		583,302
Mortgage Backed Securities - commercial		16,246		203		(201)		16,248
Collateralized mortgage obligations		195,631		77		(22,306)		173,402
State and municipal obligations		397,643		1,257		(26,061)		372,839
Municipal taxable		41,166		111		(4,155)		37,122
U.S. Treasury		473		—		(1)		472
Collateralized debt obligations		—		2,876		—		2,876
TOTAL	$	1,393,693	$	5,809	$	(127,510)	$	1,271,992

	December 31, 2023
	Amortized		Unrealized		Unrealized
(Dollar amounts in thousands)	Cost		Gains		Losses		Fair Value
U.S. Government agencies	$	102,978	$	4	$	(11,542)	$	91,440
Mortgage Backed Securities-residential		653,507		53		(83,675)		569,885
Mortgage Backed Securities-commercial		7,919		—		(436)		7,483
Collateralized mortgage obligations		209,398		6		(28,575)		180,829
State and municipal obligations		397,413		1,407		(28,009)		370,811
Municipal taxable		39,872		12		(5,599)		34,285
U.S. Treasury		1,411		—		(9)		1,402
Collateralized debt obligations		—		3,002		—		3,002
TOTAL	$	1,412,498	$	4,484	$	(157,845)	$	1,259,137

Contractual maturities of debt securities at September 30, 2024 were as follows.

	Available-for-Sale
	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value
Due in one year or less	$	7,469	$	7,394
Due after one but within five years		46,959		45,931
Due after five but within ten years		114,073		112,550
Due after ten years		365,281		333,165
		533,782		499,040
Mortgage-backed securities and collateralized mortgage obligations		859,911		772,952
TOTAL	$	1,393,693	$	1,271,992

For the three and nine months ended September 30, 2024, there were $132 thousand and $133 thousand in gross gains and $29 thousand in gross losses for both periods. There were no gross gains and losses from investment sales/calls realized by the Corporation for the three and nine months ended September 30, 2023.

20

The following tables show the securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at September 30, 2024 and December 31, 2023.

	September 30, 2024
	Less Than 12 Months				More Than 12 Months				Total
			Unrealized				Unrealized				Unrealized
(Dollar amounts in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. Government agencies	$	91	$	(9)	$	81,452	$	(8,819)	$	81,543	$	(8,828)
Mortgage Backed Securities - Residential		—		—		518,811		(65,958)		518,811		(65,958)
Mortgage Backed Securities - Commercial		1,959		(2)		7,609		(199)		9,568		(201)
Collateralized mortgage obligations		—		—		168,489		(22,306)		168,489		(22,306)
State and municipal obligations		18,228		(65)		245,087		(25,996)		263,315		(26,061)
Municipal taxable		—		—		33,143		(4,155)		33,143		(4,155)
U.S. Treasury		472		(1)		—		—		472		(1)
Total temporarily impaired securities	$	20,750	$	(77)	$	1,054,591	$	(127,433)	$	1,075,341	$	(127,510)

	December 31, 2023
	Less Than 12 Months				More Than 12 Months				Total
			Unrealized				Unrealized				Unrealized
(Dollar amounts in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
U.S. Government agencies	$	3,757	$	(73)	$	87,291	$	(11,469)	$	91,048	$	(11,542)
Mortgage Backed Securities - Residential		3,810		(41)		556,414		(83,634)		560,224		(83,675)
Mortgage Backed Securities - Commercial		—		—		7,483		(436)		7,483		(436)
Collateralized mortgage obligations		12,981		(303)		164,871		(28,272)		177,852		(28,575)
State and municipal obligations		45,154		(319)		212,022		(27,690)		257,176		(28,009)
Municipal taxable		—		—		31,958		(5,599)		31,958		(5,599)
U.S. Treasury		1,402		(9)		—		—		1,402		(9)
Total temporarily impaired securities	$	67,104	$	(745)	$	1,060,039	$	(157,100)	$	1,127,143	$	(157,845)

Management evaluates securities for impairment related to credit losses at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for impairment related to credit losses by segregating the portfolio into two general segments.

In evaluating for impairment, management considers the reason for the decline, the extent of the decline, the duration of the decline and whether the Corporation intends to sell a security or is more likely than not to be required to sell a security before recovery of its amortized cost. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the security’s amortized cost is written down to fair value through income. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.

Gross unrealized losses on investment securities were $127.5 million as of September 30, 2024 and $157.8 million as of December 31, 2023. Management believes these losses represent negative adjustments to market value relative to the interest rate environment reflecting the increase in market rates and not losses related to the creditworthiness of the issuer. The portfolio contains primarily government agency, agency backed mortgage backed securities (“MBS”), and collateralized mortgage obligations (“CMO”), which are issued by government sponsored enterprises and are backed by the full faith and credit of the United States government. Secondarily, the Corporation invests in municipal securities issued by state and local governments. Of these, almost half are either insured or contain state enhancements. On the remaining, credit is monitored by the investment committee. Based upon our review of the issuers, we do not believe these investments to be other than temporarily impaired. Management does not intend to sell these securities and it is not more likely than not that we will be required to sell them before their anticipated recovery.

21

The table below presents a rollforward of the credit losses recognized in earnings for the three and nine month periods ended September 30, 2024 and 2023:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollar amounts in thousands)	2024		2023		2024		2023
Beginning balance	$	2,974	$	2,974	$	2,974	$	2,974
Reductions for securities called during the period		—		—		—		—
Ending balance	$	2,974	$	2,974	$	2,974	$	2,974

22

5.    Qualified Affordable Housing Project Investments

The Corporation invests in qualified affordable housing projects. The balance of investment for qualified housing projects was $28.0 million at September 30, 2024 and $7.8 million at December 31, 2023. See footnote 2, New accounting standards, for the impact of the adoption of ASU 2023-02. These balances are reflected in the other assets line on the consolidated balance sheets. Total unfunded commitments related to the investments in qualified affordable housing projects totaled $19.9 million at September 30, 2024. The Corporation expects to fulfill these commitments by the end of December 31, 2037.

The Corporation recognized amortization expense of $232 thousand during the nine months ended September 30, 2024, and $585 thousand during the nine months ended September 30, 2023, which was included within other noninterest expense on the consolidated statements of income. The Corporation recognized amortization expense of $1.7 million during the nine months ended September 30, 2024, which was included within income tax expense on the consolidated statements of income. Additionally, the Corporation recognized tax credits and other benefits from its investment in affordable housing tax credits of $2.4 million during the nine months ended September 30, 2024, and $1.4 million during the nine months ended September 30, 2023.

6.    Fair Value

FASB ASC No. 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level I prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair value of most securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).

For those securities that cannot be priced using quoted market prices or observable inputs a Level 3 valuation is determined. These securities are primarily trust preferred securities and investments in state and municipal securities. The fair value of state and municipal obligations are derived by comparing the securities to current market rates plus an appropriate credit spread to determine an estimated value. Illiquidity spreads are then considered. Credit reviews are performed on each of the issuers. The significant unobservable inputs used in the fair value measurement of the Corporation’s state and municipal obligations are credit spreads related to specific issuers. Significantly higher credit spread assumptions would result in significantly lower fair value measurement. Conversely, significantly lower credit spreads would result in a significantly higher fair value measurements.

The fair value of derivatives is based on valuation models using observable market data as of the measurement date (Level 2 inputs).

23

	September 30, 2024
	Fair Value Measurements Using
	Significant Unobservable Inputs (Level 3)
(Dollar amounts in thousands)	Level 1		Level 2		Level 3		Total
U.S. Government agencies	$	—	$	85,731	$	—	$	85,731
Mortgage Backed Securities-residential		—		583,302		—		583,302
Mortgage Backed Securities-commercial		—		16,248		—		16,248
Collateralized mortgage obligations		—		173,402		—		173,402
State and municipal		—		372,034		805		372,839
Municipal taxable		—		37,122		—		37,122
U.S. Treasury		—		472		—		472
Collateralized debt obligations		—		—		2,876		2,876
TOTAL	$	—	$	1,268,311	$	3,681	$	1,271,992
Derivative Assets				3,163
Derivative Liabilities				(3,163)

	December 31, 2023
	Fair Value Measurements Using
	Significant Unobservable Inputs (Level 3)
(Dollar amounts in thousands)	Level 1		Level 2		Level 3		Total
U.S. Government agencies	$	—	$	91,440	$	—	$	91,440
Mortgage Backed Securities-residential		—		569,885		—		569,885
Mortgage Backed Securities-commercial		—		7,483		—		7,483
Collateralized mortgage obligations		—		180,829		—		180,829
State and municipal		—		369,631		1,180		370,811
Municipal taxable		—		34,285		—		34,285
U.S. Treasury		—		1,402		—		1,402
Collateralized debt obligations		—		—		3,002		3,002
TOTAL	$	—	$	1,254,955	$	4,182	$	1,259,137
Derivative Assets				2,878
Derivative Liabilities				(2,878)

There were no transfers between Level 1 and Level 2 during 2024 and 2023.

The tables below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2024 and the year ended December 31, 2023.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended
	September 30, 2024
	State and
	municipal		Collateralized
(Dollar amounts in thousands)	obligations		debt obligations		Total
Beginning balance, July 1	$	805	$	2,892	$	3,697
Total realized/unrealized gains or losses
Included in earnings		—		—		—
Included in other comprehensive income		—		(16)		(16)
Transfers		—		—		—
Settlements		—		—		—
Ending balance, September 30	$	805	$	2,876	$	3,681

24

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended
	September 30, 2024
	State and
	municipal		Collateralized
(Dollar amounts in thousands)	obligations		debt obligations		Total
Beginning balance, January 1	$	1,180	$	3,002	$	4,182
Total realized/unrealized gains or losses
Included in earnings		—		—		—
Included in other comprehensive income		—		(126)		(126)
Transfers		—		—		—
Settlements		(375)		—		(375)
Ending balance, September 30	$	805	$	2,876	$	3,681

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended
	December 31, 2023
	State and
	municipal		Collateralized
(Dollar amounts in thousands)	obligations		debt obligations		Total
Beginning balance, January 1	$	1,545	$	2,986	$	4,531
Total realized/unrealized gains or losses
Included in earnings		—		—		—
Included in other comprehensive income		—		16		16
Purchases		—		—		—
Settlements		(365)		—		(365)
Ending balance, December 31	$	1,180	$	3,002	$	4,182

Other real estate owned is valued at Level 3. Other real estate owned at September 30, 2024 with a value of $169 thousand was reduced by $45 thousand for fair value adjustment. At September 30, 2024 other real estate owned was comprised of $28 thousand from commercial loans and $141 thousand from residential loans. Other real estate owned at December 31, 2023 with a value of $107 thousand was reduced by $57 thousand for fair value adjustment. At December 31, 2023 other real estate owned was comprised of $26 thousand from commercial loans and $81 thousand from residential loans.

Fair value is measured based on the value of the collateral securing those loans, and is determined using several methods. Generally the fair value of real estate is determined based on appraisals by qualified licensed appraisers. Appraisals for real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value on the cost to replace current property. The market comparison evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and the investor’s required return. The final fair value is based on a reconciliation of these three approaches. If an appraisal is not available, the fair value may be determined by using a cash flow analysis, a broker’s opinion of value, the net present value of future cash flows, or an observable market price from an active market. Fair value of other real estate is based upon the current appraised values of the properties as determined by qualified licensed appraisers and the Company’s judgment of other relevant market conditions. Appraisals are obtained annually and reductions in value are recorded as a valuation through a charge to expense. The primary unobservable input used by management in estimating fair value are additional discounts to the appraised value to consider market conditions and the age of the appraisal, which are based on management’s past experience in resolving these types of properties. These discounts range from 5% to 100% with an average discount of 65%. Values for non-real estate collateral, such as business equipment, are based on appraisals performed by qualified licensed appraisers or the customers financial statements. Values for non real estate collateral use much higher discounts than real estate collateral. Other real estate and individually evaluated loans carried at fair value are primarily comprised of smaller balance properties.

25

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at September 30, 2024.

(Dollar amounts in thousands)	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
State and municipal obligations	$	805	Discounted cash flow	Discount rate	4.24%-4.44	%
Collateralized debt obligations	$	2,876	Discounted cash flow	Discount rate	7.30	%
Collateral dependent loans	$	4,965	Discounted cash flow	Discount rate for age of appraisal and market conditions	5.00%-100.00	%

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at December 31, 2023.

(Dollar amounts in thousands)	Fair Value		Valuation Technique(s)	Unobservable Input(s)	Range
State and municipal obligations	$	1,180	Discounted cash flow	Discount rate	4.04%-4.44	%
Collateralized debt obligations	$	3,002	Discounted cash flow	Discount rate	7.36	%
Collateral dependent loans		11,306	Discounted cash flow	Discount rate for age of appraisal and market conditions	0.00%-100.00	%

The carrying amounts and estimated fair value of financial instruments at September 30, 2024 and December 31, 2023, are shown below. Carrying amount is the estimated fair value for cash and due from banks, federal funds sold, short-term borrowings, accrued interest receivable and payable, demand deposits, short-term debt and variable-rate loans or deposits that reprice frequently and fully. Security fair values were described previously. For fixed-rate, collectively evaluated loans or deposits, variable rate loans or deposits with infrequent repricing or repricing limits, and for longer-term borrowings, fair value is based on discounted cash flows using current market rates applied to the estimated life and considering credit risk. The valuation of individually evaluated loans was described previously. Loan fair value estimates represent an exit price. Fair values of loans held for sale are based on market bids on the loans or similar loans. It was not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability. Fair value of debt is based on current rates for similar financing. The fair value of off-balance sheet items is not considered material.

	September 30, 2024
	Carrying		Fair Value
(Dollar amounts in thousands)	Value		Level 1		Level 2		Level 3		Total
Cash and due from banks	$	77,312	$	32,855	$	44,457	$	—	$	77,312
Federal funds sold		—		—		—		—		—
Securities available-for-sale		1,271,992		—		1,268,311		3,681		1,271,992
Restricted stock		15,366		n/a		n/a		n/a		n/a
Loans, net		3,669,066		—		—		3,584,596		3,584,596
Accrued interest receivable		25,386		—		6,700		18,686		25,386
Deposits		(4,717,489)		—		(4,711,554)		—		(4,711,554)
Short-term borrowings		(84,363)		—		(84,363)		—		(84,363)
Other borrowings		(30,456)		—		(32,159)		—		(32,159)
Accrued interest payable		(4,254)		—		(4,254)		—		(4,254)

	December 31, 2023
	Carrying		Fair Value
(Dollar amounts in thousands)	Value		Level 1		Level 2		Level 3		Total
Cash and due from banks	$	76,759	$	25,467	$	51,292	$	—	$	76,759
Federal funds sold		282		—		282		—		282
Securities available-for-sale		1,259,137		—		1,254,955		4,182		1,259,137
Restricted stock		15,364		n/a		n/a		n/a		n/a
Loans, net		3,128,054		—		—		3,025,621		3,025,621
Accrued interest receivable		24,877		—		6,755		18,122		24,877
Deposits		(4,090,068)		—		(4,094,552)		—		(4,094,552)
Short-term borrowings		(67,221)		—		(67,221)		—		(67,221)
Other borrowings		(108,577)		—		(108,496)		—		(108,496)
Accrued interest payable		(2,588)		—		(2,588)		—		(2,588)

26

7.    Borrowings

Short-term borrowings:

Period–end short-term borrowings were comprised of the following:

(Dollar amounts in thousands)	September 30, 2024		December 31, 2023
Federal Funds Purchased	$	48,900	$	27,300
Repurchase Agreements		35,463		39,921
	$	84,363	$	67,221

The Corporation enters into sales of securities under agreements to repurchase. The amounts received under these agreements represent short-term borrowings and are reflected as a liability in the consolidated balance sheets. The securities underlying these agreements are included in investment securities in the consolidated balance sheets. The Corporation has no control over the market value of the securities, which fluctuates due to market conditions. However, the Corporation is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price. The Corporation manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.

Collateral pledged to repurchase agreements by remaining maturity are as follows:

	September 30, 2024
Repurchase Agreements	Remaining Contractual Maturity of the Agreements
	Overnight						Greater
	and		Up to 30		30 - 90		than 90
(Dollar amounts in thousands)	continuous		days		days		days		Total
Mortgage Backed Securities - Residential and Collateralized Mortgage Obligations	$	26,338	$	—	$	1,990	$	7,135	$	35,463

	December 31, 2023
Repurchase Agreements	Remaining Contractual Maturity of the Agreements
	Overnight						Greater
	and		Up to 30		30 - 90		than 90
(Dollar amounts in thousands)	continuous		days		days		days		Total
Mortgage Backed Securities - Residential and Collateralized Mortgage Obligations	$	32,319	$	300	$	3,637	$	3,665	$	39,921

Other borrowings:

Other borrowings at September 30, 2024 and December 31, 2023 are summarized as follows:

(Dollar amounts in thousands)	September 30, 2024		December 31, 2023
FHLB advances	$	7,539	$	108,577
Notes payable		22,917		—
TOTAL	$	30,456	$	108,577

The aggregate minimum annual retirements of other borrowings are as follows:

Twelve Months Ended September 30,

2025	$	1,002
2026		5,200
2027		22,917
2028		1,337
2029		—
Thereafter		—
	$	30,456

27

At September 30, 2024 and December 31, 2023, other borrowings are summarized as follows: The Corporation’s subsidiary bank is a member of the Federal Home Loan Bank (FHLB) and accordingly are permitted to obtain advances. There are $7.5 million of advances from the FHLB at September 30, 2024, and $108.6 million of advances at December 31, 2023. FHLB advances are, generally due in full at maturity. They are secured by eligible securities and a blanket pledge on real estate loan collateral. In addition the Corporation secured a note payable to a commercial bank in the second quarter 2024. The balance at September 30, 2024 is $23 million.

8.    Components of Net Periodic Benefit Cost

	Three Months Ended September 30,								Nine Months Ended September 30,
					Post-Retirement								Post-Retirement
	Pension Benefits				Health Benefits				Pension Benefits				Health Benefits
(Dollar amounts in thousands)	2024		2023		2024		2023		2024		2023		2024		2023
Service cost	$	142	$	157	$	4	$	5	$	424	$	471	$	12	$	15
Interest cost		947		956		34		38		2,841		2,868		103		115
Expected return on plan assets		(1,051)		(970)		—		—		(3,154)		(2,909)		—		—
Net amortization of prior service cost		—		—		—		—		—		—		—		—
Net amortization of net (gain) loss		109		188		(20)		(13)		326		564		(60)		(40)
Net Periodic Benefit Cost	$	147	$	331	$	18	$	30	$	437	$	994	$	55	$	90

Employer Contributions

First Financial Corporation previously disclosed in its financial statements for the year ended December 31, 2023 that it expected to contribute $3.9 million and $604 thousand respectively to its Pension Plan and ESOP and $249 thousand to the Post Retirement Health Benefits Plan in 2024. Contributions of $3.0 million have been made to the Pension Plan thus far in 2024. Contributions of $161 thousand have been made through the first nine months of 2024 for the Post Retirement Health Benefits plan. No contributions have been made in 2024 for the ESOP. The Pension plan was frozen for most employees at the end of 2012 and for those employees there will be discretionary contributions to the ESOP plan and a 401K plan in place of the former Pension benefit. In the first nine months of 2024 and 2023 there has been $2.4 million and $1.9 million of expense accrued for potential contributions to these alternative retirement benefit options.

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9.    Revenue from Contracts with Customers

All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income. The following table presents the Corporation’s sources of Non-Interest Income for the three and nine months ended September 30, 2024 and 2023. Items outside the scope of ASC 606 are noted as such.

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollar amounts in thousands)	2024		2023		2024		2023
Non-interest income
Service charges on deposits and debit card fee income	$	8,139	$	7,099	$	21,576	$	20,971
Trust and financial services		1,251		1,140		3,903		3,642
Interchange income		177		—		490		47
Net gains on sales of loans (a)		411		321		886		811
Loan servicing fees (a)		274		447		957		997
Net gains/(losses) on sales of securities (a)		103		—		104		—
Other service charges and fees (a)		191		213		700		613
Other (b)		677		2,407		1,943		4,374
Total non-interest income	$	11,223	$	11,627	$	30,559	$	31,455

(a)Not within the scope of ASC 606.

(b)The Other category includes gains/(losses) on the sale of OREO for the three months ended September 30, 2024 and September 30, 2023, totaling $(25) thousand and zero, respectively, and for the nine months ended for the same periods, totaling $61 thousand and $(31) thousand, which is within the scope of ASC 606; the remaining balance is outside the scope of ASC 606.

(c)

Service charges on deposits: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. 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 Corporation 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 Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Trust and financial services: The Corporation earns asset management fees from its contracts with trust customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e. the trade date. Other related services provided and the fees the Corporation earns, which are based on a fixed fee schedule, are recognized when the services are rendered.

Interchange income: The Corporation earns interchange fees from debit and credit cardholder transactions conducted through the payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.

Gains/Losses on sales of OREO: The Corporation 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 an executed deed. When the Corporation finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform their obligations under the contract and whether collectability 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. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

29

10.   Accumulated Other Comprehensive Income (Loss)

The following tables summarize the changes, net of tax, within each classification of accumulated other comprehensive income/(loss) for the three and nine months ended September 30, 2024 and 2023.

	Unrealized
	gains and
	(Losses) on available-		2024
	for-sale		Retirement
(Dollar amounts in thousands)	Securities		plans		Total
Beginning balance, July 1,	$	(125,561)	$	(8,940)	$	(134,501)
Change in other comprehensive income (loss) before reclassification		31,705		—		31,705
Amounts reclassified from accumulated other comprehensive income		(77)		73		(4)
Net current period other comprehensive income (loss)		31,628		73		31,701
Ending balance, September 30,	$	(93,933)	$	(8,867)	$	(102,800)

	Unrealized
	gains and
	(Losses) on available-		2024
	for-sale		Retirement
(Dollar amounts in thousands)	Securities		plans		Total
Beginning balance, January 1,	$	(118,000)	$	(9,087)	$	(127,087)
Change in other comprehensive income (loss) before reclassification		24,145		—		24,145
Amounts reclassified from accumulated other comprehensive income		(78)		220		142
Net current period other comprehensive income (loss)		24,067		220		24,287
Ending balance, September 30,	$	(93,933)	$	(8,867)	$	(102,800)

	Unrealized
	gains and
	(Losses) on available-		2023
	for-sale		Retirement
(Dollar amounts in thousands)	Securities		plans		Total
Beginning balance, July 1,	$	(130,466)	$	(10,784)	$	(141,250)
Change in other comprehensive income (loss) before reclassification		(34,934)		—		(34,934)
Amounts reclassified from accumulated other comprehensive income		—		146		146
Net current period other comprehensive income (loss)		(34,934)		146		(34,788)
Ending balance, September 30,	$	(165,400)	$	(10,638)	$	(176,038)

	Unrealized
	gains and
	(Losses) on available-		2023
	for-sale		Retirement
(Dollar amounts in thousands)	Securities		plans		Total
Beginning balance, January 1,	$	(128,896)	$	(11,078)	$	(139,974)
Change in other comprehensive income (loss) before reclassification		(36,504)		—		(36,504)
Amounts reclassified from accumulated other comprehensive income		—		440		440
Net current period other comprehensive income (loss)		(36,504)		440		(36,064)
Ending balance, September 30,	$	(165,400)	$	(10,638)	$	(176,038)

	Balance at		Current Period		Balance at
(Dollar amounts in thousands)	7/1/2024		Change		9/30/2024
Unrealized gains (losses) on securities available-for-sale without other than temporary impairment	$	(127,730)	$	31,640	$	(96,090)
Unrealized gains (losses) on securities available-for-sale with other than temporary impairment		2,169		(12)		2,157
Total unrealized loss on securities available-for-sale	$	(125,561)	$	31,628	$	(93,933)
Unrealized gain (loss) on retirement plans		(8,940)		73		(8,867)
TOTAL	$	(134,501)	$	31,701	$	(102,800)

30

	Balance at		Current Period		Balance at
(Dollar amounts in thousands)	1/1/2024		Change		9/30/2024
Unrealized gains (losses) on securities available-for-sale without other than temporary impairment	$	(120,252)	$	24,162	$	(96,090)
Unrealized gains (losses) on securities available-for-sale with other than temporary impairment		2,252		(95)		2,157
Total unrealized gain (loss) on securities available-for-sale	$	(118,000)	$	24,067	$	(93,933)
Unrealized gain (loss) on retirement plans		(9,087)		220		(8,867)
TOTAL	$	(127,087)	$	24,287	$	(102,800)

	Balance at		Current Period		Balance at
(Dollar amounts in thousands)	7/1/2023		Change		9/30/2023
Unrealized gains (losses) on securities available-for-sale without other than temporary impairment	$	(132,671)	$	(34,997)	$	(167,668)
Unrealized gains (losses) on securities available-for-sale with other than temporary impairment		2,205		63		2,268
Total unrealized gain (loss) on securities available-for-sale	$	(130,466)	$	(34,934)	$	(165,400)
Unrealized loss on retirement plans		(10,784)		146		(10,638)
TOTAL	$	(141,250)	$	(34,788)	$	(176,038)

	Balance at		Current Period		Balance at
(Dollar amounts in thousands)	1/1/2023		Change		9/30/2023
Unrealized gains (losses) on securities available-for-sale without other than temporary impairment	$	(131,135)	$	(36,533)	$	(167,668)
Unrealized gains (losses) on securities available-for-sale with other than temporary impairment		2,239		29		2,268
Total unrealized income (loss) on securities available-for-sale	$	(128,896)	$	(36,504)	$	(165,400)
Unrealized gain (loss) on retirement plans		(11,078)		440		(10,638)
TOTAL	$	(139,974)	$	(36,064)	$	(176,038)

	Three Months Ended September 30, 2024
Details about accumulated	Amount reclassified from			Affected line item in
other comprehensive	accumulated other			the statement where
income components	comprehensive income			net income is presented
	(in thousands)
Unrealized gains and losses	$	103		Net securities gains (losses)
on available-for-sale		(26)		Income tax expense
securities	$	77		Net of tax
Amortization of	$	(97)	(a)	Salary and benefits
retirement plan items		24		Income tax expense
	$	(73)		Net of tax
Total reclassifications for the period	$	4		Net of tax

(a) Included in the computation of net periodic benefit cost. (see Footnote 7 for additional details).

31

	Nine Months Ended September 30, 2024
Details about accumulated	Amount reclassified from			Affected line item in
other comprehensive	accumulated other			the statement where
income components	comprehensive income			net income is presented
	(in thousands)
Unrealized gains and losses	$	104		Net securities gains (losses)
on available-for-sale		(26)		Income tax expense
securities	$	78		Net of tax
Amortization of	$	(293)	(a)	Salary and benefits
retirement plan items		73		Income tax expense
	$	(220)		Net of tax
Total reclassifications for the period	$	(142)		Net of tax

(a) Included in the computation of net periodic benefit cost. (see Footnote 7 for additional details).

	Three Months Ended September 30, 2023
Details about accumulated	Amount reclassified from			Affected line item in
other comprehensive	accumulated other			the statement where
income components	comprehensive income			net income is presented
	(in thousands)
Unrealized gains and losses	$	—		Net securities gains (losses)
on available-for-sale		—		Income tax expense
securities	$	—		Net of tax
Amortization of	$	(195)	(a)	Salary and benefits
retirement plan items		49		Income tax expense
	$	(146)		Net of tax
Total reclassifications for the period	$	(146)		Net of tax

(a) Included in the computation of net periodic benefit cost. (see Footnote 7 for additional details).

	Nine Months Ended September 30, 2023
Details about accumulated	Amount reclassified from			Affected line item in
other comprehensive	accumulated other			the statement where
income components	comprehensive income			net income is presented
	(in thousands)
Unrealized gains and losses	$	—		Net securities gains (losses)
on available-for-sale		—		Income tax expense
securities	$	—		Net of tax
Amortization of	$	(587)	(a)	Salary and benefits
retirement plan items		147		Income tax expense
	$	(440)		Net of tax
Total reclassifications for the period	$	(440)		Net of tax

(a) Included in the computation of net periodic benefit cost. (see Footnote 7 for additional details).

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11.   Leases

The Corporation leases certain branches under operating leases. At September 30, 2024, the Corporation had lease liabilities totaling $8,067,000 and right-of-use assets totaling $7,978,000 related to these leases. At December 31, 2023, the Corporation had lease liabilities totaling $5,456,000 and right-of-use assets totaling $5,392,000 related to these leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively. At September 30, 2024, the weighted average remaining lease term for operating leases was 11.0 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.19%.

The calculated amount of the lease liabilities and right-of-use assets are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Corporation’s lease agreements often include one or more options to renew at the Corporation’s discretion. If at lease inception, the Corporation considers the exercising of a renewal option to be reasonably certain, the Corporation will include the extended term in the calculation of the lease liability and right-of-use asset. Regarding the discount rate, the new standard requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Corporation utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

The following table represents lease costs and other lease information. As the Corporation elected, not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.

Lease costs were as follows:

	Nine Months Ended
(Dollar amounts in thousands)	September 30, 2024
Operating lease cost	$	849
Short-term lease cost		83
Variable lease cost		18
Total lease cost	$	950
Other information:
Cash paid for amounts included in the measurement of operating lease liabilities		792
Right-of-use assets obtained in exchange for new operating lease liabilities		3,262

The right-of-use assets obtained above includes $2.8 million in assets acquired in the SimplyBank acquisition. Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2024 were as follows:

(Dollar amounts in thousands)	September 30, 2024
Twelve Months Ended September 30,
2025	$	1,218
2026		1,154
2027		1,118
2028		1,062
2029		741
Thereafter		4,846
Total Future Minimum Lease Payments		10,139
Amounts Representing Interest		(2,072)
Present Value of Net Future Minimum Lease Payments	$	8,067

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12.   Acquisitions

On July 1, 2024, the Corporation completed its acquisition of SimplyBank. Therefore, the results of SimplyBank have been included in the results of operations beginning on July 1, 2024. Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Interim Merger (the “Effective Time”), other than dissenting shares, each share of SimplyBank Common Stock issued and outstanding immediately prior to the Effective Time, was converted into the right to receive $718.38 per share in cash. The aggregate value of the transaction was approximately $73.4 million. Acquisition-related costs of $1.7 million are included in the Corporation’s income statement for the year-to-date period ended September 30, 2024.

Goodwill of $10.3 million arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies. The goodwill value is subject to change pending receipt of the final valuation. The goodwill for SimplyBank is deductible for income tax purposes as the transaction was accounted for as a taxable acquisition. The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

			Measurement
	As Initially		Period
(Dollar amounts in thousands)	Reported		Adjustments		As Adjusted
Consideration
Cash consideration	$	73,400	$	—	$	73,400
Fair value of total consideration transferred	$	73,400	$	—	$	73,400
Assets acquired
Cash	$	101,553	$	—	$	101,553
Investment securities available-for-sale		77,350		—		77,350
Federal funds sold		—		—		—
Bank owned life insurance		12,816		—		12,816
Federal Home Loan Bank stock		726		—		726
Loans		467,997		—		467,997
Premises and equipment		14,231		—		14,231
Core deposit intangibles		19,788		—		19,788
Other assets		6,184		—		6,184
Total assets acquired		700,645		—		700,645
Liabilities assumed
Deposits		622,937		—		622,937
FHLB advances		1,719		—		1,719
Other liabilities		12,899		—		12,899
Total liabilities assumed		637,555		—		637,555
Net identifiable assets		63,090		—		63,090
Goodwill	$	10,310	$	—	$	10,310

The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, the Corporation believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables were not considered impaired at the acquisition date and were not subject to guidance relating to purchase credit deteriorated loans, which have shown evidence of credit deterioration since origination.

The fair value of purchased financial assets with credit deterioration was $1.7 million on the date of acquisition. The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $4.7 million. The Corporation estimates, on the date of acquisition, that $3.0 million of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.

34

The following table presents supplemental pro forma information as if the acquisition had occurred at the beginning of 2023. The unaudited pro forma information includes adjustments for interest income on loans and securities acquired, interest expense on deposits acquired, 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 dates.

	Nine Months Ended September 30,
(Dollar amounts in thousands, except per share data)	2024		2023
Net interest income	$	138,839	$	150,024
Net income	$	20,184	$	56,355
Basic and diluted earnings per share	$	1.71	$	4.70

35

ITEMS 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk

The purpose of this discussion is to point out key factors in the Corporation’s recent performance compared with earlier periods. The discussion should be read in conjunction with the financial statements beginning on page three of this report. All figures are for the consolidated entities. It is presumed the readers of these financial statements and of the following narrative have previously read the Corporation’s financial statements for 2023 in the 10-K filed for the fiscal year ended December 31, 2023.

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Corporation’s ability to effectively execute its business plans; changes in general economic and financial market conditions; changes in interest rates; changes in the competitive environment; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcy, claims and assessments; changes in banking regulations or other regulatory or legislative requirements affecting the Corporation’s business; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements is available in the Corporation’s Form 10-K for the year ended December 31, 2023, and subsequent filings with the United States Securities and Exchange Commission (SEC). Copies of these filings are available at no cost on the SEC’s Web site at www.sec.gov or on the Corporation’s Web site at www.first-online.com. Management may elect to update forward-looking statements at some future point; however, it specifically disclaims any obligation to do so.

Critical Accounting Policies

Certain of the Corporation’s accounting policies are important to the portrayal of the Corporation’s financial condition and results of operations, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for credit losses and the valuation of goodwill and valuing investment securities. See further discussion of these critical accounting policies in the 2023 Form 10-K.

Allowance for credit losses. The allowance for credit losses (ACL) represents management’s estimate of expected losses inherent within the existing loan portfolio. The allowance for credit losses is increased by the provision for credit losses charged to expense and reduced by loans charged off, net of recoveries. The allowance for credit losses is determined based on management’s assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions, nonperforming loans, determination of acquired loans as purchase credit deteriorated, and reasonable and supportable forecasts. Loans are individually evaluated when they do not share risk characteristics with other loans in the respective pool. Loans evaluated individually are excluded from the collective evaluation. Management elected the collateral dependent practical expedient upon adoption of ASC 326. Expected credit losses on individually evaluated loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Management utilizes a cohort methodology to determine the allowance for credit losses. This method identifies and captures the balance of a pool of loans with similar risk characteristics, as of a particular point in time to form a cohort, then tracks the respective losses generated by that cohort of loans over their remaining life. The cohorts track loan balances and historical loss experience since 2008, and management extends the look back period each quarter to capture all available data points in the historical loss rate calculation. The quantitative component of the ACL involves assumptions that require a significant level of estimation; these include historical losses as a predictor of future performance, appropriateness of selected delay periods, and the reasonableness of the portfolio segmentation.

A historical data set is expected to provide the best indication of future credit performance. Delay periods represent the amount of time it takes a cohort of loans to become seasoned, or incur sufficient attrition through pay downs, renewals, or charge-offs. Portfolio segmentation relates to the pooling of loans with similar risk characteristics, such as industry types, collateral, and consumer purpose.

36

On an annual basis, in the first quarter, management performs a recalibration of the delay periods and portfolio segmentation to determine whether they are reasonable and appropriate based on the information available at that time.

Management considers qualitative adjustments to expected credit loss estimates for information not already captured in the loss estimation process. Where past performance may not be representative of future losses, loss rates are adjusted for qualitative and economic forecast factors. Management uses the peak three consecutive quarter net charge off rate to capture maximum potential volatility over the reasonable and supportable forecast period. Historical losses utilized in setting the qualitative factor ranges are anchored to 2008 and may be supplemented by peer information when needed. The qualitative factor ranges are recalibrated annually to capture recent behavior that is indicative of the credit profile of the current portfolio.

Qualitative factors include items, such as changes in lending policies or procedures, asset specific risks, and economic uncertainty in forward-looking forecasts. Economic indicators utilized in forecasting include unemployment rate, gross domestic product, housing starts, and interest rates. Management uses a two-year reasonable and supportable period across all loan segments to forecast economic conditions. Management believes the two-year time horizon aligns with available industry guidance and various forecasting sources. Economic forecast adjustments are overlaid onto historical loss rates. As such, reversion from forecast rates to historical loss rates is immediate.

The ACL and allowance for unfunded commitments were $46.2 million and $1.8 million, respectively at September 30, 2024, compared to $39.8 million and $2.0 million, respectively at December 31, 2023. The qualitative amount of the reserve increased $1.6 million to $12.6 million. The quantitative amount is $33.3 million at September 30, 2024, compared to $28.4 million at December 31, 2023. There was a decrease of $200 thousand in the allowance for unfunded commitments. See additional discussion of ACL in the Allowance for Credit Losses section below.

Based on management’s analysis of the current portfolio, management believes the allowance is adequate. Changes in the financial condition of individual borrowers, economic conditions, historical loss experience, or the condition of the various markets in which collateral may be sold may affect the required level of the allowance for credit losses and the associated provision for credit losses. As management monitors these changes, as well as those factors discussed above, adjustments may be recorded to the allowance for credit losses and the associated provision for credit losses in the future.

Summary of Operating Results

Net income for the three months ended September 30, 2024 was $8.7 million, compared to $16.3 million for the same period in 2023. Basic earnings per share decreased to $0.74 for the third quarter of 2024 compared to $1.37 for the same period in 2023. Return on average assets and return on average equity were 0.64% and 6.39% respectively, for the three months ended September 30, 2024 compared to 1.35% and 13.19% for the three months ended September 30, 2023. Net income for the nine months ended September 30, 2024 was $31.0 million, compared to $48.3 million for the same period in 2023. Basic earnings per share decreased to $2.63 for the first nine months of 2024 compared to $4.02 for the same period in 2023. Return on average assets and return on average equity were 0.82% and 7.80% respectively, for the nine months ended September 30, 2024 compared to 1.33% and 12.98% for the nine months ended September 30, 2023.

In light of events in the banking sector, including bank failures, continuing interest rate activity and recessionary concerns, the Corporation has proactively positioned the balance sheet to mitigate the risks affecting the Corporation and the overall banking industry in order to serve its clients and communities.

● Liquidity remains strong, with cash and available for sale securities representing approximately 24.6% of assets at September 30, 2024. The Corporation maintains the ability to access considerable sources of contingent liquidity at the Federal Home Loan Bank and several correspondent banks. Management considers the Corporation’s current liquidity position to be adequate to meet both short-term and long-term liquidity needs. Refer to the section Liquidity Risk for additional information.

● Capital remains strong, with ratios of the Corporation, and its subsidiary bank, well above the standards to be considered well-capitalized under regulatory requirements. Refer to the section Capital Adequacy, included elsewhere in this report for additional details.

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● Asset quality remains solid, with a non-performing asset ratio of 0.31% of total assets as of September 30, 2024 and net charge-offs of 0.43% to average loans and leases, reflecting the Company's disciplined underwriting and conservative lending philosophy which has supported the Corporation’s strong credit performance during prior financial crises. Refer to the section Non-Performing Loan for additional information.

The Corporation will continue its safe and sound banking practices, but the continuing impact of the 2023 crisis and further extent on the Corporation’s operations and financial results for the remainder of 2024 is uncertain and cannot be predicted.

The primary components of income and expense affecting net income are discussed in the following analysis.

Net Interest Income

The Corporation’s primary source of earnings is net interest income, which is the difference between the interest earned on loans and other investments and the interest paid for deposits and other sources of funds. Net interest income increased $6.0 million in the three months ended September 30, 2024 to $47.2 million from $41.2 million in the same period in 2023. The net interest margin for the three months ended September 30, 2024 is 3.78% compared to 3.74% for the same period in 2023, a 1.16% increase. Net interest income decreased $2.3 million in the nine months ended September 30, 2024 to $125.4 million from $127.7 million in the same period in 2023. The net interest margin for the nine months ended September 30, 2024 is 3.63% compared to 3.83% for the same period in 2023.

The increase in yields on net loans and leases of 44 basis points is the primary contributor to the improved yield on average earning assets for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, which was due to market conditions as a result of Federal Reserve interest rate increases. Comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023, the effective rate paid on average interest-bearing deposits increased 72 basis points, due to rate competition in the market. For the same period discussed above, interest paid on other borrowings increased 99 basis points due to higher borrowing rates.

Non-Interest Income

Non-interest income for the three months ended September 30, 2024 was $11.2 million compared to $11.6 million for the same period in 2023. Non-interest income for the nine months ended September 30, 2024 was $30.6 million compared to $31.5 million for the same period in 2023.

Non-Interest Expenses

The Corporation’s non-interest expense for the quarter ended September 30, 2024 was $38.6 million compared to $32.3 million for the same period in 2023. The Corporation’s non-interest expense for the nine months ended September 30, 2024 increased $8.7 million to $104.6 milllion compared to the same period in 2023. This includes $1.7 million of acquisition related expenses, as well as an overall increase in operating expenses as a result of the acquisition.

Allowance for Credit Losses

The Corporation’s provision for credit losses for the three months ended September 30, 2024, was $9.4 million, compared to provision of $1.2 million for the same period of 2023. Net charge-offs for the third quarter of 2024 were $4.6 million compared to net charge-offs of $2.1 million for the same period of 2023. The provision for credit losses increased $9.4 million to $14.2 million for the nine months ended September 30, 2024, compared to a provision of $4.8 million for the same period in 2023. Net charge-offs for the first nine months of 2024 increased $5.2 million to $10.8 million compared to the same period in 2023. The Corporation recorded $5.5 million in Day 2 provision on non-PCD loans acquired from SimplyBank. Additionally, the increase in provision as well as charge-offs were related to one previously identified credit, reflecting further deterioration in collateral values in the quarter. No further losses are expected on this credit. Based on management’s analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate. In the first nine months of 2024, no significant changes were made.

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Income Tax Expense

The Corporation’s effective income tax rate for the first nine months of 2024 was 16.44% compared to 17.37% for the same period in 2023. Pretax income for the first nine months in 2023 was significantly higher than pretax income for first nine months in 2024. Since our permanent differences remained similar, income was the driving factor for the decrease in effective tax rate.

Non-performing Loans

Non-performing loans consist of (1) non-accrual loans on which the ultimate collectability of the full amount of interest is uncertain,  and (2) loans past due ninety days or more as to principal or interest. Non-performing loans decreased to $14.1 million at September 30, 2024 compared to $24.6 million at December 31, 2023. Nonperforming loans increased 12.3% compared to $12.6 million as of September 30, 2023.

A summary of non-performing loans at September 30, 2024 and December 31, 2023 follows:

	(000's)
	September 30, 2024			December 31, 2023
Non-accrual loans	$	12,617		$	23,596
Accruing loans past due over 90 days		1,517			960
	$	14,134		$	24,556
Ratio of the allowance for credit losses as a percentage of non-performing loans		326.7	%		161.9	%

The following loan categories comprise significant components of the nonperforming non-restructured loans:

	September 30, 2024		December 31, 2023
Non-accrual loans
Commercial loans	$	7,428	$	18,380
Residential loans		2,524		2,065
Consumer loans		2,665		3,151
	$	12,617	$	23,596
Past due 90 days or more
Commercial loans	$	38	$	4
Residential loans		1,475		911
Consumer loans		4		45
	$	1,517	$	960

Interest Rate Sensitivity and Liquidity

First Financial Corporation has established risk measures, limits and policy guidelines for managing interest rate risk and liquidity. Responsibility for management of these functions resides with the Asset Liability Committee. The primary goal of the Asset Liability Committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors.

Interest Rate Risk

Management considers interest rate risk to be the Corporation’s most significant market risk. Interest rate risk is the exposure to changes in net interest income as a result of changes in interest rates. Consistency in the Corporation’s net interest income is largely dependent on the effective management of this risk.

The Asset Liability position is measured using sophisticated risk management tools, including earning simulation and market value of equity sensitivity analysis. These tools allow management to quantify and monitor both short-term and long-term exposure to interest rate risk. Simulation modeling measures the effects of changes in interest rates, changes in the shape of the yield curve and the effects of embedded options on net interest income. This measure projects earnings in the various environments over the next three years. It is important to note that measures of interest rate risk have limitations and are dependent on various assumptions. These assumptions are

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inherently uncertain and, as a result, the model cannot precisely predict the impact of interest rate fluctuations on net interest income. Actual results will differ from simulated results due to timing, frequency and amount of interest rate changes as well as overall market conditions. The Committee has performed a thorough analysis of these assumptions and believes them to be valid and theoretically sound. These assumptions are continuously monitored for behavioral changes.

The Corporation from time to time utilizes derivatives to manage interest rate risk. Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Corporation’s risk management strategy.

The table below shows the Corporation’s estimated sensitivity profile as of September 30, 2024. The change in interest rates assumes a parallel shift in interest rates of 100, 200, and 300 basis points. Given a 100 basis point increase in rates, net interest income would decrease 1.55% over the next 12 months and increase 1.09% over the following 12 months. Given a 100 basis point decrease in rates, net interest income would increase 5.96% over the next 12 months and increase 2.74% over the following 12 months. These estimates assume all rate changes occur overnight and management takes no action as a result of this change.

Basis Point	Percentage Change in Net Interest Income
Interest Rate Change	12 months		24 months		36 months
Down 300	6.88	%	(2.95)	%	(13.56)	%
Down 200	6.32		(0.36)		(7.92)
Down 100	5.96		2.74		(1.14)
Up 100	(1.55)		1.09		4.57
Up 200	(6.25)		(1.13)		5.76
Up 300	(9.48)		(1.89)		8.41

Typical rate shock analysis does not reflect management’s ability to react and thereby reduce the effect of rate changes, and represents a worst-case scenario.

Liquidity Risk

Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers, and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Generally the Corporation relies on deposits, loan repayments and repayments of investment securities as its primary sources of funds. The Corporation has $14.4 million of investments that mature throughout the next 12 months. The Corporation also anticipates $131.9 million of principal payments from mortgage-backed and other securities. Given the current rate environment, the Corporation anticipates $26.9 million in securities to be called within the next 12 months. The Corporation also has $346.3 million of unused borrowing capacity available with the Federal Home Loan Bank of Indianapolis, $378.9 million available with the Federal Reserve Bank, and $125 million of available fed funds lines with correspondent banks. With these sources of funds, the Corporation currently anticipates adequate liquidity to meet the expected obligations of its customers.

Financial Condition

Comparing the first nine months of 2024 to year-ended December 31, 2023, loans net of deferred loan costs, have increased $547 million to $3.7 billion. Deposits increased 15.3% to $4.7 billion at September 30, 2024 compared to December 31, 2023. Other borrowings decreased $78.1 million to $30.5 million at September 30, 2024 compared to December 31, 2023. Shareholders’ equity increased 7.19% or $38.0 million. This financial performance increased book value per share 7.08% to $47.93 at September 30, 2024 from $44.76 at December 31, 2023. Book value per share is calculated by dividing the total shareholders’ equity by the number of shares outstanding. Accumulated other comprehensive loss increased $24.3 million primarily due to the market value of the securities portfolio, which reflected the increase in securities pricing.

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Capital Adequacy

The Federal Reserve, OCC and Federal Deposit Insurance Corporation (collectively, joint agencies) establish regulatory capital guidelines for U.S. banking organizations. Regulatory capital guidelines require that capital be measured in relation to the credit and market risks of both on- and off-balance sheet items using various risk weights. On January 1, 2015, the Basel 3 rules became effective and include transition provisions through January 1, 2019. Under Basel 3, Total capital consists of two tiers of capital, Tier 1 and Tier 2. Tier 1 capital is further composed of Common equity tier 1 capital and additional tier 1 capital.

Common equity tier 1 capital primarily includes qualifying common shareholders’ equity, retained earnings and certain minority interests. Goodwill, disallowed intangible assets and certain disallowed deferred tax assets are excluded from Common equity tier 1 capital.

Additional tier 1 capital primarily includes qualifying non-cumulative preferred stock, trust preferred securities (Trust Securities) subject to phase-out and certain minority interests. Certain deferred tax assets are also excluded.

Tier 2 capital primarily consists of qualifying subordinated debt, a limited portion of the allowance for loan and lease losses, Trust Securities subject to phase-out and reserves for unfunded lending commitments. The Corporation’s Total capital is the sum of Tier 1 capital plus Tier 2 capital.

To meet adequately capitalized regulatory requirements, an institution must maintain a Tier 1 capital ratio of 8.50 percent and a Total capital ratio of 10.50 percent. A “well-capitalized” institution must generally maintain capital ratios 200 bps higher than the minimum guidelines. The risk-based capital rules have been further supplemented by a Tier 1 leverage ratio, defined as Tier 1 capital divided by quarterly average total assets, after certain adjustments. BHCs must have a minimum Tier 1 leverage ratio of at least 4.0 percent. National banks must maintain a Tier 1 leverage ratio of at least 5.0 percent to be classified as “well capitalized.” Failure to meet the capital requirements established by the joint agencies can lead to certain mandatory and discretionary actions by regulators that could have a material adverse effect on the Corporation’s financial position. Below are the capital ratios for the Corporation and lead bank.

The fully phased in capital conservation buffer set the minimum ratios for common equity Tier 1 capital at 7%, the Tier 1 capital at 8.5% and the total capital at 10.5%. Currently the Corporation exceeds all of these minimums.

	September 30, 2024		December 31, 2023		To Be Well Capitalized
Common equity tier 1 capital
Corporation	12.31	%	14.76	%	N/A
First Financial Bank	12.63	%	13.84	%	—	%
Total risk-based capital
Corporation	13.34	%	15.80	%	N/A
First Financial Bank	13.67	%	14.89	%	—	%
Tier I risk-based capital
Corporation	12.31	%	14.76	%	N/A
First Financial Bank	12.63	%	13.84	%	—	%
Tier I leverage capital
Corporation	10.25	%	12.14	%	N/A
First Financial Bank	10.27	%	10.73	%	—	%

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ITEM 4.Controls and Procedures

First Financial Corporation’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of September 30, 2024, an evaluation was performed under the supervision and with the participation of management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on that evaluation, management, including the principal executive officer and principal financial officer, concluded that the Corporation’s disclosure controls and procedures as of September 30, 2024 were effective in ensuring material information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis. Additionally, there was no change in the Corporation's internal control over financial reporting that occurred during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting.

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PART II – Other Information

ITEM 1.Legal Proceedings.

There are no material pending legal proceedings, other than routine litigation incidental to the business of the Corporation or its subsidiaries, to which the Corporation or any of the subsidiaries is a party to or of which any of their respective property is subject. Further, there is no material legal proceeding in which any director, officer, principal shareholder, or affiliate of the Corporation or any of its subsidiaries, or any associate of such director, officer, principal shareholder or affiliate is a party, or has a material interest, adverse to the Corporation or any of its subsidiaries.

ITEM 1A. Risk Factors.

There have been no material changes in the risk factors from those disclosed in the Corporation’s 2023 Form 10-K filed for December 31, 2023.

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

(a) None.

(b) Not applicable.

(c) Purchases of Equity Securities

The Corporation periodically acquires shares of its common stock directly from shareholders in individually negotiated transactions. On April 21, 2022 First Financial Corporation issued a press release announcing that its Board of Directors has authorized a stock repurchase program pursuant to which up to 10% of the Corporations outstanding shares of common stock, or approximately 1,243,531 shares may be repurchased.

Following is certain information regarding shares of common stock purchased by the Corporation during the quarter covered by this report.

			(c)
			Total Number Of Shares	(c)
	(a)	(b)	Purchased As Part Of	Maximum
	Total Number Of	Average Price	Publicly Announced Plans	Number of Shares That May Yet
	Shares Purchased	Paid Per Share	Or Programs *	Be Purchased *
July 1-31, 2024	—	—	—	—
August 1-31, 2024	—	—	—	—
September 1-30, 2024	—	—	—	—
Total	—	—	—	518,860

ITEM 3.Defaults upon Senior Securities.

Not applicable.

ITEM 4.Mine Safety Disclosures

Not applicable.

ITEM 5.Other Information.

During the three months ended September 30, 2024, there were no Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements adopted, modified or terminated by any director or officer of the Corporation.

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ITEM 6.Exhibits.

Exhibit No.:	Description of Exhibit:
3.1	Amended and Restated Articles of Incorporation of First Financial Corporation, incorporated by reference to Exhibit 3(i) of the Corporation’s Form 10-Q filed for the quarter ended September 30, 2002.
3.2	Amended and Restated Code of By-Laws of First Financial Corporation, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed on February 22, 2021.
3.3	Articles of Amendment to the Amended and Restated Articles of Incorporation of First Financial Corporation, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed on April 27, 2021.
10.1*	Employment Agreement for Norman L. Lowery, dated and effective January 1, 2024, incorporated by reference to Exhibit 10.01 of the Corporation’s Form 8-K filed on October 20, 2023.
10.2*	2001 Long-Term Incentive Plan of First Financial Corporation, incorporated by reference to Exhibit 10.3 of the Corporation’s Form 10-Q filed for the quarter ended September 30, 2002.
10.5*	2005 Long-Term Incentive Plan of First Financial Corporation, incorporated by reference to Exhibit 10.7 of the Corporation’s Form 8-K filed on September 4, 2007.
10.6*	2005 Executives Deferred Compensation Plan, incorporated by reference to Exhibit 10.5 of the Corporation’s Form 8-K filed on September 4, 2007.
10.7*	2005 Executives Supplemental Retirement Plan, incorporated by reference to Exhibit 10.6 of the Corporation’s Form 8-K filed on September 4, 2007.
10.9*	First Financial Corporation 2010 Long-Term Incentive Compensation Plan incorporated by reference to Exhibit 10. 9 of the Corporation’s Form 10-K filed March 15, 2011.
10.10*	First Financial Corporation 2011 Short-Term Incentive Compensation Plan incorporated by reference to Exhibit 10.10 of the Corporation’s Form 10-K filed March 15, 2011.
10.11*	First Financial Corporation Amended and Restated 2011 Omnibus Equity Incentive Plan incorporated by reference to Exhibit 10.1 of the Corporation’s Form 8-K for the annual meeting filed on April 27, 2021.
10.12*	Form of Restricted Stock Award Agreement under the First Financial Corporation 2011 Omnibus Equity Incentive Plan incorporated by reference to Exhibit 10.12 of the Corporation’s Form 10-Q for the quarter ended March 31, 2012 filed on May 10, 2012.
10.13*	Employment Agreement for Norman D. Lowery, effective July 1, 2024, incorporated by reference to Exhibit 10.1 of the Corporation’s Form 8-K filed August 7, 2024.
10.14*	Employment Agreement for Rodger A. McHargue, effective July 1, 2024, incorporated by reference to Exhibit 10.2 of the Corporation’s Form 8-K filed August 7, 2024.
10.15*	Employment Agreement for Stephen P. Panagouleas, effective July 1, 2024, incorporated by reference to Exhibit 10.3 of the Corporation’s Form 8-K filed August 7, 2024.
10.16*	Employment Agreement for Mark A. Franklin, effective July 1, 2024, incorporated by reference to Exhibit 10.4 of the Corporation’s Form 8-K filed August 7, 2024.
31.1	Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 by Principal Executive Officer, dated November 6, 2024.
31.2	Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 by Principal Financial Officer, dated November 6, 2024.
32.1	Certification, dated November 6, 2024, of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2005 on Form 10-Q for the quarter ended September 30, 2024.
101.1	Financial statements from the Quarterly Report on Form 10-Q of the Corporation for the quarter ended September 30, 2024, formatted in XBRL pursuant to Rule 405 : (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Shareholders’ Equity, and (v) Notes to Consolidated Financial Statements, as blocks of text and in detail**.

*Management contract or compensatory plan or arrangement.

**Furnished, not filed, for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

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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 thereunto duly authorized.

	FIRST FINANCIAL CORPORATION
	(Registrant)
Date: November 6, 2024	By /s/ Norman D. Lowery
	Norman D. Lowery, President, CEO & Director
	(Principal Executive Officer)
Date: November 6, 2024	By /s/ Rodger A. McHargue
	Rodger A. McHargue, Treasurer and CFO
	(Principal Financial Officer)

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