FIRST FINANCIAL BANCORP OH

Previous 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.

Current wording

First Financial Bancorp. is an $18.1 billion financial holding company headquartered in Cincinnati, Ohio. The Company primarily operates through First Financial Bank, an Ohio-chartered commercial bank with 128 full service banking centers at September 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 $3.8 billion in assets under management as of September 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

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.

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 September 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 resulting 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 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.

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 resulting 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 measurement period for recording adjustments to the fair value of assets and liabilities for Brady Ware Capital ended in January 2024, while the measurement period for Brady Ware Corporate Finance ended in May 2024.

Previous wording

The Company utilizes certain non-GAAP financial measures, which we believe provide useful insight to the reader of the Consolidated Financial Statements. These non-GAAP measures should be supplemental to primary GAAP measures and should not be read in isolation or relied upon as a substitute for the primary GAAP measures.

Current wording

The Company utilizes certain non-GAAP financial measures, which it believes provide useful insight to the reader of the Consolidated Financial Statements. These non-GAAP measures should be supplemental to primary GAAP measures and should not be read in isolation or relied upon as a substitute for the primary GAAP measures.

Previous wording

In addition to capital ratios defined by the U.S. banking agencies, First Financial considers various measures when evaluating capital utilization and adequacy, including the return on average tangible shareholder's equity and the tangible common equity ratio. These calculations are intended to complement the capital ratios defined by the U.S. banking agencies for both absolute and comparative purposes and may be useful for evaluating the performance of a business as the ratios calculate the capital and return available to common shareholders without the impact of intangible assets and their related amortization. As GAAP does not include capital ratio measures, the Company believes there are no comparable GAAP financial measures to these ratios. These ratios are not formally defined by GAAP or codified in the federal banking regulations and, therefore, are considered to be non-GAAP financial measures.

Current wording

In addition to capital ratios defined by the U.S. banking agencies, First Financial considers various measures when evaluating capital utilization and adequacy, including the return on average tangible shareholder's equity and the tangible common equity ratio. These calculations are intended to complement the capital ratios defined by the U.S. banking agencies for both absolute and comparative purposes and may be useful for evaluating the performance of a business as the ratios calculate the capital and return available to common shareholders without the impact of intangible assets and their related amortization. As GAAP does not include capital ratio measures, the Company believes there are no comparable GAAP financial measures to these ratios.

Previous 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.

Current wording

Linked quarter comparison: Third quarter 2024 net income was $52.5 million and earnings per diluted common share were $0.55. This compares with second quarter 2024 net income of $60.8 million and earnings per diluted common share of $0.64. Return on average assets was 1.17% for the third quarter of 2024 compared to 1.38% for the second quarter of 2024. Return on average shareholders’ equity was 8.80% for the third quarter of 2024 compared to 10.72% for the second quarter of 2024.

Previous 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.

Current wording

Year-to-date comparison: For the nine months ended September 30, 2024, net income was $163.9 million and earnings per diluted common share were $1.72. This compares with net income of $199.1 million and earnings per diluted common share of $2.09 for the first nine months of 2023. Return on average assets for the nine months ended September 30, 2024 was 1.24% compared to 1.57% for the same period in 2023, and return on average shareholders' equity was 9.50% and 12.53% for the first nine months of 2024 and 2023, respectively.

Previous wording

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

Current wording

A discussion of First Financial's operating results for the three and nine month periods ended September 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 and leases to customers as well as marketable investment securities.

Current wording

First Financial’s primary 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 borrowings that fund the earning assets. Earning assets consist of interest-bearing loans and leases to customers as well as marketable investment securities.

Previous 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.

Current wording

Interest income of $257.1 million increased $4.4 million, or 1.7%, in the third quarter of 2024 when compared to the second quarter of 2024 primarily due to a $120.6 million increase in average earning assets. Average earning assets were $15.3 billion for the third quarter of 2024 compared to $15.2 billion for the second quarter of 2024. The increase in earning assets was largely driven by a $93.1 million, or 0.8%, increase in average loan balances during the third quarter.

Previous 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.

Current wording

Interest expense of $101.6 million increased $2.2 million, or 2.2%, in the third quarter of 2024 when compared to the second quarter of 2024, largely due to higher interest rates coupled with increases in average interest-bearing deposits, partially offset by lower borrowings. The Company's total cost of interest bearing deposits increased 3 bp to 3.21% in the third quarter of 2024 as customers continued to migrate to higher cost accounts, and average deposit balances increased $166.2 million, or 1.2%, to $13.8 billion. The increase in average deposits was driven primarily by increases in money market accounts, retail CDs and a seasonal increase in public funds. Average borrowed funds decreased $117.5 million, or 10.0%, from the linked quarter.

Previous 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

Current wording

The notional value of the Company's cash flow hedges was $1.0 billion as of September 30, 2024, with the $3.1 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 September 30, 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 51 months and 60 months, respectively.

Previous 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.

Current wording

Year-to-date comparison: Net interest income for the first nine months of 2024 decreased $16.4 million, or 3.5%, compared to the same period of 2023. Net interest margin on a fully tax equivalent basis was 4.09% for the nine months ended September 30, 2024, which is a decrease of 36 bps when compared to the same period in 2023. This was driven by a 119 bp increase in the cost of average interest bearing deposits and a 33 bp increase in the cost of borrowed funds, which outpaced a 48 bp increase in earning asset yields.

Previous 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.

Current wording

Interest income for the nine months ended September 30, 2024 grew $86.0 million, or 12.9%, to $750.5 million compared to $664.6 million for the same period of the prior year due to higher interest rates and earning asset balances. Average earning assets of $15.1 billion for the first nine months of 2024 increased $696.3 million, or 4.8%, when compared to the same period of 2023, driven primarily by an $843.3 million, or 8.0%, increase in average loan balances, which more than offset a $347.5 million, or 9.8%, decrease in average investment securities. Additionally, the yield on earning assets increased 48 bps in the first nine months of 2024 compared to the same period in the prior year due to higher interest rates.

Previous 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.

Current wording

Interest expense for the nine months ended September 30, 2024 was $292.9 million compared to $190.6 million for the same period in the prior year. The increase was driven by a$1.4 billion, or 15.0%, increase in average interest bearing deposits coupled with a 119 bp increase in rates on those deposits. The increase in deposit rates was driven by both higher interest rates as well as continued customer migration to higher cost products. Additionally, the cost of borrowed funds increased 33 bps from the same period in the prior year, which more than offset a $332.5 million, or 22.9%, decrease in average borrowings.

Previous 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.

Current wording

Year-to-date comparison: Noninterest income of $153.7 million for the first nine months of 2024 decreased $11.7 million, or 7.1%, from $165.4 million in the comparable period of 2023. The decline was primarily attributed to losses on investment securities, lower foreign exchange income and client derivative fees. These declines were partially offset by higher other noninterest income, gains on the sale of loans and service charge income. Losses on investment securities increased $22.3 million compared to the prior year due to a $9.7 million impairment loss and $13.2 million of losses resulting from the repositioning of a portion of the investment portfolio during 2024. Foreign exchange income decreased $6.1 million, or 13.4%, and client derivative fees decreased $1.3 million, or 28.6%, due to lower demand in 2024 compared to the prior period. Partially offsetting these declines, leasing business income increased $9.8 million, or 25.4%, due to continued balance growth at Summit. Other noninterest income increased $3.1 million, or 19.2%, due primarily to a $4.4 million gain related to a deferred tax adjustment. Gains on the sales of loans increased $3.0 million, or 29.5%, as mortgage demand increased in the current year as a result of stabilized interest rates, and service charges on deposits increased $1.2 million, or 5.9%, as a result of growth in deposit balances.

Previous 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.

Current wording

Year-to-date comparison: Noninterest expenses of $371.7 million for the first nine months of 2024 increased $12.3 million, or 3.4%, compared to the same period in 2023 primarily due to higher leasing business expenses, other noninterest expenses, salaries and benefits expenses, furniture and equipment costs and professional services, partially offset by lower data processing expenses. Leasing business expense increased $8.2 million, or 35.0%, as a result of the growth in the operating lease portfolio, while salaries and benefits expenses increased $2.0 million, or 0.9%, due to annual salary increases and the Agile acquisition. Other noninterest expenses increased $2.4 million, or 10.2%, primarily due to a $0.5 million increase in fraud losses compared to the prior year as well as a $0.5 million supplemental contribution ot the First Financial Foundation. Furniture and equipment costs increased $0.9 million, or 9.3%, due to the technology upgrades in the current year, while professional services increased $0.7 million, or 10.0%, from the prior year primarily due to an increase in consulting costs related to the Company's ongoing efficiency efforts. Partially offsetting these increases, data processing expenses decreased $1.3 million, or 4.8%, in the current year, largely due to expenses from the Company's 2023 online banking system conversion.

Previous 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.

Current wording

Linked quarter comparison: In the third quarter of 2024, First Financial recorded income tax expense of $12.4 million on pre-tax income of $64.9 million, resulting in an effective tax rate of 19.2%. This compared to income tax expense of $14.0 million on pre-tax income of $74.8 million and an effective tax rate of 18.7% for the second quarter 2024. The higher effective tax rate in the third quarter is primarily driven by tax credit adjustments in the current period.

Previous 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.

Current wording

Year-to-date comparison: For the first nine months of 2024, income tax expense was $37.5 million on pre-tax income of $201.4 million, resulting in an effective tax rate of 18.6%. This compared to income tax expense of $48.1 million on pre-tax income of $247.2 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 $3.2 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.

Current wording

First Financial's investment portfolio totaled $3.4 billion at September 30, 2024 and $3.2 billion at December 31, 2023, or 18.5% and 18.4% of total assets, respectively. AFS securities totaled $3.2 billion at September 30, 2024 and $3.0 billion at December 31, 2023, while HTM securities totaled $78.0 million at September 30, 2024 and $80.3 million at December 31, 2023. The effective duration of the investment portfolio was 4.3 years at September 30, 2024 and 4.6 years at December 31, 2023.

Previous 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.

Current wording

For the nine months ended September 30, 2024, the Company realized $22.7 million of losses on investment securities, which compares to $0.4 million million for the same period in the prior year. The losses in 2024 included the previously mentioned $9.7 million of impairment losses, as well as a total of $13.2 million of losses on the sale of investment securities resulting from the strategic repositioning of a portion of the investment portfolio. The repositioning included the sale of $372.2 million of securities and is expected to increase future yields. 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 in the first quarter of 2024.

Previous 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.

Current wording

The Company's Consolidated Financial Statements reflected a $203.6 million and $282.0 million unrealized after-tax loss on debt securities as of September 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 primarily driven by multiple interest rate increases from November 2022 through July 2023. The unrealized losses of $203.6 million as of September 30, 2024 declined from $291.1 million as of June 30, 2024, largely due to the decrease in interest rates in the final month of the third quarter.

Previous 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.

Current wording

The Company had net unrealized losses of $6.9 million and $8.6 million on its HTM securities at September 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 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.

Current wording

The Company had a $0.2 million unrealized gain on equity securities recorded in noninterest income for the three months ended September 30, 2024 compared to a $0.1 million unrealized loss for the three months ended June 30, 2024. For the first nine months of 2024, the Company had $0.3 million of unrealized gains on equity securities versus an insignificant unrealized gain for the same period of 2023.

Previous 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.

Current wording

residential real estate loans increased by $88.5 million, or 6.6%, to $1.4 billion; and home equity increased $66.8 million, or 8.8%, to $825.4 million. Partially offsetting these areas of loan growth, installment loans decreased $17.8 million, or 11.2%, to $141.3 million; and commercial real estate loans decreased $46.1 million, or 1.1%, to $4.0 billion.

Previous wording

Second quarter 2024 average loans of $11.4 billion, excluding loans held for sale, increased $372.7 million, or 3.4%, from the first quarter 2024. The broad-based growth over the linked quarter included an increase of $172.6 million, or 4.9%, in C&I; an increase of $79.8 million, or 13.2% in construction real estate; an increase of $45.5 million, or 1.1%, in commercial real estate; an increase of $29.2 million, or 6.1%, in lease financing; an increase of $25.0 million, or 3.3%, in home equity; and an increase of $24.4 million, or 1.8%, in residential real estate.

Current wording

Third quarter 2024 average loans of $11.5 billion, excluding loans held for sale, increased $90.7 million, or 0.8%, from the second quarter 2024. The growth over the linked quarter included an increase of $80.0 million, or 11.7% in construction real estate; an increase of $40.9 million, or 8.0%, in lease financing; an increase of $38.8 million, or 2.9%, in residential real estate; an increase of $20.9 million, or 2.6%, in home equity; and an increase of $7.7 million, or 0.2%, in C&I. These increases were partially offset by a decrease of $86.8 million, or 2.1%, in CRE; a decrease of $8.7 million, or 5.7%, in installment; and a decrease of $2.0 million, or 3.0%, in Credit card.

Previous 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.

Current wording

Through the first nine months of 2024, average loans of $11.3 billion, excluding loans held for sale, increased $840.1 million, or 8.0%, from the comparable period of 2023. The increase from prior year reflected broad-based growth across most loan categories, including an increase of $204.7 million, or 5.9%, in C&I loans; an increase of $197.5 million, or 62.4%, in lease financing; an increase of $179.8 million, or 15.2% in residential real estate; an increase of $150.0 million, or 28.1%, in real estate construction; an increase of $71.5 million, or 1.8%, in CRE; an increase of $59.2 million, or 8.1%, in home equity; and an increase of $7.2 million or 12.2%, in Credit card. Partially offsetting these increases was a decrease of $29.8 million, or 16.5%, in installment loans.

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 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.

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 September 30, 2024, First Financial had $413.2 million of loans collateralized by non-owner occupied office space, which represents 3.6% 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 September 30, 2024, 77.8% of the office portfolio was pass rated, and there were two relationships totaling $17.3 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 $4.2 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.

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 $4.1 billion at September 30, 2024 and$4.5 billion at December 31, 2023. As of September 30, 2024, commitments with a fixed interest rate totaled $100.1 million while commitments with variable interest rates totaled $4.0 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 one year to 31.0 years at September 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 $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.

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 $60.9 million and $34.9 million at September 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 $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.

Current wording

First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amount of $323.8 million and $341.7 million at September 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 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.

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 September 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 $83.5 million and $96.4 million at September 30, 2024 and December 31, 2023, respectively.

Previous wording

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 a borrower's continued failure to adhere to contractual payment terms, coupled with other pertinent factors. When a loan is placed into nonaccrual status, any unpaid accrued interest is reversed and the recognition of interest income is suspended.

Current wording

Loans are classified as nonaccrual when, in the opinion of management, collection of principal and interest is doubtful or when payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to a borrower's continued failure to adhere to contractual payment terms, coupled with other pertinent factors. When a loan is placed into nonaccrual status, any unpaid accrued interest is reversed and the recognition of interest income is suspended.

Previous 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.

Current wording

Nonaccrual loans were $65.4 million, or 0.57% of total loans, as of September 30, 2024, reflecting a $0.3 million, or 0.5%, decline from $65.8 million as of December 31, 2023. Nonperforming assets, which consist of nonaccrual loans and OREO, were $65.5 million, or 0.36% of total assets, at September 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 $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.

Current wording

Classified assets, which are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse, totaled $206.2 million as of September 30, 2024 compared to $141.0 million at December 31, 2023. Classified assets were 114 bps as a percentage of total assets at September 30, 2024, compared to 80 bps as of December 31, 2023. The $65.2 million increase in classified assets during the period was primarily due to the downgrade of seven large relationships with no concentration in any particular loan type.

Previous 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.

Current wording

The total ACL, which includes both funded and unfunded reserves, was $176.0 million at September 30, 2024 and $159.9 million as of December 31, 2023.

Previous 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.

Current wording

ACL - loans and leases. The ACL on loans and leases was $158.8 million as of September 30, 2024 and $141.4 million as of December 31, 2023. As a percentage of period-end loans, the ACL was 1.37% as of September 30, 2024 and 1.29% as of December 31, 2023. The increase in the ACL was primarily driven by loan growth and credit migration.

Previous 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.

Current wording

In the third quarter of 2024, the Company recorded net charge-offs of $7.3 million, or 25 bps of average loans and leases on an annualized basis, compared to net charge-offs of $4.2 million, or 15 bps, for the second quarter of 2024. The charge-offs in the third quarter included a $3.6 million loss on a single C&I customer. Through the first nine months of 2024, the Company recorded net charge-offs of $22.1 million, or 26 bps on an annualized basis, compared to net charge-offs of $22.0 million, or 28 bps on an annualized basis, for the same period of 2023.

Previous 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.

Current wording

The ACL as a percentage of nonaccrual loans was 242.7% at September 30, 2024 and 215.1% at December 31, 2023. The increase in this ratio was driven primarily by the increase in the reserve during the period, along with a slight decrease in nonaccrual loan balances.

Previous 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.

Current wording

Provision expense is a product of the Company's ACL model combined with net charge-off activity during the period. During the third quarter of 2024, the Company recorded $9.9 million of provision expense for loans and leases compared to $16.2 million during the second quarter of 2024. Through the first nine months of 2024, the Company recorded a provision expense of $39.5 million compared to $34.3 million for the same period of 2023.