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LOANS AND LEASES
 9 Months Ended
Sep. 30, 2021
Receivables [Abstract]  
LOANS AND LEASES LOANS AND LEASES
First Financial offers clients a variety of commercial and consumer loan and lease products with diverse interest rates and payment terms. Commercial loan categories include C&I, CRE, construction real estate and lease financing. Consumer loan categories include residential real estate, home equity, installment and credit card.

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

In accordance with the CARES Act and the 2021 Consolidated Appropriations Act, First Financial participated in offering PPP loans to its customers. These loans provide a direct incentive for small businesses to keep their workers on the payroll and to maintain their operations during the COVID-19 pandemic. PPP loans are eligible to be forgiven provided certain conditions are met. As of September 30, 2021, First Financial had $175.7 million in PPP loans, net of unearned fees of $7.8 million. As of December 31, 2020, First Financial had $594.6 million in PPP loans, net of unearned fees of $13.7 million.

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

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

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

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

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

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

First Financial considers repayment performance to be the best indicator of credit quality for consumer loans. Consumer loans that have principal and interest payments that are past due by 90 days or more are generally classified as nonperforming. Additionally, consumer loans that have been modified in a TDR are classified as nonperforming.

The following table sets forth the Company's loan portfolio at September 30, 2021 by risk attribute and origination date:
(Dollars in thousands)20212020201920182017PriorTerm TotalRevolvingTotal
Commercial & industrial
Pass$489,560 $512,620 $383,028 $202,002 $147,090 $166,385 $1,900,685 $615,657 $2,516,342 
Special mention431 4,549 1,008 15,556 6,816 6,631 34,991 9,897 44,888 
Substandard2,349 760 13,743 1,697 11,901 3,007 33,457 8,161 41,618 
Doubtful0 0 0 0 0 0 0 0 0 
Total$492,340 $517,929 $397,779 $219,255 $165,807 $176,023 $1,969,133 $633,715 $2,602,848 
Lease financing
Pass$14,074 $16,538 $12,217 $10,015 $4,672 $3,865 $61,381 $0 $61,381 
Special mention06,46700006,46706,467 
Substandard000007707 
Doubtful000000000 
Total$14,074 $23,005 $12,217 $10,015 $4,672 $3,872 $67,855 $0 $67,855 
Construction real estate
Pass$53,083 $119,443 $217,302 $46,300 $531 $13,337 $449,996 $8,040 $458,036 
Special mention0 0 0 0 0 0 0 0 0 
Substandard0 0 18,968 0 0 0 18,968 0 18,968 
Doubtful0 0 0 0 0 0 0 0 0 
Total$53,083 $119,443 $236,270 $46,300 $531 $13,337 $468,964 $8,040 $477,004 
Commercial real estate - investor
Pass$445,746 $435,144 $981,639 $427,966 $322,647 $469,803 $3,082,945 $76,906 $3,159,851 
Special mention9,969 1,858 17,867 18,106 49,486 81,349 178,635 35 178,670 
Substandard1,634 5,992 9,787 24,037 7,120 12,573 61,143 0 61,143 
Doubtful0 0 0 0 0 0 0 0 0 
Total$457,349 $442,994 $1,009,293 $470,109 $379,253 $563,725 $3,322,723 $76,941 $3,399,664 
Commercial real estate - owner
Pass$128,070 $185,207 $127,847 $138,551 $121,509 $253,909 $955,093 $29,432 $984,525 
Special mention338 2,605 1,727 2,684 4,533 11,518 23,405 3,010 26,415 
Substandard61 477 9,548 12,779 2,396 2,471 27,732 38 27,770 
Doubtful0 0 0 0 0 0 0 0 0 
Total$128,469 $188,289 $139,122 $154,014 $128,438 $267,898 $1,006,230 $32,480 $1,038,710 
Residential real estate
Performing$194,575 $253,746 $160,338 $77,771 $37,865 $192,662 $916,957 $0 $916,957 
Nonperforming72 515 516 491 639 3,302 5,535 0 5,535 
Total$194,647 $254,261 $160,854 $78,262 $38,504 $195,964 $922,492 $0 $922,492 
Home equity
Performing$33,942 $48,210 $15,748 $12,538 $8,144 $35,170 $153,752 $552,820 $706,572 
Nonperforming0 0 44 39 56 220 359 2,119 2,478 
(Dollars in thousands)20212020201920182017PriorTerm TotalRevolvingTotal
Total$33,942 $48,210 $15,792 $12,577 $8,200 $35,390 $154,111 $554,939 $709,050 
Installment
Performing$13,705 $30,753 $9,667 $6,428 $4,721 $2,582 $67,856 $28,021 $95,877 
Nonperforming16 12 58 2 4 10 102 98 200 
Total$13,721 $30,765 $9,725 $6,430 $4,725 $2,592 $67,958 $28,119 $96,077 
Credit cards
Performing$0 $0 $0 $0 $0 $0 $0 $46,838 $46,838 
Nonperforming0 0 0 0 0 0 0 393 393 
Total$0 $0 $0 $0 $0 $0 $0 $47,231 $47,231 
Grand Total$1,387,625 $1,624,896 $1,981,052 $996,962 $730,130 $1,258,801 $7,979,466 $1,381,465 $9,360,931 

The following table sets forth the Company's loan portfolio at December 31, 2020 by risk attribute and origination date:
(Dollars in thousands)20202019201820172016PriorTerm TotalRevolvingTotal
Commercial & industrial
Pass$1,141,163 $460,210 $296,221 $208,077 $122,686 $138,307 $2,366,664 $502,286 $2,868,950 
Special mention24,668 10,281 18,118 6,893 6,668 6,090 72,718 10,470 83,188 
Substandard6,709 2,370 8,022 26,565 5,124 1,192 49,982 5,389 55,371 
Doubtful0 0 0 0 0 0 0 0 0 
Total$1,172,540 $472,861 $322,361 $241,535 $134,478 $145,589 $2,489,364 $518,145 $3,007,509 
Lease financing
Pass$22,916 $22,397 $12,942 $6,967 $4,802 $2,368 $72,392 $0 $72,392 
Special mention290000002900290 
Substandard50018012003050305 
Doubtful000000000 
Total$23,211 $22,397 $12,942 $7,147 $4,922 $2,368 $72,987 $0 $72,987 
Construction real estate
Pass$96,410 $259,524 $182,625 $23,185 $24,786 $426 $586,956 $19,671 $606,627 
Special mention0 621 18,203 9,984 661 0 29,469 0 29,469 
Substandard0 0 0 0 0 0 0 0 0 
Doubtful0 0 0 0 0 0 0 0 0 
Total$96,410 $260,145 $200,828 $33,169 $25,447 $426 $616,425 $19,671 $636,096 
Commercial real estate - investor
Pass$515,950 $1,011,898 $427,077 $378,536 $286,587 $361,403 $2,981,451 $56,398 $3,037,849 
Special mention0 17,463 15,534 44,426 32,408 43,704 153,535 559 154,094 
Substandard6,198 2,043 22,497 7,067 68 14,724 52,597 0 52,597 
Doubtful0 0 0 0 0 0 0 0 0 
Total$522,148 $1,031,404 $465,108 $430,029 $319,063 $419,831 $3,187,583 $56,957 $3,244,540 
Commercial real estate - owner
Pass$185,692 $162,480 $147,236 $125,275 $128,755 $211,519 $960,957 $36,721 $997,678 
Special mention4,292 11,380 2,891 8,230 3,017 19,384 49,194 59 49,253 
Substandard668 504 7,054 5,496 306 2,321 16,349 38 16,387 
Doubtful0 0 0 0 0 0 0 0 0 
Total$190,652 $174,364 $157,181 $139,001 $132,078 $233,224 $1,026,500 $36,818 $1,063,318 
(Dollars in thousands)20202019201820172016PriorTerm TotalRevolvingTotal
Residential real estate
Performing$290,277 $241,601 $115,747 $64,220 $60,094 $224,281 $996,220 $0 $996,220 
Nonperforming321 429 673 643 87 4,713 6,866 0 6,866 
Total$290,598 $242,030 $116,420 $64,863 $60,181 $228,994 $1,003,086 $0 $1,003,086 
Home equity
Performing$60,967 $20,200 $17,445 $11,308 $9,744 $41,571 $161,235 $577,609 $738,844 
Nonperforming0 0 0 39 28 138 205 4,050 4,255 
Total$60,967 $20,200 $17,445 $11,347 $9,772 $41,709 $161,440 $581,659 $743,099 
Installment
Performing$21,584 $15,614 $11,041 $8,812 $1,954 $3,185 $62,190 $19,479 $81,669 
Nonperforming15 53 23 35 17 36 179 2 181 
Total$21,599 $15,667 $11,064 $8,847 $1,971 $3,221 $62,369 $19,481 $81,850 
Credit cards
Performing$0 $0 $0 $0 $0 $0 $0 $47,845 $47,845 
Nonperforming0 0 0 0 0 0 0 640 640 
Total$0 $0 $0 $0 $0 $0 $0 $48,485 $48,485 
Grand Total$2,378,125 $2,239,068 $1,303,349 $935,938 $687,912 $1,075,362 $8,619,754 $1,281,216 $9,900,970 

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

Loan delinquency, including loans classified as nonaccrual, was as follows:
 As of September 30, 2021
(Dollars in thousands)30 – 59
days
past due		60 – 89
days
past due		> 90 days
past due		Total
past
due		CurrentTotal> 90 days
past due
and still
accruing
Loans       
Commercial & industrial$2,574 $17 $3,487 $6,078 $2,596,770 $2,602,848 $0 
Lease financing0 0 0 0 67,855 67,855 0 
Construction real estate0 0 0 0 477,004 477,004 0 
Commercial real estate-investor0 0 18,674 18,674 3,380,990 3,399,664 0 
Commercial real estate-owner541 523 325 1,389 1,037,321 1,038,710 0 
Residential real estate3,112 384 2,040 5,536 916,956 922,492 0 
Home equity1,135 208 1,135 2,478 706,572 709,050 0 
Installment106 55 39 200 95,877 96,077 0 
Credit card310 51 106 467 46,764 47,231 104 
Total$7,778 $1,238 $25,806 $34,822 $9,326,109 $9,360,931 $104 
 As of December 31, 2020
(Dollars in thousands)30 – 59
days
past due		60 – 89
days
past due		> 90 days
past due		Total
past
due		CurrentTotal> 90 days
past due
and still
accruing
Loans       
Commercial & industrial$6,532 $0 $1,861 $8,393 $2,999,116 $3,007,509 $0 
Lease financing0 0 0 0 72,987 72,987 0 
Construction real estate0 0 0 0 636,096 636,096 0 
Commercial real estate-investor136 0 24,422 24,558 3,219,982 3,244,540 0 
Commercial real estate-owner6,480 174 400 7,054 1,056,264 1,063,318 0 
Residential real estate2,809 370 3,687 6,866 996,220 1,003,086 0 
Home equity1,483 835 1,937 4,255 738,844 743,099 0 
Installment94 35 51 180 81,670 81,850 0 
Credit card303 163 174 640 47,845 48,485 169 
Total$17,837 $1,577 $32,532 $51,946 $9,849,024 $9,900,970 $169 

For PCD assets, the delinquency status was determined individually for each loan in accordance with the individual loan's contractual repayment terms.

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.

Troubled Debt Restructurings. A loan modification is considered a TDR when the borrower is experiencing financial difficulty and a concession is made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. The most common types of modifications include interest rate reductions, maturity extensions and modifications to principal amortization, including interest-only structures. Modified terms are dependent upon the financial position and needs of the individual borrower. If the modification agreement is violated, the loan is managed by the Company’s credit administration group for resolution, which may result in foreclosure in the case of real estate. In accordance with the CARES Act, performing loans that demonstrated limited signs of credit deterioration, but were modified to provide borrowers relief during the COVID-19 pandemic were not considered to be TDR as of June 30, 2021 or December 31, 2020.

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

First Financial had 152 TDRs totaling $31.8 million at September 30, 2021, including $11.4 million on accrual status and $20.3 million classified as nonaccrual. First Financial had $0.3 million of commitments outstanding to lend additional funds to borrowers whose loan terms have been modified through TDRs, and the ACL included reserves of $6.3 million related to TDRs at September 30, 2021. Additionally, as of September 30, 2021, $5.2 million of accruing TDRs have been performing in accordance with the restructured terms for more than one year.

First Financial had 155 TDRs totaling $21.8 million at December 31, 2020, including $7.1 million of loans on accrual status and $14.7 million classified as nonaccrual. First Financial had $0.3 million commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs. At December 31, 2020, the ACL included reserves of $8.8 million related to TDRs, and $5.0 million of the accruing TDRs had been performing in accordance with the restructured terms for more than one year.
The following tables provide information on loan modifications classified as TDRs during the three and nine months ended September 30, 2021 and 2020:
Three months ended
September 30, 2021September 30, 2020
(Dollars in thousands)Number of loansPre-modification loan balancePeriod end balanceNumber of loansPre-modification loan balancePeriod end balance
Commercial & industrial0 $0 $0 1 $1,480 $1,480 
Construction real estate0 0 0 0 0 0 
Commercial real estate1 6,835 761 0 0 0 
Residential real estate1 145 142 2 109 92 
Home equity0 0 0 4 120 118 
Installment1 0 0 0 0 0 
Total3 $6,980 $903 7 $1,709 $1,690 
Nine months ended
September 30, 2021September 30, 2020
(Dollars in thousands)Number of loansPre-modification loan balancePeriod end balanceNumber of loansPre-modification loan balancePeriod end balance
Commercial & industrial5 $4,967 $4,831 8 $14,984 $14,984 
Construction real estate0 0 0 0 0 0 
Commercial real estate8 16,850 9,807 0 0 0 
Residential real estate14 1,265 1,233 20 1,677 1,581 
Home equity2 30 30 10 346 344 
Installment1 0 0 1 26 15 
Total30 $23,112 $15,901 39 $17,033 $16,924 

For TDRs identified during the each of the three and nine months ended September 30, 2021, there were $0.6 million chargeoffs for the portion of TDRs determined to be uncollectible. For TDRs identified during the three and nine months ended September 30, 2020, there were $0.6 million and $1.7 million of chargeoffs for the portion of TDRs determined to be uncollectible, respectively.

The following table provides information on how TDRs were modified during the three and nine months ended September 30, 2021 and 2020:
Three months endedNine months ended
September 30,September 30,
(Dollars in thousands)2021202020212020
Extended maturities$0 $0 $0 $0 
Adjusted interest rates000 0 
Combination of rate and maturity changes000 0 
Forbearance7611,4807,008 4,663 
Other (1)
1422108,893 12,261 
Total$903 $1,690 $15,901 $16,924 
(1) Includes covenant modifications and other concessions, or combination of concessions, that do not consist of interest rate adjustments, forbearance and maturity extensions

First Financial considers repayment performance as an indication of the effectiveness of the Company's loan modifications. Borrowers that are 90 days or more past due on any principal or interest payments, or who prematurely terminate a restructured loan agreement without paying off the contractual principal balance, are considered to be in default of the terms of the TDR agreement.
For each of the three and nine month periods ended September 30, 2021, there was one TDR relationship for $0.1 million for which there was a payment default during the period that occurred within twelve months of the loan modifications. For each of the three and nine month periods ended September 30, 2020, there was one TDR relationship with an insignificant balance for which there was a payment default during the period that occurred within twelve months of the loan modifications.

As stated in the CARES Act and subsequently modified by the Consolidated Appropriations Act, loan modifications in response to COVID-19 executed on loans that were not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020, and the earlier of 60 days after the date of termination of the National Emergency or January 1, 2022 are not required to be reported as TDR.

As of September 30, 2021, the Company's loan portfolio included $101.2 million of active loan modifications made under the guidance of the CARES Act that were not classified as TDR. These modifications were comprised of 20 commercial loans making interest only payments. Active modifications were concentrated in hotel and franchise loans, which were $66.7 million and $34.4 million respectively as of September 30, 2021, or 66.0% and 34.0% of the total active modifications at September 30, 2021.

As of December 31, 2020, the Company's loan portfolio included $320.2 million of active loan modifications made under the guidance of the CARES Act that were not classified as TDR. These modifications included $291.5 million of borrowers making interest only payments at year end, and full principal and interest deferrals of $28.7 million. Active modifications as of December 31, 2020 were primarily hotel and franchise loans, which were $186.2 million and $44.3 million respectively, or 58.2% and 13.8% of the total active modifications at December 31, 2020. As of December 31, 2020, the Company's loan portfolio included 90 commercial loans with balances of $312.5 million and 53 consumer loans with balances of $7.7 million modified in response to COVID-19 that are not considered TDRs.
Nonperforming Loans. Loans classified as nonaccrual and loans modified as TDRs are considered nonperforming. The following table provides information on nonperforming loans:
September 30, 2021December 31, 2020
(Dollars in thousands)Nonaccrual loans with a related ACLNonaccrual loans with no related ACLTotal nonaccrualNonaccrual loans with a related ACLNonaccrual loans with no related ACLTotal nonaccrual
Nonaccrual loans (1)
  
Commercial & industrial$12,328 $2,832 $15,160 $18,711 $10,519 $29,230 
Lease financing0 0 0 0 0 0 
Construction real estate0 0 0 0 0 0 
Commercial real estate24,308 14,256 38,564 6,957 27,725 34,682 
Residential real estate0 9,416 9,416 251 11,350 11,601 
Home equity0 2,735 2,735 0 5,076 5,076 
Installment0 91 91 0 163 163 
Total nonaccrual loans$36,636 $29,330 $65,966 $25,919 $54,833 $80,752 
(1) Nonaccrual loans include nonaccrual TDRs of $20.3 million and $14.7 million as of September 30, 2021 and December 31, 2020, respectively.

Three months endedNine months ended
September 30,September 30,
(Dollars in thousands)2021202020212020
Interest income effect on nonperforming loans 
Gross amount of interest that would have been recorded under original terms$3,506 $1,552 $8,157 $4,185 
Interest included in income
Nonaccrual loans1,709 689 3,526 1,226 
Troubled debt restructurings338 64 645 367 
Total interest included in income2,047 753 4,171 1,593 
Net impact on interest income$1,459 $799 $3,986 $2,592 
First Financial individually reviews all nonperforming loan relationships greater than $250,000 to determine if an individually evaluated allowance is necessary based on the borrower’s overall financial condition, resources and payment record, support from guarantors and the realizable value of any collateral. Individually evaluated allowances are based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.

A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty and the repayment is expected to be provided substantially through the operation or sale of collateral. The following table presents the amortized cost basis of collateral dependent loans by class of loan.
September 30, 2021
Type of Collateral
(Dollar in thousands)Business
assets		Commercial real estateEquipmentLandResidential real estateOtherTotal
Class of loan
Commercial & industrial$13,691 $827 $443 $0 $0 $199 $15,160 
Commercial real estate-investor019,726 0 5,987 209 0 25,922 
Commercial real estate-owner06,481 6,033 39 89 0 12,642 
Residential real estate00 0 0 9,416 0 9,416 
Home equity00002,735 0 2,735 
Installment00000 91 91 
Total$13,691 $27,034 $6,476 $6,026 $12,449 $290 $65,966 
December 31, 2020
Type of Collateral
(Dollar in thousands)Business
assets		Commercial real estateEquipmentLandResidential real estateOtherTotal
Class of loan
Commercial & industrial$30,961 $6,130 $2,608 $865 $0 $4,892 $45,456 
Commercial real estate-investor020,212 661 5,537 872 0 27,282 
Commercial real estate-owner5,8423,495 0 42 344 0 9,723 
Residential real estate00 0 0 11,601 0 11,601 
Home equity00005,076 0 5,076 
Installment00000 163 163 
Total$36,803 $29,837 $3,269 $6,444 $17,893 $5,055 $99,301 

Lease financing. First Financial originates both sales-type and direct financing leases, and the Company manages and reviews lease residuals in accordance with its credit policies. Sales-type lease contracts contain the ability to purchase the underlying equipment at lease maturity and profit or loss is recognized at lease commencement.  Direct financing leases are generally three to five years in length and may be extended at maturity, however, early cancellation may result in a fee to the borrower.  For direct financing leases, the net unearned income is deferred and amortized over the life of the lease.
OREO. OREO consists of properties acquired by the Company primarily through the loan foreclosure or repossession process, that results in partial or total satisfaction of problem loans.

Changes in OREO were as follows:
Three months endedNine months ended
 September 30,September 30,
(Dollars in thousands)2021202020212020
Balance at beginning of period$340 $1,872 $1,287 $2,033 
Additions
Commercial & industrial0 187 98 510 
Residential real estate0 136 0 282 
Total additions0 323 98 792 
Disposals  
Commercial & industrial0 0 (768)(217)
Residential real estate0 (510)(268)(1,270)
Total disposals0 (510)(1,036)(1,487)
Valuation adjustment  
Commercial & industrial0 (22)(9)448 
Residential real estate0 (20)0 (143)
Total valuation adjustment0 (42)(9)305 
Balance at end of period$340 $1,643 $340 $1,643