FIRST FINANCIAL BANCORP OH

Previous wording

First Financial Bancorp. is a $17.6 billion financial holding company headquartered in Cincinnati, Ohio. The Company primarily operates through First Financial Bank, an Ohio-chartered commercial bank with 130 full service banking centers at March 31, 2024. First Financial provides banking and financial services products to business and retail clients through its six lines of business: Commercial, Retail Banking, Mortgage Banking, Wealth Management, Investment Commercial Real Estate and Commercial Finance. The Commercial Finance business lends to targeted industry verticals on a nationwide basis. Operating under the brand of Yellow Cardinal Advisory Group, Wealth Management had $3.6 billion in assets under management as of March 31, 2024 and provides the following services: financial planning, investment management, trust administration, estate settlement, business succession planning services, brokerage services and retirement planning.

Current wording

First Financial Bancorp. is an $18.2 billion financial holding company headquartered in Cincinnati, Ohio. The Company primarily operates through First Financial Bank, an Ohio-chartered commercial bank with 131 full service banking centers at June 30, 2024. First Financial provides banking and financial services products to business and retail clients through its six lines of business: Commercial, Retail Banking, Mortgage Banking, Wealth Management, Investment Commercial Real Estate and Commercial Finance. The Commercial Finance business lends to targeted industry verticals on a nationwide basis. Operating under the brand of Yellow Cardinal Advisory Group, Wealth Management had $3.6 billion in assets under management as of June 30, 2024 and provides the following services: financial planning, investment management, trust administration, estate settlement, business succession planning services, brokerage services and retirement planning.

Previous wording

On February 29, 2024, First Financial closed its acquisition of Agile Premium Finance in an all cash transaction. Headquartered in Lincolnshire, IL, Agile originates commercial loans for the payment of annual property and casualty insurance for businesses. The loans are secured by the unearned premium of the policies and have an average original term of approximately ten months. Agile is among industry leaders in the premium finance lending space and is active in all 50 states. Upon completion of the transaction, Agile became a division of the Bank and continues to operate as Agile Premium Finance, taking advantage of its existing brand recognition within the insurance premium financing industry.

Current wording

On February 29, 2024, First Financial completed its acquisition of Agile Premium Finance for $96.9 million in an all cash transaction. Headquartered in Lincolnshire, IL, Agile originates commercial loans for the payment of annual property and casualty insurance for businesses. Agile is among industry leaders in the premium finance lending space and is active in all 50 states. Agile loans are secured by the unearned premium of the insurance policies and have an average original term of approximately ten months. Upon completion of the transaction, Agile became a division of the Bank and continues to operate as Agile Premium Finance, taking advantage of its existing brand recognition within the insurance premium financing industry.

Previous wording

The Agile transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed were $97.8 million and $2.7 million, respectively. Acquisition accounting adjustments are considered preliminary at March 31, 2024. These present value measurements are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values become available, and the measurement period ends in March 2025.

Current wording

The Agile transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. The fair value of assets acquired and liabilities assumed were $97.8 million and $2.7 million, respectively. Acquisition accounting adjustments are considered preliminary at June 30, 2024. These fair value measurements are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values become available, and the measurement period for Agile ends in March 2025. Goodwill arising from the Agile acquisition was $1.8 million while other intangible assets created in the transaction include a customer list, non-compete agreements, trade name and a servicing asset.

Previous wording

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. Goodwill arising from the Brady Ware acquisition was $4.2 million and reflects the business’s growth potential and the expectation that the acquisition will provide additional revenue growth with the expansion of the Bank's advisory business. In May 2023, First Financial also acquired Brady Ware Corporate Finance, a broker-dealer and member of FINRA. First Financial recorded $0.1 million of goodwill in connection with the acquisition of Brady Ware Corporate Finance. The fair value measurements of Brady Ware assets and liabilities are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values become available, and the measurement period ends in January 2024 for Brady Ware Capital. The measurement period for recording adjustments to the fair value of assets and liabilities ends in May 2024 for Brady Ware Corporate Finance.

Current wording

The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. Goodwill arising from the Brady Ware acquisition was $4.2 million and reflects the business’s growth potential and the expectation that the acquisition will provide additional revenue growth with the expansion of the Bank's advisory business. In May 2023, First Financial also acquired Brady Ware Corporate Finance, a broker-dealer and member of FINRA. First Financial recorded $0.1 million of goodwill in connection with the acquisition of Brady Ware Corporate Finance. The fair value measurements of Brady Ware assets and liabilities are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values become available, and the measurement period ended in January 2024 for Brady Ware Capital. The measurement period for recording adjustments to the fair value of assets and liabilities ended in May 2024 for Brady Ware Corporate Finance.

Previous wording

Linked quarter comparison: First quarter 2024 net income was $50.7 million and earnings per diluted common share were $0.53. This compares with fourth quarter 2023 net income of $56.7 million and earnings per diluted common share of $0.60. Return on average assets was 1.18% for the first quarter of 2024 compared to 1.31% for the fourth quarter of 2023. Return on average shareholders’ equity was 9.00% for the first quarter of 2024 compared to 10.50% for the fourth quarter of 2023.

Current wording

Linked quarter comparison: Second quarter 2024 net income was $60.8 million and earnings per diluted common share were $0.64. This compares with first quarter 2024 net income of $50.7 million and earnings per diluted common share of $0.53. Return on average assets was 1.38% for the second quarter of 2024 compared to 1.18% for the first quarter of 2024. Return on average shareholders’ equity was 10.72% for the second quarter of 2024 compared to 9.00% for the first quarter of 2024.

Previous wording

Year-to-date comparison: For the three months ended March 31, 2024, net income was $50.7 million and earnings per diluted common share were $0.53. This compares with net income of $70.4 million and earnings per diluted common share of $0.74 for the first three months of 2023. Return on average assets for the three months ended March 31, 2024 was 1.18% compared to 1.69% for the same period in 2023, and return on average shareholders' equity was 9.00% and 13.71% for the first three months of 2024 and 2023, respectively.

Current wording

Year-to-date comparison: For the six months ended June 30, 2024, net income was $111.5 million and earnings per diluted common share were $1.17. This compares with net income of $136.1 million and earnings per diluted common share of $1.43 for the first six months of 2023. Return on average assets for the six months ended June 30, 2024 was 1.28% compared to 1.62% for the same period in 2023, and return on average shareholders' equity was 9.86% and 13.00% for the first six months of 2024 and 2023, respectively.

Previous wording

A discussion of First Financial's operating results for the three month period ended March 31, 2024 follows.

Current wording

A discussion of First Financial's operating results for the three and six month periods ended June 30, 2024 follows.

Previous wording

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

Current wording

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

Previous wording

Interest income increased $2.2 million, or 0.9%, in the first quarter of 2024 when compared to the fourth quarter of 2023 largely due to a $273.9 million increase in earning assets. Average earning assets were $14.8 billion for the first quarter of 2024 compared to $14.5 billion for the fourth quarter of 2023. Average loan balances increased by $315.2 million, or 2.9%, during the first quarter of 2024.

Current wording

Interest income of $252.7 million increased $12.0 million, or 5.0%, in the second quarter of 2024 when compared to the first quarter of 2024 due to a $414.3 million increase in average earning assets coupled with a 14 bp increase in earning asset yields. Average earning assets were $15.2 billion for the second quarter of 2024 compared to $14.8 billion for the first quarter of 2024. The increase in earning assets was driven by a $374.7 million, or 3.4%, increase in average loan balances during the second quarter.

Previous wording

Interest expense of $91.9 million increased $7.3 million, or 8.6%, in the first quarter of 2024 when compared to the fourth quarter of 2023, largely due to higher interest rates coupled with increases in average deposits and borrowings. The Company's total cost of interest bearing deposits increased 23 bps to 3.02% in the first quarter of 2024, while average deposit balances increased $76.3 million, or 0.6%, to $13.3 billion. The increase in average deposits was driven primarily by increases in money market accounts and retail CDs. Average borrowed funds increased $55.1 million, or 5.1%, from the linked quarter.

Current wording

Interest expense of $99.4 million increased $7.5 million, or 8.1%, in the second quarter of 2024 when compared to the first quarter of 2024, largely due to higher interest rates coupled with increases in average deposits and borrowings. The Company's total cost of interest bearing deposits increased 16 bps to 3.18% in the second quarter of 2024 as customers continued to migrate to higher cost accounts, while average deposit balances increased $351.1 million, or 2.6%, to $13.6 billion. The increase in average deposits was driven primarily by increases in money market accounts and retail CDs. Average borrowed funds increased $32.2 million, or 2.8%, from the linked quarter.

Previous wording

The notional value of the Company's cash flow hedges was $1.0 billion as of March 31, 2024, with the $0.3 million change in the fair value recorded in AOCI in the Consolidated Balance Sheet. Comparatively, the notional value of cash flow hedges as of December 31, 2023 was $1.0 billion with the $3.8 million change in fair value recorded in AOCI. As of March 31, 2024 and December 31, 2023, the maximum length of time over which the Company was hedging its exposure to the variability in future cash flows was 57 months and 60 months, respectively.

Current wording

The notional value of the Company's cash flow hedges was $1.0 billion as of June 30, 2024, with the $0.8 million change in the fair value recorded in AOCI in the Consolidated Balance Sheet. Comparatively, the notional value of cash flow hedges as of December 31, 2023 was $1.0 billion with the $3.8 million change in fair value recorded in AOCI. As of June 30, 2024 and

Previous wording

Year-to-date comparison: Net interest income for the first three months of 2024 decreased $10.6 million, or 6.6%, compared to the same period of 2023. Net interest margin on a fully tax equivalent basis was 4.10% for the three months ended March 31, 2024, a decrease of 45 bps when compared to the same period in 2023. This was driven by a 158 bp increase in the cost of average interest bearing deposits and a 56 bp increase in the cost of borrowed funds, which outpaced a 64 bp increase in earning asset yields.

Current wording

Year-to-date comparison: Net interest income for the first six months of 2024 decreased $16.5 million, or 5.2%, compared to the same period of 2023. Net interest margin on a fully tax equivalent basis was 4.10% for the six months ended June 30, 2024, which is a decrease of 41 bps when compared to the same period in 2023. This was driven by a 141 bp increase in the cost of average interest bearing deposits and a 43 bp increase in the cost of borrowed funds, which outpaced a 58 bp increase in earning asset yields.

Previous wording

Interest income for the three months ended March 31, 2024 grew $32.1 million, or 15.4%, to $240.7 million compared to $208.6 million for the same period of the prior year due to higher interest rates. Average earning assets of $14.8 billion for the first three months of 2024 increased $430.9 million, or 3.0%, when compared to the same period of 2023, driven primarily by a $692.9 million, or 6.7%, increase in average loan balances, which more than offset a $497.7 million, or 13.7%, decrease in average investment securities.

Current wording

Interest income for the six months ended June 30, 2024 grew $60.9 million, or 14.1%, to $493.4 million compared to $432.5 million for the same period of the prior year due to higher interest rates. Average earning assets of $15.0 billion for the first six months of 2024 increased $599.4 million, or 4.2%, when compared to the same period of 2023, driven primarily by a $809.8 million, or 7.8%, increase in average loan balances, which more than offset a $463.1 million, or 12.9%, decrease in average investment securities.

Previous wording

Interest expense for the three months ended March 31, 2024 was $91.9 million compared to $49.3 million for the same period in the prior year. The increase was driven by a$1.3 billion, or 14.1%, increase in average interest bearing deposits coupled with a 158 bp increase in rates on those deposits. Additionally, average borrowed funds decreased $295.3 million from the same period of the prior year, while the cost of those borrowed funds increased 56 bps due to higher interest rates.

Current wording

Interest expense for the six months ended June 30, 2024 was $191.4 million compared to $113.9 million for the same period in the prior year. The increase was driven by a$1.3 billion, or 15.0%, increase in average interest bearing deposits coupled with a 141 bp increase in rates on those deposits. Additionally, the cost of borrowed funds increased 43 bps from the same period in the prior year due to higher interest rates.

Previous wording

Linked quarter comparison: First quarter 2024 noninterest income was $46.5 million, decreasing $0.5 million, or 1.0%, compared to $47.0 million for the fourth quarter 2023. The decrease from the linked quarter was primarily driven by losses on the sale of investment securities and a decline in other noninterest income, largely offset by increases in leasing business income and foreign exchange income. Losses on the sale of investment securities increased $4.4 million largely as a result of the strategic repositioning of $228.8 million of the investment portfolio during the first quarter. While the repositioning resulted in a $5.2 million loss, the reinvestment is expected to result in a 278 bp increase in yield resulting in an earn-back of approximately 1 year. Other noninterest income decreased $1.2 million, or 19.5%, due to lower income from limited partnership investments during the period. Leasing business income increased $1.7 million, or 13.5%, primarily driven by higher volumes and remarketing fees during the first quarter. Foreign exchange income increased $1.7 million, or 19.5%, largely due to a $4.6 million loss on a trade recognized in the fourth quarter of 2023.

Current wording

Linked quarter comparison: Second quarter 2024 noninterest income was $61.5 million, increasing $15.0 million, or 32.2%, compared to $46.5 million for the first quarter 2024. The increase from the linked quarter was primarily driven by foreign exchange income, fewer losses on the sale of investment securities, and leasing business income. Foreign exchange income increased $6.4 million, or 60.9%, as product demand increased during the period. Loss on the sale of investment securities decreased $5.3 million largely as a result of a $5.2 million loss recognized in the prior quarter as part of the strategic repositioning of $228.8 million of the investment portfolio. This repositioning is expected to result in a 278 bp increase in yield, resulting in an earn-back of approximately 1 year. Leasing business income increased $2.2 million, or 15.3%, primarily driven by an increase in end-of-term fees during the second quarter.

Previous wording

Year-to-date comparison: Noninterest income of $46.5 million for the first three months of 2024 decreased $9.0 million, or 16.3%, from $55.5 million in the comparable period of 2023. The decline was primarily attributed to lower foreign exchange income and higher losses on the sale of investment securities, partially offset by higher gains on the sale of loans. Foreign exchange income decreased $6.5 million, or 38.2%, due to lower demand in 2024, while losses on the sales of investment securities increased $5.3 million compared to the prior year due to a repositioning of a portion of the investment portfolio in the first quarter of 2024. Gains on the sales of loans increased $1.4 million, or 62.1%, as mortgage demand increased as a result of stabilized interest rates in the current year.

Current wording

Year-to-date comparison: Noninterest income of $108.0 million for the first six months of 2024 decreased $0.8 million, or 0.7%, from $108.8 million in the comparable period of 2023. The decline was primarily attributed to losses on the sale of investment securities, lower foreign exchange fees, and lower other noninterest income. These declines were partially offset by higher leasing business income and gains on the sale of loans. Losses on the sales of investment securities increased $4.9 million compared to the prior year due to a repositioning of a portion of the investment portfolio in the first quarter of 2024, while foreign exchange income decreased $4.7 million, or 14.8%, due to lower demand in 2024. Other noninterest income decreased $1.1 million, or 10.5%, primarily due to higher BOLI income in the prior period. Largely offsetting these declines, leasing business income increased $7.5 million, or 31.3%, due to continued balance growth at Summit, as well as higher end-of-term income received in the current period. Gains on the sales of loans increased $2.1 million, or 33.8%, as mortgage demand increased in the current year as a result of stabilized interest rates.

Previous wording

Linked quarter comparison: First quarter 2024 noninterest expense was $122.4 million, an increase of $3.2 million, or 2.7%, from $119.1 million for the fourth quarter 2023. This increase was primarily driven by higher salaries and benefits, other noninterest expense and leasing business expense, partially offset by declines in FDIC assessments and professional services expense. Salaries and benefits expenses increased $3.4 million, or 4.8%, from the linked quarter primarily due to seasonal employee costs such as annual raises and payroll taxes as well as higher variable compensation, which is tied to fee income. Other noninterest expenses increased $1.2 million, or 14.2%, from the linked quarter primarily due to an increase in pension related costs. Leasing business expenses increased $0.8 million, or 8.9%, for the first quarter of 2024 as a result of increased production. Partially offsetting these increases, FDIC assessments decreased $0.9 million, or 23.9%, largely due to the special assessment recorded in the fourth quarter, while professional services decreased $0.9 million, or 28.0%, due to lower legal expenses and consulting costs.

Current wording

Linked quarter comparison: Second quarter 2024 noninterest expense was $123.6 million, an increase of $1.2 million, or 1.0%, from $122.4 million for the first quarter 2024. This increase was primarily driven by higher salaries and benefits, marketing, professional services and data processing, which were largely offset by lower other noninterest expense. Salaries and benefits expenses increased $1.2 million, or 1.6%, from the linked quarter primarily due to the full-quarter impact of both annual raises and the Agile acquisition, as well as higher variable incentive compensation tied to fee income. Marketing expenses increased $0.6 million, or 32.8%, due to increased promotional advertising; professional services increased $0.6 million, or 27.2%, due to an increase in consulting costs; and data processing expenses increased $0.6 million, or 6.9%, due to higher wealth management tax processing costs. Other noninterest expenses decreased $2.0 million, or 20.6%, from the linked quarter primarily due to fewer fraud losses in the current quarter.

Previous wording

Year-to-date comparison: Noninterest expenses of $122.4 million for the first three months of 2024 increased $5.7 million, or 4.9%, compared to the same period in 2023 primarily due to higher other noninterest expense, salaries and benefits expenses and leasing business expenses, partially offset by lower data processing expenses. Other noninterest expense increased $2.3 million, or 31.9%, primarily due to a $0.8 million increase in fraud losses as well as a $0.5 million increase in pension related costs. Salaries and benefits expenses increased $1.8 million, or 2.5%, due to annual salary increases and higher restricted stock awards, partially offset by lower incentive compensation. Leasing business expense increased $1.8 million, or 22.9%, as a result of the growth in the leasing portfolio. Partially offsetting these increases, data processing expenses decreased $0.7 million, or 7.9%, in the current year, largely due to the Company's online banking system conversion which occurred in 2023.

Current wording

Year-to-date comparison: Noninterest expenses of $245.9 million for the first six months of 2024 increased $8.6 million, or 3.6%, compared to the same period in 2023 primarily due to higher leasing business expenses, salaries and benefits expenses, other noninterest expenses and professional services, partially offset by lower data processing expenses. Leasing business expense increased $5.2 million, or 35.5%, as a result of the growth in the leasing portfolio, while salaries and benefits expenses increased $2.8 million, or 1.9%, due to annual salary increases and the Agile acquisition. Other noninterest expenses increased $1.3 million, or 8.0%, primarily due to a $1.0 million increase in fraud losses compared to the prior year. Professional services increased $0.9 million, or 21.1%, from the prior year primarily due to an increase in consulting costs. Partially offsetting these increases, data processing expenses decreased $1.7 million, or 9.0%, in the current year, largely due to expenses from the Company's 2023 online banking system conversion.

Previous wording

Linked quarter comparison: In the first quarter of 2024, First Financial recorded income tax expense of $11.0 million on pre-tax income of $61.7 million, resulting in an effective tax rate of 17.9%. This compared to income tax expense of $14.7 million on pre-tax income of $71.4 million with an effective tax rate of 20.5% for the fourth quarter 2023. The lower effective tax rate in 2024 is primarily driven by tax credits realized in 2024 as well as lower taxable income.

Current wording

Linked quarter comparison: In the second quarter of 2024, First Financial recorded income tax expense of $14.0 million on pre-tax income of $74.8 million, resulting in an effective tax rate of 18.7%. This compared to income tax expense of $11.0 million on pre-tax income of $61.7 million with an effective tax rate of 17.9% for the first quarter 2024. The higher effective tax rate in the second quarter is primarily driven by higher taxable income.

Previous wording

Year-to-date comparison: For the first three months of 2024, income tax expense was $11.0 million on pre-tax income of $61.7 million, resulting in an effective tax rate of 17.9%. This compared to income tax expense of $17.3 million on pre-tax income of $87.7 million and an effective tax rate of 19.7% for the comparable period in 2023. Similar to the linked quarter comparison, the lower effective tax rate in 2024 compared to 2023 is primarily driven by tax credits realized in the current year as well as lower taxable income.

Current wording

Year-to-date comparison: For the first six months of 2024, income tax expense was $25.0 million on pre-tax income of $136.5 million, resulting in an effective tax rate of 18.3%. This compared to income tax expense of $32.8 million on pre-tax income of $168.8 million and an effective tax rate of 19.4% for the comparable period in 2023. The the lower effective tax rate in 2024 compared to 2023 is primarily driven by tax credits realized in the current year as well as lower taxable income.

Previous wording

First Financial's investment portfolio totaled $3.1 billion, or 17.4% of total assets, at March 31, 2024 and $3.2 billion, or 18.4% of total assets, at December 31, 2023. AFS securities totaled $2.9 billion at March 31, 2024 and $3.0 billion December 31, 2023, while HTM securities totaled $79.5 million at March 31, 2024 and $80.3 million at December 31, 2023. The effective duration of the investment portfolio was 4.6 years at both March 31, 2024 and December 31, 2023.

Current wording

First Financial's investment portfolio totaled $3.2 billion at both June 30, 2024 and December 31, 2023, or 17.9% and 18.4% of total assets, respectively. AFS securities totaled $3.0 billion at both June 30, 2024 and December 31, 2023, while HTM securities totaled $78.9 million at June 30, 2024 and $80.3 million at December 31, 2023. The effective duration of the investment portfolio was 4.4 years at June 30, 2024 and 4.6 years at December 31, 2023.

Previous wording

Losses on the sale of investment securities were $5.2 million during the first quarter of 2024, largely as a result of the strategic repositioning of $228.8 million of the investment portfolio. The repositioning resulted in $7.9 million of gross losses, however it is expected to result in a 278 bp increase in future yield and have an earn-back of approximately 1 year. The losses incurred from the repositioning were partially offset by $2.2 million of gains recognized from the sale of the Company's remaining Class B Visa shares.

Current wording

While there were no sales of investment securities in the second quarter of 2024, the Company incurred a $5.2 million net loss on the sale of investment securities during the first quarter of 2024, largely as a result of the strategic repositioning of $228.8 million of the investment portfolio. The repositioning resulted in $7.9 million of gross losses; however it is expected to result in a 278 bp increase in future yield and have an earn-back of approximately one year. The losses incurred from the repositioning were partially offset by $2.2 million of gains recognized from the sale of the Company's remaining Class B Visa shares.

Previous wording

The Company's Consolidated Financial Statements reflected a $289.1 million and $282.0 million unrealized after-tax loss on debt securities as of March 31, 2024 and December 31, 2023, respectively. These unrealized losses were included as a component of equity in accumulated other comprehensive income on the Consolidated Balance Sheets and were driven by an increase in interest rates.

Current wording

The Company's Consolidated Financial Statements reflected a $291.1 million and $282.0 million unrealized after-tax loss on debt securities as of June 30, 2024 and December 31, 2023, respectively. These unrealized losses were included as a component of equity in accumulated other comprehensive income on the Consolidated Balance Sheets and were driven by an increase in interest rates.

Previous wording

The Company had net unrealized losses of $8.7 million and $8.6 million on its HTM securities at March 31, 2024 and December 31, 2023, respectively. Similar to the unrealized losses on AFS securities, this unrealized loss was driven by interest rate increases. The unrealized losses on HTM securities have no impact on the Consolidated Financial Statements of the Company.

Current wording

The Company had net unrealized losses of $8.9 million and $8.6 million on its HTM securities at June 30, 2024 and December 31, 2023, respectively. Similar to the unrealized losses on AFS securities, this unrealized loss was driven by interest rate increases. The unrealized losses on HTM securities have no impact on the Consolidated Financial Statements of the Company.

Previous wording

The Company had a $0.1 million unrealized gain on equity securities recorded in noninterest income for the three months ended March 31, 2024 and a $0.2 million unrealized gain for the same period ended December 31, 2023. For the first three months 2023, the Company had an unrealized gain on equity securities of $0.1 million.

Current wording

The Company had a $0.1 million unrealized loss on equity securities recorded in noninterest income for the three months ended June 30, 2024 and a $0.1 million unrealized gain for the same period ended March 31, 2024. For the first six months of both 2024 and 2023, the Company had an insignificant unrealized gain on equity securities.

Previous wording

Excluding loans held for sale, loan balances increased $271.9 million, or 2.5%, to $11.2 billion as of March 31, 2024 from $10.9 billion as of December 31, 2023. C&I loans increased $90.2 million, or 2.6%, to $3.6 billion largely due to $118.6 million of Agile loans added during the period. Construction loans increased $76.8 million, or 13.6%, to $641.6 million; commercial real estate loans increased $65.0 million, or 1.6%, to $4.1 billion; finance leases increased by $18.0 million, or 3.8%, to $492.9 million; home equity increased $15.1 million, or 2.0%, to $773.8 million and residential real estate loans increased by $11.0 million, or 0.8%, to $1.3 billion. Partially offsetting these areas of loan growth, installment loans decreased $5.2 million, or 3.3%, to $153.8 million.

Current wording

Excluding loans held for sale, loan balances increased $588.0 million, or 5.4%, to $11.5 billion as of June 30, 2024 from $10.9 billion as of December 31, 2023. C&I loans increased $281.3 million, or 8.0%, to $3.8 billion, which included $207.8 million of Agile loans added during the period. Construction loans increased $176.6 million, or 31.3%, to $741.4 million; residential real estate loans increased by $43.6 million, or 3.3%, to $1.4 billion; finance leases increased by $59.7 million, or 12.6%, to $534.6 million; and home equity increased $42.2 million, or 5.6%, to $800.9 million Partially offsetting these areas of loan growth, installment loans decreased $10.5 million, or 6.6%, to $148.5 million; and commercial real estate loans decreased $4.3 million, or 0.1%, to $4.1 billion.

Previous wording

Through the first three months of 2024, average loans of $11.1 billion, excluding loans held for sale, increased $0.7 billion, or 6.6%, from the comparable period of 2023. The increase from prior year reflected broad-based growth across most loan categories, including an $86.8 million, or 2.5%, increase in C&I loans; a $220.9 million or 19.8%, increase in residential real estate; a $228.3 million, or 90.5%, increase in lease financing; an $84.2 million, or 2.1% increase in CRE; and a $67.7 million, or 12.6%, increase in real estate construction.

Current wording

Through the first six months of 2024, average loans of $11.2 billion, excluding loans held for sale, increased $805.4 million, or 7.7%, from the comparable period of 2023. The increase from prior year reflected broad-based growth across most loan categories, including a $206.9 million, or 71.8%, increase in lease financing; a $200.3 million, or 17.4%, increase in residential real estate; a $166.6 million, or 4.8%, increase in C&I loans; $116.7 million, or 22.1%, increase in real estate construction; an $89.9 million, or 2.2%, increase in CRE; and a $50.6 million, or 7.0%, increase in home equity.

Previous wording

Additionally, given the potential for stress related to commercial office space, First Financial performed a targeted review of its exposure to this sector. As of March 31, 2024, First Financial had $439.4 million of loans collateralized by non-owner occupied office space, which represents 3.9% of the total loan portfolio. The overall LTV of the portfolio at origination was strong, and 66.4% of the portfolio is located in suburban locations. Additionally, the majority of the portfolio is secured by Class A and Class B assets with recourse to the sponsor. As of March 31, 2024, 83.8% of the office portfolio was pass rated, and there were two relationships totaling $17.4 million on nonaccrual status.

Current wording

Additionally, given the potential for stress related to commercial office space, First Financial performed a targeted review of its exposure to this sector. As of June 30, 2024, First Financial had $433.6 million of loans collateralized by non-owner occupied office space, which represents 3.8% of the total loan portfolio. The overall LTV of the portfolio at origination was strong, and 66.8% of the portfolio is located in suburban locations. Additionally, the majority of the portfolio is secured by Class A and Class B assets with recourse from the sponsor. As of June 30, 2024, 81.5% of the office portfolio was pass rated, and there were two relationships totaling $17.5 million on nonaccrual status.

Previous wording

Off-balance sheet arrangements include commitments to extend credit and financial guarantees. Loan commitments are agreements to extend credit to a client absent any violation of any condition established in the commitment agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. First Financial had outstanding commitments to extend credit, including overdraft lending lines, totaling $4.4 billion at March 31, 2024 and$4.5 billion at December 31, 2023. As of March 31, 2024, commitments with a fixed interest rate totaled $91.6 million while commitments with variable interest rates totaled $4.3 billion. At December 31, 2023, commitments with a fixed interest rate totaled $108.2 million while commitments with variable interest rates totaled $4.4 billion. The fixed rate commitments have interest rates ranging from 0% to 21% and maturities ranging from less than 1 year to 31.0 years at March 31, 2024 and maturities ranging from less than one year to 31.6 years for December 31, 2023.

Current wording

Off-balance sheet arrangements include commitments to extend credit and financial guarantees. Loan commitments are agreements to extend credit to a client absent any violation of any condition established in the commitment agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. First Financial had outstanding commitments to extend credit, including overdraft lending lines, totaling $4.2 billion at June 30, 2024 and$4.5 billion at December 31, 2023. As of June 30, 2024, commitments with a fixed interest rate totaled $90.7 million while commitments with variable interest rates totaled $4.2 billion. At December 31, 2023, commitments with a fixed interest rate totaled $108.2 million while commitments with variable interest rates totaled $4.4 billion. The fixed rate commitments have interest rates ranging from 0% to 21% and maturities ranging from less than 1 year to 31.0 years at June 30, 2024 and maturities ranging from less than one year to 31.6 years for December 31, 2023.

Previous wording

Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party. First Financial’s letters of credit consist primarily of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services. First Financial has issued letters of credit aggregating $37.0 million and $34.9 million at March 31, 2024 and December 31, 2023, respectively. Management conducts regular reviews of these instruments on an individual client basis.

Current wording

Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party. First Financial’s letters of credit consist primarily of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services. First Financial has issued letters of credit aggregating $33.8 million and $34.9 million at June 30, 2024 and December 31, 2023, respectively. Management conducts regular reviews of these instruments on an individual client basis.

Previous wording

First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amount of $326.2 million and $341.7 million at March 31, 2024 and December 31, 2023, respectively. Under a risk participation agreement, the Company either assumes or sells a portion of the credit exposure associated with an interest rate swap with a counterparty. The Company's exposure is limited to instances where the loan customer defaults on its obligation to perform under the interest rate swap agreement.

Current wording

First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amount of $334.3 million and $341.7 million at June 30, 2024 and December 31, 2023, respectively. Under a risk participation agreement, the Company either assumes or sells a portion of the credit exposure associated with an interest rate swap with a counterparty. The Company's exposure is limited to instances where the loan customer defaults on its obligation to perform under the interest rate swap agreement.

Previous wording

First Financial is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation or community revitalization projects. These investments are included in accrued interest and other assets in the Consolidated Balance Sheets, with any unfunded commitments included in accrued interest and other liabilities in the Consolidated Balance Sheets. As of March 31, 2024, First Financial expects to recover its remaining investments through the use of the tax credits that are generated by the investments. First Financial had unfunded commitments related to tax credit investments of $95.7 million and $96.4 million at March 31, 2024 and December 31, 2023, respectively.

Current wording

First Financial is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation or community revitalization projects. These investments are included in accrued interest and other assets in the Consolidated Balance Sheets, with any unfunded commitments included in accrued interest and other liabilities in the Consolidated Balance Sheets. As of June 30, 2024, First Financial expects to recover its remaining investments through the use of the tax credits that are generated by the investments. First Financial had unfunded commitments related to tax credit investments of $88.4 million and $96.4 million at June 30, 2024 and December 31, 2023, respectively.

Previous wording

Nonaccrual loans were $59.2 million, or 0.53% of total loans, as of March 31, 2024, reflecting a $6.5 million, or 9.9%, decline from $65.8 million as of December 31, 2023. The decrease in nonaccrual loans was primarily due to the $4.5 million charge-off related to a single commercial real estate relationship. Nonperforming assets, which consist of nonaccrual loans and OREO, were $59.4 million, or 0.34% of total assets, at March 31, 2024 compared to $65.9 million, or 0.38% of total assets, at December 31, 2023.

Current wording

Nonaccrual loans were $62.7 million, or 0.54% of total loans, as of June 30, 2024, reflecting a $3.1 million, or 4.7%, decline from $65.8 million as of December 31, 2023. Nonperforming assets, which consist of nonaccrual loans and OREO, were $62.7 million, or 0.35% of total assets, at June 30, 2024 compared to $65.9 million, or 0.38% of total assets, at December 31, 2023.

Previous wording

Classified assets, which are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse, totaled $162.3 million as of March 31, 2024 compared to $141.0 million at December 31, 2023. Classified assets were 92 bps as a percentage of total assets at March 31, 2024, compared to 80 bps as of December 31, 2023. The increase in classified assets during the period was primarily due to the downgrade of one CRE relationship and one C&I relationship during the period.

Current wording

Classified assets, which are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse, totaled $195.3 million as of June 30, 2024 compared to $141.0 million at December 31, 2023. Classified assets were 107 bps as a percentage of total assets at June 30, 2024, compared to 80 bps as of December 31, 2023. The increase in classified assets during the period was primarily due to the downgrade of four large relationships with no concentration in any particular loan type.

Previous wording

The Company utilized the Moody's March baseline forecast as its R&S forecast in the quantitative model at March 31, 2024. For reasonableness, the Company also considered the impact to the model from alternative, more adverse economic forecasts and slower prepayment speeds. These alternative analyses were utilized to inform the Company's qualitative adjustments. Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future credit stress, such as franchise, hotel and investor commercial real estate lending, when making qualitative adjustments to the ACL model.

Current wording

The Company utilized the Moody's June baseline forecast as its R&S forecast in the quantitative model at June 30, 2024. For reasonableness, the Company also considered the impact to the model from alternative prepayment speeds and more adverse economic forecasts. These alternative analyses were utilized to inform the Company's qualitative adjustments. Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future credit stress, such as franchise, hotel and investor commercial real estate lending, when making qualitative adjustments to the ACL model.

Previous wording

The total ACL, which includes both funded and unfunded reserves, was $160.4 million at March 31, 2024 and $159.9 million as of December 31, 2023.

Current wording

The total ACL, which includes both funded and unfunded reserves, was $172.6 million at June 30, 2024 and $159.9 million as of December 31, 2023.

Previous wording

ACL - loans and leases. The ACL on loans and leases was $144.3 million as of March 31, 2024 and $141.4 million as of December 31, 2023. As a percentage of period-end loans, the ACL was 1.29% as of both March 31, 2024 and December 31, 2023. The increase in the ACL was driven by loan growth and slower prepayment speeds, which effectively increased the duration of the loan portfolio.

Current wording

ACL - loans and leases. The ACL on loans and leases was $156.2 million as of June 30, 2024 and $141.4 million as of December 31, 2023. As a percentage of period-end loans, the ACL was 1.36% as of June 30, 2024 and 1.29% as of December 31, 2023. The increase in the ACL was driven by loan growth and credit migration.

Previous wording

In the first quarter of 2024, the Company recorded net charge-offs of $10.6 million, or 38 bp of average loans and leases on an annualized basis, compared to net charge-offs of $12.6 million, or 46 bps, for the fourth quarter of 2023. The charge-offs in the first quarter included a $4.5 million loss on a single CRE loan. Through the first three months of 2024, the Company recorded net charge-offs of $10.6 million, or 38 bp on an annualized basis compared to insignificant net charge-offs for the same period of 2023.

Current wording

In the second quarter of 2024, the Company recorded net charge-offs of $4.2 million, or 15 bp of average loans and leases on an annualized basis, compared to net charge-offs of $10.6 million, or 38 bps, for the first quarter of 2024. The charge-offs in the first quarter included a $4.5 million loss on a single CRE loan. Through the first six months of 2024, the Company recorded net charge-offs of $14.8 million, or 27 bp on an annualized basis compared to net charge-offs of $5.7 million for the same period of 2023.

Previous wording

The ACL as a percentage of nonaccrual loans was 243.6% at March 31, 2024 and 215.1% at December 31, 2023. The increase in this ratio was primarily driven by the $6.5 million, or 9.9%, decline in nonaccrual loans during the period outpacing the increase in the reserve.

Current wording

The ACL as a percentage of nonaccrual loans was 249.2% at June 30, 2024 and 215.1% at December 31, 2023. The increase in this ratio was driven by both the increase in the reserve and decline in nonaccrual loans during the period.

Previous wording

Provision expense is a product of the Company's ACL model combined with net charge-off activity during the period. During the first quarter of 2024, the Company recorded $13.4 million of provision expense for loans and leases compared to $8.8 million during the fourth quarter of 2023. First quarter 2024 provision expense was primarily driven by net charge-offs and loan growth during the period. Through the first three months of 2024, the Company recorded a provision expense of $13.4 million compared to a provision expense of $8.6 million for the same period of 2023.

Current wording

Provision expense is a product of the Company's ACL model combined with net charge-off activity during the period. During the second quarter of 2024, the Company recorded $16.2 million of provision expense for loans and leases compared to $13.4 million during the first quarter of 2024. Through the first six months of 2024, the Company recorded a provision expense of $29.6 million compared to $21.4 million for the same period of 2023.