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REGULATORY MATTERS

12 Months Ended

Dec. 31, 2023

20.REGULATORY MATTERS:

The Corporation and its bank affiliate are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements.

Further, the Corporation’s primary source of funds to pay dividends to shareholders is dividends from its subsidiary bank and compliance with these capital requirements can affect the ability of the Corporation and its banking affiliate to pay dividends. At December 31, 2023, $38.9 million of undistributed earnings of the subsidiary bank, included in consolidated retained earnings, were available for distribution to the Corporation with regulatory approval. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and Bank must meet specific capital guidelines that involve quantitative measures of the Corporation’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporation’s and Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and Bank to maintain minimum amounts and ratios of Total, Common equity tier I capital and Tier I Capital to risk-weighted assets, and of Tier I Capital to average assets. Under the Basel III rules, the Corporation must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital.

Management believes, as of December 31, 2023 and 2022, that the Corporation meets all capital adequacy requirements to which it is subject.

As of December 31, 2023, the most recent notification from the respective regulatory agencies categorized the subsidiary bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the bank must maintain minimum total risk-based, Common equity tier I capital, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the bank’s category.

The following table presents the actual and required capital amounts and related ratios for the Corporation and First Financial Bank, N.A., at year-end 2023 and 2022.


									To Be Well Capitalized
						For Capital			Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
(Dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount	Ratio
Total risk-based capital
Corporation – 2023	$	602,258	15.80	%	$	400,201	10.500	%	N/A	N/A
Corporation – 2022		561,347	14.61	%		403,400	10.500	%	N/A	N/A
First Financial Bank – 2023		560,975	14.89	%		395,567	10.500	%	376,731	10.00	%
First Financial Bank – 2022		498,246	13.14	%		398,179	10.500	%	379,219	10.00	%
Common equity tier I capital
Corporation – 2023	$	562,492	14.76	%	$	266,800	7.000	%	N/A	N/A
Corporation – 2022		521,568	13.58	%		268,933	7.000	%	N/A	N/A
First Financial Bank – 2023		521,209	13.84	%		263,712	7.000	%	244,875	6.50	%
First Financial Bank – 2022		458,467	12.09	%		265,453	7.000	%	246,492	6.50	%
Tier I risk-based capital
Corporation – 2023	$	562,492	14.76	%	$	323,972	8.500	%	N/A	N/A
Corporation – 2022		521,568	13.58	%		326,562	8.500	%	N/A	N/A
First Financial Bank – 2023		521,209	13.84	%		320,221	8.500	%	301,385	8.00	%
First Financial Bank – 2022		458,467	12.09	%		322,336	8.500	%	303,375	8.00	%
Tier I leverage capital
Corporation – 2023	$	562,492	12.14	%	$	185,309	4.00	%	N/A	N/A
Corporation – 2022		521,568	10.78	%		193,476	4.00	%	N/A	N/A
First Financial Bank – 2023		521,209	10.73	%		194,384	4.00	%	242,981	5.00	%
First Financial Bank – 2022		458,467	9.50	%		193,073	4.00	%	241,341	5.00	%

In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC published an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Corporation did not adopt the capital transition relief.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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