First Financial offers clients a variety of commercial and consumer loan and lease products with various interest rates and payment terms. Commercial loan categories include C&I, CRE, construction real estate and lease financing. Consumer loan categories include residential real estate, home equity, installment and credit card.

Lending activities are primarily concentrated in states where the Bank operates banking centers (Ohio, Indiana, Kentucky and Illinois). First Financial also offers two nationwide lending platforms, one that provides equipment and leasehold improvement financing for franchisees in the quick service and casual dining restaurant sector and another that provides loans primarily to insurance agents and brokers that are secured by commissions and cash collateral accounts.

Special Mention - First Financial assigns a special mention rating to loans and leases with potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in First Financial's credit position at some future date.

Substandard - First Financial assigns a substandard rating to loans or leases that are inadequately protected by the current sound financial worth and paying capacity of the borrower or the collateral pledged, if any. Substandard loans and leases have well-defined weaknesses that jeopardize repayment of the debt. Substandard loans and leases are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not addressed.

Doubtful - First Financial assigns a doubtful rating to loans and leases with all of the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.

First Financial considers repayment performance as the best indicator of credit quality for consumer loans. Consumer loans that have principal and interest payments that are past due by 90 days or more are generally classified as nonperforming. Additionally, consumer loans that have been modified in a TDR are classified as nonperforming. Purchased impaired loans are not classified as nonperforming as the loans are considered to be performing under FASB ASC Topic 310-30.



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



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



	As of December 31, 2019
(Dollars in thousands)	30 – 59 days past due		60 – 89 days past due		> 90 days past due		Total past due		Current		Subtotal		Purchased impaired		Total		> 90 days past due and still accruing
Loans
Commercial & industrial	$	1,266	$	3,332	$	14,518	$	19,116	$	2,443,680	$	2,462,796	$	3,081	$	2,465,877	$	0
Lease financing	0		0		0		0		88,364		88,364		0		88,364		0
Construction real estate	0		0		0		0		493,167		493,167		15		493,182		0
Commercial real estate	776		857		5,613		7,246		4,151,513		4,158,759		35,892		4,194,651		0
Residential real estate	8,032		1,928		5,031		14,991		1,014,138		1,029,129		26,820		1,055,949		0
Home equity	2,530		1,083		2,795		6,408		762,863		769,271		2,598		771,869		0
Installment	111		50		148		309		82,022		82,331		258		82,589		0
Credit card	208		75		201		484		48,700		49,184		0		49,184		201
Total	$	12,923	$	7,325	$	28,306	$	48,554	$	9,084,447	$	9,133,001	$	68,664	$	9,201,665	$	201



	As of December 31, 2018
(Dollars in thousands)	30 - 59 days past due		60 - 89 days past due		> 90 days past due		Total past due		Current		Subtotal		Purchased impaired		Total		> 90 days past due and still accruing
Loans
Commercial & industrial	$	13,369	$	41	$	7,423	$	20,833	$	2,488,450	$	2,509,283	$	5,378	$	2,514,661	$	0
Lease financing	352		0		0		352		93,063		93,415		0		93,415		0
Construction real estate	0		0		0		0		548,687		548,687		248		548,935		0
Commercial real estate	6,279		1,158		12,644		20,081		3,682,455		3,702,536		52,145		3,754,681		0
Residential real estate	11,060		2,976		4,535		18,571		902,404		920,975		34,671		955,646		0
Home equity	5,245		1,228		2,578		9,051		804,835		813,886		3,396		817,282		0
Installment	420		37		145		602		92,128		92,730		482		93,212		0
Credit card	541		96		63		700		45,682		46,382		0		46,382		63
Total	$	37,266	$	5,536	$	27,388	$	70,190	$	8,657,704	$	8,727,894	$	96,320	$	8,824,214	$	63

Nonaccrual. Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful or when principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to the continued failure to adhere to contractual payment terms by the borrower, coupled with other pertinent factors. When a loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued but unpaid interest is reversed. Any payments received while a loan is on nonaccrual status are applied as a reduction to the carrying value of the loan. A loan classified as nonaccrual may return to accrual status if none of the principal and interest is due and unpaid, and the Bank expects repayment of the remaining contractual principal and interest.

Purchased impaired loans are classified as performing, even though they may be contractually past due, as any nonpayment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period provision for loan and lease losses or prospective yield adjustments.

Troubled debt restructurings. A loan modification is considered a TDR when the borrower is experiencing financial difficulty and concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. The most common types of modifications include interest rate reductions, maturity extensions and modifications to principal amortization, including interest-only structures. Modified terms are dependent upon the financial position and needs of the individual borrower. If the modification agreement is violated, the loan is managed by the Company’s credit administration group for resolution, which may result in foreclosure in the case of real estate.

First Financial had 157 TDRs totaling $30.0 million at December 31, 2019, including $11.4 million of loans on accrual status and $18.5 million of loans classified as nonaccrual. First Financial had $2.5 million commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs, and the ALLL included reserves of $2.5 million related to TDRs as of December 31, 2019. For the years ended December 31, 2019, 2018 and 2017, First Financial charged off $2.6 million, $0.9 million and $0.3 million, respectively, for the portion of TDRs determined to be uncollectible. Additionally, as of December 31, 2019, approximately $4.7 million of the accruing TDRs have been performing in accordance with the restructured terms for more than one year.

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

First Financial had 214 TDRs totaling $23.9 million at December 31, 2017, including $17.5 million of loans on accrual status and $6.4 million of loans classified as nonaccrual. First Financial had an insignificant amount of commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs. At December 31, 2017, the ALLL included reserves of $1.3 million related to TDRs, and $17.2 million of the accruing TDRs had been performing in accordance with the restructured terms for more than one year.



	Years ended December 31,
	2019					2018					2017
(Dollars in thousands)	Number of loans	Pre-modification loan balance		Period end balance		Number of loans	Pre-modification loan balance		Period end balance		Number of loans	Pre-modification loan balance		Period end balance
Commercial & industrial	8	$	25,009	$	25,071	17	$	23,943	$	23,890	7	$	5,724	$	5,661
Construction real estate	0	0		0		0	0		0		0	0		0
Commercial real estate	9	3,024		2,932		8	3,385		3,150		8	1,816		1,758
Residential real estate	30	3,415		3,062		13	1,148		1,073		6	416		315
Home equity	14	395		366		5	95		192		1	39		39
Installment	2	41		39		0	0		0		0	0		0
Total	63	$	31,884	$	31,470	43	$	28,571	$	28,305	22	$	7,995	$	7,773



	Years Ended December 31,
(Dollars in thousands)	2019		2018		2017
Extended maturities	$	2,877	$	4,093	$	3,261
Adjusted interest rates	5,284		52		2,767
Combination of rate and maturity changes	516		0		489
Forbearance	20,320		23,175		1,181
Other ⁽¹⁾	2,473		985		75
Total	$	31,470	$	28,305	$	7,773

First Financial considers repayment performance as an indication of the effectiveness of the Company's loan modifications. Borrowers that are 90 days or more past due on any principal or interest payments, or who prematurely terminate a restructured loan agreement without paying off the contractual principal balance, are considered to be in payment default of the terms of the TDR agreement.

For the twelve months ended December 31, 2019, there were three TDRs with a balance of $7.0 million for which there was a payment default during the period that occurred within twelve months of the loan modification. For the twelve months ended December 31, 2018, there was one TDR with an insignificant balance for which there was a payment default during the period that occurred within twelve months of the loan modification. For the twelve months ended December 31, 2017, there was one TDR with a balance $1.5 million for which there was a payment default during the period that occurred within twelve months of the loan modification.



(Dollars in thousands)	2019		2018		2017
Impaired loans
Nonaccrual loans ⁽¹⁾
Commercial & industrial	$	24,346	$	30,925	$	5,229
Lease financing	223		22		82
Construction real estate	0		9		29
Commercial real estate	7,295		20,500		10,616
Residential real estate	10,892		13,495		4,140
Home equity	5,242		5,580		3,743
Installment	167		169		243
Total nonaccrual loans	48,165		70,700		24,082
Accruing troubled debt restructurings	11,435		16,109		17,545
Total impaired loans	$	59,600	$	86,809	$	41,627

Interest income effect
Gross amount of interest that would have been recorded under original terms	$	5,813	$	4,656	$	3,397
Interest included in income
Nonaccrual loans	1,042		715		535
Troubled debt restructurings	801		642		710
Total interest included in income	1,843		1,357		1,245
Net impact on interest income	$	3,970	$	3,299	$	2,152

Commitments outstanding to borrowers with nonaccrual loans	$	3	$	200	$	0

First Financial individually reviews all impaired commercial loan relationships greater than $250,000, as well as consumer loan TDRs greater than $250,000, to determine if a specific allowance is necessary based on the borrower’s overall financial condition, resources, and payment record, support from guarantors and the realizable value of any collateral. Specific allowances are based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.



	December 31, 2019						December 31, 2018
(Dollars in thousands)	Current balance		Contractual principal balance		Related allowance		Current balance		Contractual principal balance		Related allowance
Loans with no related allowance recorded
Commercial & industrial	$	16,726	$	19,709	$	0	$	36,694	$	42,561	$	0
Lease financing	223		223		0		22		22		0
Construction real estate	0		0		0		9		26		0
Commercial real estate	10,160		17,897		0		23,513		31,375		0
Residential real estate	14,868		17,368		0		17,297		19,975		0
Home equity	5,700		6,462		0		6,351		7,461		0
Installment	204		341		0		174		563		0
Total	47,881		62,000		0		84,060		101,983		0

Loans with an allowance recorded
Commercial & industrial	10,754		21,513		2,044		939		939		667
Lease financing	0		0		0		0		0		0
Construction real estate	0		0		0		0		0		0
Commercial real estate	671		675		113		1,509		1,509		461
Residential real estate	294		294		18		301		301		32
Home equity	0		0		0		0		0		0
Installment	0		0		0		0		0		0
Total	11,719		22,482		2,175		2,749		2,749		1,160

Total
Commercial & industrial	27,480		41,222		2,044		37,633		43,500		667
Lease financing	223		223		0		22		22		0
Construction real estate	0		0		0		9		26		0
Commercial real estate	10,831		18,572		113		25,022		32,884		461
Residential real estate	15,162		17,662		18		17,598		20,276		32
Home equity	5,700		6,462		0		6,351		7,461		0
Installment	204		341		0		174		563		0
Total	$	59,600	$	84,482	$	2,175	$	86,809	$	104,732	$	1,160



	Years ended December 31,
	2019				2018				2017
(Dollars in thousands)	Average balance		Interest income recognized		Average balance		Interest income recognized		Average balance		Interest income recognized
Loans with no related allowance recorded
Commercial & industrial	$	31,846	$	926	$	14,498	$	360	$	13,167	$	280
Lease financing	168		0		21		0		112		4
Construction real estate	6		0		20		2		601		1
Commercial real estate	18,757		357		24,738		490		20,935		563
Residential real estate	15,915		307		11,359		301		7,616		196
Home equity	5,893		121		5,541		114		4,032		99
Installment	170		2		274		2		332		4
Total	72,755		1,713		56,451		1,269		46,795		1,147

Loans with an allowance recorded
Commercial & industrial	4,721		87		900		44		1,204		28
Lease financing	57		0		0		0		0		0
Construction real estate	0		0		0		0		0		0
Commercial real estate	1,339		31		1,402		18		2,634		40
Residential real estate	446		12		895		23		1,112		26
Home equity	0		0		80		3		101		4
Installment	0		0		0		0		0		0
Total	6,563		130		3,277		88		5,051		98

Total
Commercial & industrial	36,567		1,013		15,398		404		14,371		308
Lease financing	225		0		21		0		112		4
Construction real estate	6		0		20		2		601		1
Commercial real estate	20,096		388		26,140		508		23,569		603
Residential real estate	16,361		319		12,254		324		8,728		222
Home equity	5,893		121		5,621		117		4,133		103
Installment	170		2		274		2		332		4
Total	$	79,318	$	1,843	$	59,728	$	1,357	$	51,846	$	1,245



	Years ended December 31,
(Dollars in thousands)	2019			2018			2017
Balance at beginning of year	$	1,401		$	2,781		$	6,284
Additions
Commercial	415			1,269			1,732
Residential	2,033			1,913			2,387
Total additions	2,448			3,182			4,119
Disposals
Commercial	(541		)	(2,967		)	(5,409		)
Residential	(912		)	(830		)	(1,574		)
Total disposals	(1,453		)	(3,797		)	(6,983		)
Valuation adjustments
Commercial	(112		)	(355		)	(439		)
Residential	(251		)	(410		)	(200		)
Total valuation adjustments	(363		)	(765		)	(639		)
Balance at end of year	$	2,033		$	1,401		$	2,781