What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 606 added, 273 removed, 848 unchanged (51% of the section changed)

3 unchanged sentences

(Dollar amounts in thousands, except per share data)

2020 December 31,

Cash and due from banks $ 386,507 $ 127,426

1 unchanged sentence

Securities available-for-sale 907,433 926,717

Net deferred loan costs

Commercial 1,694,376 1,584,447

Residential 657,657 682,077

Consumer 425,601 386,006

2,777,634 2,652,530

Net deferred loan (fees)/costs ( 551 ) 3,860

Allowance for loan losses ( 23,285 ) ( 19,943 )

2,753,798 2,636,447

Restricted stock 15,200 15,394

2 unchanged sentences

Bank-owned life insurance 95,013 94,251

Goodwill 78,592 78,592

Other intangible assets 9,829 10,643

Other real estate owned 3,577 3,625

Other assets 37,688 41,556

TOTAL ASSETS $ 4,368,112 $ 4,023,250

LIABILITIES AND SHAREHOLDERS’ EQUITY

3 unchanged sentences

Other interest-bearing deposits 2,779,190 2,601,430

3,569,893 3,275,357

Short-term borrowings 100,096 80,119

18 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2020 2019 2020 2019

(unaudited) (unaudited) (unaudited) (unaudited)

INTEREST INCOME:

Loans, including related fees $ 33,224 $ 27,533 $ 68,258 $ 54,287

Taxable 3,624 3,516 7,653 7,197

Tax-exempt 2,008 1,873 3,946 3,740

Other 400 337 802 651

TOTAL INTEREST INCOME 39,256 33,259 80,659 65,875

INTEREST EXPENSE:

Deposits 3,019 3,316 7,549 6,133

Short-term borrowings 101 158 368 481

11 unchanged sentences

Gain on sales of mortgage loans 1,205 496 1,903 916

Other 281 1,964 622 2,242

TOTAL NON-INTEREST INCOME 8,776 9,743 17,871 17,379

3 unchanged sentences

Equipment expense 2,673 1,751 5,134 3,568

FDIC Expense 49 199 ( 181 ) 339

Other 7,676 7,183 15,098 14,349

TOTAL NON-INTEREST EXPENSE 26,883 23,492 54,437 47,185

1 unchanged sentence

Provision for income taxes 2,899 3,204 5,919 5,421

NET INCOME 11,924 12,569 24,105 22,251

OTHER COMPREHENSIVE INCOME (LOSS)

9 unchanged sentences

Three Months Ended

March 31, 2020 , and 2019

June 30, 2020, and 2019

(Dollar amounts in thousands, except per share data)

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income/(Loss)

Balance, January 1, 2019

Income/(Loss) Treasury

Balance, April 1, 2019 $ 1,825 $ 76,974 $ 466,398 $ ( 12,927 ) $ ( 69,474 ) $ 462,796

Net income — — 12,569 — — 12,569

Other comprehensive income — — — 8,645 — 8,645

Omnibus Equity Incentive Plan 1 199 — — — 200

Balance, June 30, 2019 $ 1,826 $ 77,173 $ 472,577 $ ( 4,282 ) $ ( 69,474 ) $ 477,820

Balance, April 1, 2020 $ 2,005 $ 139,898 $ 504,236 $ 6,001 $ ( 70,369 ) $ 581,771

Net income — — 11,924 — — 11,924

Other comprehensive income — — — 3,514 — 3,514

Omnibus Equity Incentive Plan 1 205 — — — 206

Cash dividends, $.52 per share — — (7,131) — — (7,131)

Balance, June 30, 2020 $ 2,006 $ 140,103 $ 509,029 $ 9,515 $ ( 70,369 ) $ 590,284

See accompanying notes.

FIRST FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Six Months Ended

June 30, 2020, and 2019

(Dollar amounts in thousands, except per share data)

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income/(Loss) Treasury

Balance, January 1, 2019 $ 1,824 $ 76,774 $ 456,716 $ ( 23,454 ) $ ( 69,159 ) $ 442,701

Net income — — 22,251 — — 22,251

Other comprehensive loss — — — 19,172 — 19,172

Omnibus Equity Incentive Plan 2 399 — — — 401

Treasury shares purchased (7,866 shares) — — — — ( 315 ) ( 315 )

Balance, March 31, 2019

ASU 2018-02 adjustment — — — — — —

Cash dividends, $.51 per share — — ( 6,390 ) — — ( 6,390 )

Balance, June 30, 2019 $ 1,826 $ 77,173 $ 472,577 $ ( 4,282 ) $ ( 69,474 ) $ 477,820

Balance, January 1, 2020 $ 2,005 $ 139,694 $ 492,055 $ ( 7,501 ) $ ( 68,645 ) $ 557,608

Net income — — 24,105 — — 24,105

Other comprehensive income — — — 17,016 — 17,016

1 unchanged sentence

Treasury shares purchased (46,989 shares) — — — — ( 1,724 ) ( 1,724 )

Balance, March 31, 2020

See accompanying notes.

Cash dividends, $.52 per share — — ( 7,131 ) — — ( 7,131 )

Balance, June 30, 2020 $ 2,006 $ 140,103 $ 509,029 $ 9,515 $ ( 70,369 ) $ 590,284

FIRST FINANCIAL CORPORATION

1 unchanged sentence

(Dollar amounts in thousands, except per share data)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income $ 24,105 $ 22,251

Adjustments to reconcile net income to net cash provided by operating activities:

6 unchanged sentences

Depreciation and amortization 2,946 2,025

Other, net 5,503 397

NET CASH FROM OPERATING ACTIVITIES 39,713 27,814

4 unchanged sentences

Loans made to customers, net of repayment ( 119,340 ) ( 58,383 )

Redemption of restricted stock 200 —

Purchase of restricted stock ( 6 ) ( 22 )

Payments to acquire business — —

Proceeds from sales of other real estate owned 357 458

16 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying March 31, 2020 and 2019 consolidated financial statements are unaudited.

The accompanying June 30, 2020 and 2019 consolidated financial statements are unaudited.

The December 31, 2019 consolidated financial statements are as reported in the First Financial Corporation (the “Corporation”) 2019 annual report.

32 unchanged sentences

Allowance for Loan Losses

The following table presents the activity of the allowance for loan losses by portfolio segment for the three months

ended March 31.

The following table presents the activity of the allowance for loan losses by portfolio segment for the three months ended June 30.

Allowance for Loan Losses:

March 31, 2020

(Dollar amounts in thousands)

June 30, 2020

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Beginning balance $ 9,323 $ 1,452 $ 8,757 $ 1,531 $ 21,063

1 unchanged sentence

Loans charged -off ( 141 ) ( 166 ) ( 1,233 ) — ( 1,540 )

Recoveries 154 63 580 — 797

Ending Balance $ 10,149 $ 1,876 $ 10,054 $ 1,206 $ 23,285

Allowance for Loan Losses:

March 31, 2019

(Dollar amounts in thousands)

June 30, 2019

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Beginning balance $ 9,239 $ 1,492 $ 7,562 $ 2,667 $ 20,960

1 unchanged sentence

Loans charged -off ( 403 ) ( 117 ) ( 1,386 ) — ( 1,906 )

Recoveries 163 89 714 — 966

Ending Balance $ 9,481 $ 1,323 $ 7,744 $ 1,702 $ 20,250

The following table presents the allocation of the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method at March 31, 2020 and December 31, 2019 .

The following table presents the activity of the allowance for loan losses by portfolio segment for the six months ended June 30.

Allowance for Loan Losses:

March 31, 2020

(Dollar amounts in thousands)

June 30, 2020

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Beginning balance $ 8,945 $ 1,302 $ 8,304 $ 1,392 $ 19,943

Provision for loan losses 1,333 778 3,730 ( 186 ) 5,655

Loans charged -off ( 674 ) ( 423 ) ( 3,347 ) — ( 4,444 )

Recoveries 545 219 1,367 — 2,131

Ending Balance $ 10,149 $ 1,876 $ 10,054 $ 1,206 $ 23,285

Allowance for Loan Losses:

June 30, 2019

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Beginning balance $ 9,848 $ 1,313 $ 7,481 $ 1,794 $ 20,436

Provision for loan losses ( 158 ) 155 1,795 ( 92 ) 1,700

Loans charged -off ( 659 ) ( 419 ) ( 2,937 ) — ( 4,015 )

Recoveries 450 274 1,405 — 2,129

Ending Balance $ 9,481 $ 1,323 $ 7,744 $ 1,702 $ 20,250

The following table presents the allocation of the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method at June 30, 2020 and December 31, 2019.

Allowance for Loan Losses June 30, 2020

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Individually evaluated for impairment $ 237 $ — $ — $ — $ 237

2 unchanged sentences

Ending Balance $ 10,149 $ 1,876 $ 10,054 $ 1,206 $ 23,285

March 31, 2020

(Dollar amounts in thousands)

June 30, 2020

(Dollar amounts in thousands) Commercial Residential Consumer Total

Individually evaluated for impairment $ 7,433 $ 4,669 $ — $ 12,102

4 unchanged sentences

December 31, 2019

(Dollar amounts in thousands)

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Individually evaluated for impairment 48 — — — 48

2 unchanged sentences

Ending Balance $ 8,945 $ 1,302 $ 8,304 $ 1,392 $ 19,943

December 31, 2019

(Dollar amounts in thousands)

Loans December 31, 2019

(Dollar amounts in thousands) Commercial Residential Consumer Total

Individually evaluated for impairment 3,161 3,952 — 7,113

3 unchanged sentences

The following tables present loans individually evaluated for impairment by class of loans.

March 31, 2020

(Dollar amounts in thousands)

June 30, 2020

Principal Recorded Allowance

Losses Average

Recorded Interest

Income Cash Basis

(Dollar amounts in thousands) Balance Investment Allocated Investment Recognized Recognized

With no related allowance recorded:

Commercial & Industrial $ 1,654 $ 1,124 $ — $ 1,087 $ — $ —

Farmland 1,324 1,324 — 1,548 — —

Non Farm, Non Residential 3,512 3,512 — 2,341 — —

Agriculture — — — — — —

All Other Commercial 25 25 — 26 — —

First Liens 3,358 3,358 — 3,630 — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily — — — — — —

All Other Residential — — — — — —

3 unchanged sentences

Commercial & Industrial 523 523 89 271 — —

Farmland — — — — — —

Non Farm, Non Residential 171 171 — 57 — —

Agriculture — — — — — —

All Other Commercial 754 754 148 251 — —

First Liens — — — — — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily 1,311 1,311 — 437 — —

All Other Residential — — — — — —

1 unchanged sentence

All Other Consumer — — — — — —

TOTAL $ 12,632 $ 12,102 $ 237 $ 9,648 $ — $ —

December 31, 2019

(Dollar amounts in thousands)

Principal Recorded Allowance

Losses Average

Recorded Interest

Income Cash Basis

(Dollar amounts in thousands) Balance Investment Allocated Investment Recognized Recognized

With no related allowance recorded:

Commercial & Industrial $ 1,519 $ 989 $ — $ 848 $ — $ —

Farmland 1,997 1,997 — 1,999 — —

Non Farm, Non Residential — — — — — —

Agriculture — — — — — —

All Other Commercial 27 27 — 461 — —

First Liens 3,952 3,952 — 4,055 — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily — — — — — —

All Other Residential — — — — — —

3 unchanged sentences

Commercial & Industrial 148 148 48 1,108 — —

Farmland — — — 84 — —

Non Farm, Non Residential — — — — —

Agriculture — — — 138 — —

All Other Commercial — — — — — —

First Liens — — — — — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily — — — — — —

All Other Residential — — — — — —

1 unchanged sentence

All Other Consumer — — — — — —

TOTAL $ 7,643 $ 7,113 $ 48 $ 8,693 $ — $ —

Three Months Ended

March 31, 2020

June 30, 2020 Six Months Ended

June 30, 2020

Recorded Interest

Income Cash Basis

Interest Income Average

Recorded Interest

Income Cash Basis

Interest Income

(Dollar amounts in thousands)

(Dollar amounts in thousands) Investment Recognized Recognized Investment Recognized Recognized

With no related allowance recorded:

Commercial & Industrial $ 1,137 $ — $ — $ 1,087 $ — $ —

Farmland 1,324 — — 1,548 — —

Non Farm, Non Residential 3,512 — — 2,341 — —

Agriculture — — — — — —

All Other Commercial 26 — — 26 — —

First Liens 3,469 — — 3,630 — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily — — — — — —

All Other Residential — — — — — —

3 unchanged sentences

Commercial & Industrial 332 — — 271 — —

Farmland — — — — — —

Non Farm, Non Residential 86 — — 57 — —

Agriculture — — — — — —

All Other Commercial 377 — — 251 — —

First Liens — — — — — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily 656 — — 437 — —

All Other Residential — — — — — —

1 unchanged sentence

All Other Consumer — — — — — —

TOTAL $ 10,919 $ — $ — $ 9,648 $ — $ —

Three Months Ended

March 31, 2019

June 30, 2019 Six Months Ended

June 30, 2019

Recorded Interest

Income Cash Basis

Interest Income Average

Recorded Interest

Income Cash Basis

Interest Income

(Dollar amounts in thousands)

(Dollar amounts in thousands) Investment Recognized Recognized Investment Recognized Recognized

With no related allowance recorded:

Commercial & Industrial $ 720 $ — $ — $ 676 $ — $ —

Farmland 1,982 — — 1,995 — —

Non Farm, Non Residential — — — — — —

Agriculture — — — — — —

All Other Commercial 569 — — 750 — —

First Liens 4,121 — — 4,219 — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily — — — — — —

All Other Residential — — — — — —

3 unchanged sentences

Commercial & Industrial 1,711 — — 1,747 — —

Farmland 105 — — 140 — —

Non Farm, Non Residential — — — — — —

Agriculture 173 — — 231 — —

All Other Commercial — — — — — —

First Liens — — — — — —

Home Equity — — — — — —

Junior Liens — — — — — —

Multifamily — — — — — —

All Other Residential — — — — — —

1 unchanged sentence

All Other Consumer — — — — — —

TOTAL $ 9,381 $ — $ — $ 9,758 $ — $ —

The tables below presents the recorded investment in non-performing loans.

March 31, 2020

90 Days Still

Debt Restructured

Nonaccrual Excluding

(Dollar amounts in thousands)

June 30, 2020

90 Days Still Troubled

Debt Restructured Nonaccrual Excluding

(Dollar amounts in thousands) Accruing Accruing Nonaccrual TDR

Commercial & Industrial $ — $ — $ 4 $ 2,934

Farmland — — — 1,536

Non Farm, Non Residential — — — 4,139

Agriculture 126 — — 72

All Other Commercial — — — 805

First Liens 3,791 2,558 588 2,659

Home Equity 138 — — 41

Junior Liens 185 80 8 155

Multifamily — — — 1,311

All Other Residential — — — 45

1 unchanged sentence

All Other Consumer 3 142 512 526

TOTAL $ 4,577 $ 2,780 $ 1,126 $ 14,634

December 31, 2019

90 Days Still

Debt Restructured

Nonaccrual Excluding

(Dollar amounts in thousands)

90 Days Still Troubled

Debt Restructured Nonaccrual Excluding

(Dollar amounts in thousands) Accruing Accruing Nonaccrual TDR

Commercial & Industrial $ — $ — $ 11 $ 2,191

Farmland 5 — — 2,410

Non Farm, Non Residential — — — 441

Agriculture — — — 485

All Other Commercial — — — 114

First Liens 625 3,007 396 2,876

Home Equity 12 — — 61

Junior Liens 51 94 9 175

Multifamily — — — —

All Other Residential 738 — — 203

1 unchanged sentence

All Other Consumer 4 239 444 452

TOTAL $ 1,662 $ 3,340 $ 875 $ 9,546

Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The following tables presents the aging of the recorded investment in loans by past due category and class of loans.

March 31, 2020

(Dollar amounts in thousands)

June 30, 2020

30-59 Days 60-89 Days Greater

than 90 days Total

(Dollar amounts in thousands) Past Due Past Due Past Due Past Due Current Total

Commercial & Industrial $ 463 $ 536 $ 1,519 $ 2,518 $ 743,472 $ 745,990

Farmland — — 1,416 1,416 125,455 126,871

Non Farm, Non Residential 4,594 — 222 4,816 371,401 376,217

Agriculture 460 145 205 810 149,166 149,976

All Other Commercial 98 754 33 885 303,497 304,382

First Liens 996 896 4,327 6,219 360,695 366,914

Home Equity 149 249 156 554 64,451 65,005

Junior Liens 330 343 222 895 54,453 55,348

Multifamily 298 — 1,311 1,609 153,795 155,404

All Other Residential — 352 — 352 16,548 16,900

1 unchanged sentence

All Other Consumer 94 36 9 139 29,410 29,549

TOTAL $ 11,933 $ 4,712 $ 9,788 $ 26,433 $ 2,763,944 $ 2,790,377

December 31, 2019

(Dollar amounts in thousands)

30-59 Days 60-89 Days Greater

than 90 days Total

(Dollar amounts in thousands) Past Due Past Due Past Due Past Due Current Total

Commercial & Industrial $ 2,885 $ 766 $ 1,379 $ 5,030 $ 594,925 $ 599,955

Farmland 132 — 2,089 2,221 137,730 139,951

Non Farm, Non Residential 3,749 104 — 3,853 398,854 402,707

Agriculture 277 128 — 405 162,794 163,199

All Other Commercial — — 109 109 288,845 288,954

First Liens 6,452 1,292 1,458 9,202 375,924 385,126

Home Equity 124 63 34 221 70,813 71,034

Junior Liens 384 43 137 564 54,533 55,097

Multifamily — — — — 148,282 148,282

All Other Residential 1,082 — 890 1,972 22,510 24,482

1 unchanged sentence

All Other Consumer 228 42 2 272 31,692 31,964

During the three months ended March 31, 2020 and 2019 , the terms of certain loans were modified as troubled debt restructurings (TDRs).

TOTAL $ 21,801 $ 3,421 $ 6,368 $ 31,590 $ 2,634,852 $ 2,666,442

During the three and six months ended June 30, 2020 and 2019, the terms of certain loans were modified as troubled debt restructurings (TDRs).

The following tables present the activity for TDRs.

(Dollar amounts in thousands)

(Dollar amounts in thousands) Commercial Residential Consumer Total

April 1, $ 4 $ 3,438 $ 714 $ 4,156

Added — 63 41 104

Charged Off — — ( 15 ) ( 15 )

Payments ( 4 ) ( 270 ) ( 72 ) ( 346 )

June 30, $ — $ 3,231 $ 668 $ 3,899

(Dollar amounts in thousands) Commercial Residential Consumer Total

January 1, $ 11 $ 3,485 $ 698 $ 4,194

Added — 123 135 258

Charged Off — ( 6 ) ( 50 ) ( 56 )

Payments ( 11 ) ( 371 ) ( 115 ) ( 497 )

June 30, $ — $ 3,231 $ 668 $ 3,899

(Dollar amounts in thousands) Commercial Residential Consumer Total

April 1, 136 4,019 619 4,774

Added — — 92 92

Charged Off — — ( 30 ) ( 30 )

Payments ( 9 ) ( 222 ) ( 64 ) ( 295 )

June 30, 127 3,797 617 4,541

(Dollar amounts in thousands) Commercial Residential Consumer Total

January 1, 145 4,043 618 4,806

Added — 122 163 285

Charged Off — ( 16 ) ( 46 ) ( 62 )

Payments ( 18 ) ( 352 ) ( 118 ) ( 488 )

June 30, 127 3,797 617 4,541

Modification of the terms of such loans typically include one or a combination of the following:

5 unchanged sentences

Modifications involving an extension of the maturity date were for periods ranging from twelve months to ten years.

Troubled debt restructurings during the three months ended March 31, 2020 and 2019 did not result in any material charge-offs or additional provision expense.

The Corporation has no allocations of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2020 and 2019 .

The Corporation has not committed to lend additional amounts as of March 31, 2020 and 2019 to customers with outstanding loans that are classified as troubled debt restructurings.

None of the charge-offs during the three months ended March 31, 2020 and 2019 were of restructurings that had occurred in the previous 12 months.

Troubled debt restructurings during the three months ended June 30, 2020 and 2019 did not result in any material charge-offs or additional provision expense.

The Corporation has no allocations of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2020 and 2019.

The Corporation has not committed to lend additional amounts as of June 30, 2020 and 2019 to customers with outstanding loans that are classified as troubled debt restructurings.

None of the charge-offs during the three and six months ended June 30, 2020 and 2019 were of restructurings that had occurred in the previous 12 months.

The CARES Act includes a provision that permits a financial institution to elect to suspend temporarily troubled debt restructuring accounting under ASC Subtopic 310-40 in certain circumstances (“section 4013”).

2 unchanged sentences

and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020.

In response to this section of the CARES Act, the federal banking agencies issued a revised interagency statement on April 7, 2020 that, in consultation with the Financial Accounting Standards Board, confirmed that for loans not subject to section 4013, short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not troubled debt restructurings under ASC Subtopic 310-40.

In response to this section of the CARES Act, the federal banking agencies

issued a revised interagency statement on April 7, 2020 that, in consultation with the Financial Accounting Standards Board, confirmed that for loans not subject to section 4013, short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not troubled debt restructurings under ASC Subtopic 310-40.

This includes short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant.

Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

In the first quarter ending March 31, 2020, 81 loans totaling $110 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

As of June 30, 2020, 1,341 loans totaling $343 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

Credit Quality Indicators:

17 unchanged sentences

Loans listed as not rated are either those with an outstanding balance less than $ 100 thousand or are included in groups of homogeneous loans.

As of March 31, 2020 and December 31, 2019 , and based on the most recent analysis performed, the risk category of loans by class of loans are as follows:

March 31, 2020

(Dollar amounts in thousands)

As of June 30, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans are as follows:

June 30, 2020

(Dollar amounts in thousands) Pass Special

Mention Substandard Doubtful Not Rated Total

Commercial & Industrial $ 694,384 $ 17,364 $ 19,298 $ — $ 12,799 $ 743,845

Farmland 111,597 5,706 7,684 — 86 125,073

Non Farm, Non Residential 350,871 11,599 11,637 — 702 374,809

Agriculture 123,953 6,784 16,697 — 497 147,931

All Other Commercial 298,835 3,036 817 — 30 302,718

First Liens 94,359 856 6,301 — 264,155 365,671

Home Equity 2,537 — 170 — 62,156 64,863

Junior Liens 2,115 33 307 — 52,761 55,216

Multifamily 153,622 108 1,311 — 14 155,055

All Other Residential 3,684 — 11 — 13,157 16,852

1 unchanged sentence

All Other Consumer 267 — 41 — 29,110 29,418

TOTAL $ 1,836,654 $ 45,486 $ 64,853 $ — $ 830,641 $ 2,777,634

December 31, 2019

(Dollar amounts in thousands)

(Dollar amounts in thousands) Pass Special

Mention Substandard Doubtful Not Rated Total

Commercial & Industrial $ 549,341 $ 19,253 $ 26,349 $ 5 $ 2,761 $ 597,709

Farmland 119,858 8,673 8,644 — 100 137,275

Non Farm, Non Residential 381,404 4,424 12,269 — 3,678 401,775

Agriculture 127,144 4,507 27,490 — 985 160,126

All Other Commercial 283,266 3,141 1,120 — 35 287,562

First Liens 174,338 926 4,382 — 204,266 383,912

Home Equity 18,417 — 134 11 52,280 70,842

Junior Liens 2,839 64 178 76 51,817 54,974

Multifamily 146,497 112 1,315 — 19 147,943

All Other Residential 12,624 — 205 — 11,577 24,406

1 unchanged sentence

All Other Consumer 3,155 — 38 — 28,615 31,808

TOTAL $ 1,821,763 $ 41,100 $ 82,662 $ 92 $ 706,913 $ 2,652,530

The amortized cost and fair value of the Corporation’s investments are shown below.

All securities are classified as available-for-sale.

March 31, 2020

(Dollar amounts in thousands)

June 30, 2020

(Dollar amounts in thousands) Amortized

Cost Unrealized

Gains Unrealized

Losses Fair Value

Government agencies $ 92,391 $ 4,344 $ ( 3 ) $ 96,732

4 unchanged sentences

Municipal taxable 12,352 274 — 12,626

Treasury 2,501 24 — 2,525

Collateralized debt obligations — 2,945 — 2,945

TOTAL $ 867,416 $ 40,251 $ ( 234 ) $ 907,433

December 31, 2019

(Dollar amounts in thousands)

(Dollar amounts in thousands) Amortized

Cost Unrealized

Gains Unrealized

Losses Fair Value

Government agencies $ 102,490 $ 1,293 $ ( 150 ) $ 103,633

4 unchanged sentences

Municipal taxable 728 2 — 730

Treasury 7,494 10 — 7,504

Collateralized debt obligations — 3,619 — 3,619

Contractual maturities of debt securities at March 31, 2020 were as follows.

TOTAL $ 907,575 $ 20,976 $ ( 1,834 ) $ 926,717

Contractual maturities of debt securities at June 30, 2020 were as follows.

Securities not due at a single maturity or with no maturity date, primarily mortgage-backed and equity securities are shown separately.

Available-for-Sale

(Dollar amounts in thousands)

Amortized Fair

(Dollar amounts in thousands) Cost Value

Due in one year or less $ 7,485 $ 7,530

2 unchanged sentences

Due after ten years 247,817 266,961

377,415 401,576

Mortgage-backed securities and collateralized mortgage obligations 490,001 505,857

There were $244 thousand in gross gains and $50 thousand in losses from investment sales/calls realized by the Corporation for the three months ended March 31, 2020 .

For the three months ended March 31, 2019 there were $2 thousand in gross gains and $6 thousand in losses on sales of investment securities.

The following tables show the securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position, at March 31, 2020 and December 31, 2019 .

March 31, 2020

Less Than 12 Months

More Than 12 Months

(Dollar amounts in thousands)

TOTAL $ 867,416 $ 907,433

There were $ 34 thousand and $278 thousand in gross gains and $3 thousand and $53 thousand in losses from investment sales/calls realized by the Corporation for the three and six months ended June 30, 2020.

For the three and six months ended June 30, 2019 there were $ 16 thousand and $18 thousand in gross gains and zero and $6 thousand in losses on sales/calls of investment securities.

June 30, 2020

Less Than 12 Months More Than 12 Months Total

Unrealized Unrealized Unrealized

(Dollar amounts in thousands) Fair Value Losses Fair Value Losses Fair Value Losses

Government agencies $ 1,021 $ ( 3 ) $ — $ — $ 1,021 $ ( 3 )

Mortgage Backed Securities - Residential

Collateralized mortgage obligations 3,827 ( 124 ) — — 3,827 ( 124 )

2 unchanged sentences

December 31, 2019

Less Than 12 Months

More Than 12 Months

(Dollar amounts in thousands)

Less Than 12 Months More Than 12 Months Total

Unrealized Unrealized Unrealized

(Dollar amounts in thousands) Fair Value Losses Fair Value Losses Fair Value Losses

US Government agencies $ 29,183 $ ( 150 ) $ — $ — $ 29,183 $ ( 150 )

14 unchanged sentences

The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.

Gross unrealized losses on investment securities were $446 thousand as of March 31, 2020 and $1.8 million as of December 31, 2019 .

Gross unrealized losses on investment securities were $ 234 thousand as of June 30, 2020 and $1.8 million as of December 31, 2019.

A majority of these losses represent negative adjustments to market value relative to the interest rate environment reflecting the increase in market rates and not losses related to the creditworthiness of the issuer.

2 unchanged sentences

There is one remaining collateralized debt obligations security with previously recorded OTTI but there was no additional OTTI recorded in 2020 or 2019.

During the quarter ended June 30, 2018, an obligation was called, resulting in the elimination of the OTTI associated with that obligation.

A recovery of previously recorded OTTI of $4.2 million was received and recognized in non-interest income for the period.

In addition the Corporation received $2.4 million of interest income associated with the call.

The table below presents a rollforward of the credit losses recognized in earnings for the three month period ended March 31, 2020 and 2019 :

Three Months Ended March 31,

The table below presents a rollforward of the credit losses recognized in earnings for the three month period ended June 30, 2020 and 2019:

Three Months Ended June 30, Six Months Ended June 30,

(Dollar amounts in thousands) 2020 2019 2020 2019

24 unchanged sentences

The fair value of derivatives is based on valuation models using observable market data as of the measurement date (Level 2 inputs).

March 31, 2020

June 30, 2020

Fair Value Measurements Using Significant

Unobservable Inputs (Level 3)

(Dollar amounts in thousands)

(Dollar amounts in thousands) Level 1 Level 2 Level 3 Total

Government agencies $ — $ 96,732 $ — $ 96,732

4 unchanged sentences

Municipal taxable — 12,626 — 12,626

Treasury — 2,525 — 2,525

Collateralized debt obligations — — 2,945 2,945

TOTAL $ — $ 902,253 $ 5,180 $ 907,433

Derivative Assets 2,861

3 unchanged sentences

Unobservable Inputs (Level 3)

(Dollar amounts in thousands)

(Dollar amounts in thousands) Level 1 Level 2 Level 3 Total

Government agencies $ — $ 103,633 $ — $ 103,633

4 unchanged sentences

Municipal taxable — 730 — 730

Treasury — 7,504 — 7,504

Collateralized debt obligations — — 3,619 3,619

TOTAL $ — $ 920,533 $ 6,184 $ 926,717

Derivative Assets 828

1 unchanged sentence

There were no transfers between Level 1 and Level 2 during 2020 and 2019.

The tables below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2020 and the year ended December 31, 2019 .

The tables below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2020 and the year ended December 31, 2019.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Three Months Ended March 31, 2020

(Dollar amounts in thousands)

Collateralized

Three Months Ended June 30, 2020

(Dollar amounts in thousands) State and

obligations Collateralized

obligations Total

Beginning balance, April 1 $ 2,235 $ 3,233 $ 5,468

Total realized/unrealized gains or losses

Included in earnings — — —

Included in other comprehensive income — ( 288 ) ( 288 )

Transfers — — —

Settlements — — —

Ending balance, June 30 $ 2,235 $ 2,945 $ 5,180

Six Months Ended June 30, 2020

(Dollar amounts in thousands) State and

obligations Collateralized

obligations Total

Beginning balance, January 1 $ 2,565 $ 3,619 $ 6,184

2 unchanged sentences

Included in other comprehensive income — ( 674 ) ( 674 )

Ending balance, March 31

Transfers — — —

Settlements ( 330 ) — ( 330 )

Ending balance, June 30 $ 2,235 $ 2,945 $ 5,180

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Year Ended December 31, 2019

(Dollar amounts in thousands)

Collateralized

(Dollar amounts in thousands) State and

obligations Collateralized

obligations Total

Beginning balance, January 1 $ 3,135 $ 3,258 $ 6,393

2 unchanged sentences

Included in other comprehensive income — 498 498

Purchases — — —

Settlements ( 570 ) ( 137 ) ( 707 )

Ending balance, December 31 $ 2,565 $ 3,619 $ 6,184

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at March 31, 2020 .

(Dollar amounts in thousands)

Valuation Technique(s)

Unobservable Input(s)

State and municipal obligations

Discounted cash flow

Discount rate

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at June 30, 2020.

(Dollar amounts in thousands) Fair Value Valuation Technique(s) Unobservable Input(s) Range

State and municipal obligations $ 2,235 Discounted cash flow Discount rate

Probability of default 3.09%-4.44%

3.09%-4.44% 0%

Other real estate

Sales comparison/income approach

Discount rate for age of appraisal and market conditions

Impaired Loans

Sales comparison/income approach

Discount rate for age of appraisal and market conditions

Other real estate $ 3,577 Sales comparison/income approach Discount rate for age of appraisal and market conditions 5.00%-20.00%

Impaired Loans $ 2,522 Sales comparison/income approach Discount rate for age of appraisal and market conditions 0.00%-50.00%

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at December 31, 2019.

(Dollar amounts in thousands)

Valuation Technique(s)

Unobservable Input(s)

State and municipal obligations

Discounted cash flow

Discount rate

(Dollar amounts in thousands) Fair Value Valuation Technique(s) Unobservable Input(s) Range

State and municipal obligations $ 2,565 Discounted cash flow Discount rate

Probability of default 2.87%-4.44%

2.87%-4.44% 0%

Other real estate

Sales comparison/income approach

Discount rate for age of appraisal and market conditions

Impaired Loans

Sales comparison/income approach

Discount rate for age of appraisal and market conditions

Other real estate $ 3,625 Sales comparison/income approach Discount rate for age of appraisal and market conditions 5.00%-20.00%

Impaired Loans 100 Sales comparison/income approach Discount rate for age of appraisal and market conditions 0.00%-50.00%

Impaired loans disclosed in footnote 2, which are measured for impairment using the fair value of collateral, are valued at Level 3.

They are carried at a fair value of $99 thousand , after a valuation allowance of $42 thousand at March 31, 2020 and at a fair value of $100 thousand , net of a valuation allowance of $48 thousand at December 31, 2019 .

The impact to the provision for loan losses for the three months ended March 31, 2020 and for the twelve months ended December 31, 2019 was a $6 thousand decrease, and a $689 thousand decrease, respectively.

They are carried at a fair value of $2.5 million, after a valuation allowance of $ 237 thousand at June 30, 2020 and at

a fair value of $ 100 thousand, net of a valuation allowance of $ 48 thousand at December 31, 2019.

The impact to the provision for loan losses for the three and six months ended June 30, 2020 and for the twelve months ended December 31, 2019 was a $195 thousand increase, a $189 thousand increase, and a $ 689 thousand decrease, respectively.

Other real estate owned is valued at Level 3.

Other real estate owned at March 31, 2020 with a value of $3.9 million was reduced $50 thousand for fair value adjustment.

At March 31, 2020 other real estate owned was comprised of $3.5 million from commercial loans and $411 thousand from residential loans.

Other real estate owned at June 30, 2020 with a value of $ 3.6 million was reduced $ 50 thousand for fair value adjustment.

At June 30, 2020 other real estate owned was comprised of $ 3.4 million from commercial loans and $ 199 thousand from residential loans.

Other real estate owned at December 31, 2019 with a value of $ 3.6 million was reduced $ 64 thousand for fair value adjustment.

16 unchanged sentences

Other real estate and impaired loans carried at fair value are primarily comprised of smaller balance properties.

The following tables presents loans identified as impaired by class of loans, and carried at fair value on a non-recurring basis, as of March 31, 2020 and December 31, 2019 , which are all considered Level 3.

March 31, 2020

(Dollar amounts in thousands)

The following tables presents loans identified as impaired by class of loans, and carried at fair value on a non-recurring basis, as of June 30, 2020 and December 31, 2019, which are all considered Level 3.

June 30, 2020

(Dollar amounts in thousands) Carrying

Value Allowance

Allocated Fair Value

Commercial & Industrial $ 523 $ 89 $ 434

Farmland — — —

Non Farm, Non Residential 171 — 171

Agriculture — — —

All Other Commercial 754 148 606

First Liens — — —

Home Equity — — —

Junior Liens — — —

Multifamily 1,311 — 1,311

All Other Residential — — —

1 unchanged sentence

All Other Consumer — — —

TOTAL $ 2,759 $ 237 $ 2,522

December 31, 2019

(Dollar amounts in thousands)

(Dollar amounts in thousands) Carrying

Value Allowance

Allocated Fair Value

Commercial & Industrial $ 148 $ 48 $ 100

Farmland — — —

Non Farm, Non Residential — — —

Agriculture — — —

All Other Commercial — — —

First Liens — — —

Home Equity — — —

Junior Liens — — —

Multifamily — — —

All Other Residential — — —

1 unchanged sentence

All Other Consumer — — —

The carrying amounts and estimated fair value of financial instruments at March 31, 2020 and December 31, 2019 , are shown below.

TOTAL $ 148 $ 48 $ 100

The carrying amounts and estimated fair value of financial instruments at June 30, 2020 and December 31, 2019, are shown below.

Carrying amount is the estimated fair value for cash and due from banks, federal funds sold, short-term borrowings, accrued interest receivable and payable, demand deposits, short-term debt and variable-rate loans or deposits that reprice frequently and fully.

3 unchanged sentences

Loan fair value estimates represent an exit price.

Fair values of loans held for sale are based on market bids on the

loans or similar loans.

Fair values of loans held for sale are based on market bids on the loans or similar loans.

It was not practicable to determine the fair value of Federal Home Loan Bank stock due to restrictions placed on its transferability.

1 unchanged sentence

The fair value of off-balance sheet items is not considered material.

March 31, 2020

(Dollar amounts in thousands)

June 30, 2020

Carrying Fair Value

(Dollar amounts in thousands) Value Level 1 Level 2 Level 3 Total

Cash and due from banks $ 386,507 $ 26,098 $ 360,409 $ — $ 386,507

1 unchanged sentence

Securities available-for-sale 907,433 — 902,253 5,180 907,433

Restricted stock

Restricted stock 15,200 n/a n/a n/a n/a

Loans, net 2,753,798 — — 2,818,265 2,818,265

Accrued interest receivable 17,205 — 4,646 12,559 17,205

Deposits ( 3,569,893 ) — ( 3,581,637 ) — ( 3,581,637 )

Short-term borrowings ( 100,096 ) — ( 100,096 ) — ( 100,096 )

2 unchanged sentences

December 31, 2019

(Dollar amounts in thousands)

Carrying Fair Value

(Dollar amounts in thousands) Value Level 1 Level 2 Level 3 Total

Cash and due from banks $ 127,426 $ 26,275 $ 101,151 $ — $ 127,426

1 unchanged sentence

Securities available-for-sale 926,717 — 920,533 6,184 926,717

Restricted stock

Restricted stock 15,394 n/a n/a n/a n/a

Loans, net 2,636,447 — — 2,648,692 2,648,692

Accrued interest receivable 18,523 — 3,583 14,940 18,523

Deposits ( 3,275,357 ) — ( 3,278,099 ) — ( 3,278,099 )

Short-term borrowings ( 80,119 ) — ( 80,119 ) — ( 80,119 )

3 unchanged sentences

Period–end short-term borrowings were comprised of the following:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Federal Funds Purchased $ 4,325 $ 900

Repurchase Agreements 95,771 79,219

$ 100,096 $ 80,119

The Corporation enters into sales of securities under agreements to repurchase.

5 unchanged sentences

Collateral pledged to repurchase agreements by remaining maturity are as follows:

March 31, 2020

Repurchase Agreements

Remaining Contractual Maturity of the Agreements

(Dollar amounts in thousands)

Overnight and continuous

Up to 30 days

Greater than 90 days

June 30, 2020

Repurchase Agreements Remaining Contractual Maturity of the Agreements

(Dollar amounts in thousands) Overnight and continuous Up to 30 days 30 - 90 days Greater than 90 days Total

Mortgage Backed Securities - Residential and Collateralized Mortgage Obligations $ 89,524 $ 150 $ 513 $ 5,584 $ 95,771

December 31, 2019

Repurchase Agreements

Remaining Contractual Maturity of the Agreements

(Dollar amounts in thousands)

Overnight and continuous

Up to 30 days

Greater than 90 days

Repurchase Agreements Remaining Contractual Maturity of the Agreements

(Dollar amounts in thousands) Overnight and continuous Up to 30 days 30 - 90 days Greater than 90 days Total

Mortgage Backed Securities - Residential and Collateralized Mortgage Obligations $ 69,709 $ 1,927 $ 6,552 $ 1,031 $ 79,219

Components of Net Periodic Benefit Cost

Three Months Ended March 31,

Pension Benefits

Post-Retirement

Three Months Ended June 30, Six Months Ended June 30,

(000's) (000's)

Pension Benefits Post-Retirement

Health Benefits Pension Benefits Post-Retirement

Health Benefits

2020 2019 2020 2019 2020 2019 2020 2019

Service cost $ 325 $ 304 $ 9 $ 9 $ 650 $ 609 $ 19 $ 17

Interest cost 779 866 31 36 1,558 1,733 62 73

5 unchanged sentences

First Financial Corporation previously disclosed in its financial statements for the year ended December 31, 2019 that it expected to contribute $ 3.7 million and $ 736 thousand respectively to its Pension Plan and ESOP and $ 251 thousand to the Post Retirement Health Benefits Plan in 2020.

Contributions of $435 thousand have been made to the Pension Plan thus far in 2020 .

Contributions of $60 thousand have been made through the first three months of 2020 for the Post Retirement Health Benefits plan.

Contributions of $ 1.2 million have been made to the Pension Plan thus far in 2020.

Contributions of $ 119 thousand have been made through the first six months of 2020 for the Post Retirement Health Benefits plan.

No contributions have been made in 2020 for the ESOP.

The Pension plan was frozen for most employees at the end of 2012 and for those employees there will be discretionary contributions to the ESOP plan and a 401K plan in place of the former Pension benefit.

In the first three months of 2020 and 2019 there has been $412 thousand and $390 thousand of expense accrued for potential contributions to these alternative retirement benefit options.

In the first six months of 2020 and 2019 there has been $ 870 thousand and $ 726 thousand of expense accrued for potential contributions to these alternative retirement benefit options.

New accounting standards

5 unchanged sentences

All other goodwill impairment guidance will remain largely unchanged.

2017-04 is effective for interim and annual reporting

periods beginning after December 15, 2019, applied prospectively.

2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019, applied prospectively.

Early adoption is permitted for any impairment tests performed after January 1, 2017.

20 unchanged sentences

In June 2016 ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial

Instruments (ASU 2016-13), was issued and requires entities to use a current expected credit loss ("CECL") model which is a

new impairment model based on expected losses rather than incurred losses.

Under this model an entity would recognize an

impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from

financial assets measured at amortized cost.

The entity's estimate would consider relevant information about past events,

current conditions, and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses

upon loan origination.

ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019,

with early adoption permitted for annual reporting periods beginning after December 15, 2018.

The Corporation formed a cross-functional internal management committee and engaged a third party vendor to assist with the

transition to the guidance set forth in this update.

The new allowance model implemented by the Corporation estimates credit

losses over the expected life of the portfolio and includes a qualitative framework to account for the drivers of losses that are

not captured by the quantitative model.

Measurement of Credit Losses on Financial Instruments (ASU 2016-13), was issued and requires entities to use a current expected credit loss ("CECL") model which is a new impairment model based on expected losses rather than incurred losses.

Under this model an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost.

The entity's estimate would consider relevant information about past events, current conditions, and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses upon loan origination.

ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted for annual reporting periods beginning after December 15, 2018.

The Corporation formed a cross-functional internal management committee and engaged a third party vendor to assist with the transition to the guidance set forth in this update.

The new allowance model implemented by the Corporation estimates credit losses over the expected life of the portfolio and includes a qualitative framework to account for the drivers of losses that are not captured by the quantitative model.

The results continue to be utilized to refine our models and estimation techniques.

Documentation of new methodologies and internal controls that will be implemented as part of CECL as well as model

validation is also being finalized.

While the committee continues to analyze and modify calculations, the Corporation currently

expects the adoption of ASU 2016-13 will result in an increase in allowance for loan losses amount at January 1, 2020 in the

range of $15 million to $25 million.

The allowance for credit losses also increased due to the requirement to record an

allowance on acquired loan portfolios, previously recorded at fair value.

Once finalized, the cumulative effect adjustment, as a

result of the adoption of this guidance, was originally to be recorded on January 1, 2020, net of tax, as an adjustment to retained earnings.

Documentation of new methodologies and internal controls that will be implemented as part of CECL as well as model validation is also being finalized.

While the committee continues to analyze and modify calculations, the Corporation currently expects the adoption of ASU 2016-13 will result in an increase in allowance for loan losses amount at January 1, 2020 in the range of $15 million to $25 million.

The allowance for credit losses also increased due to the requirement to record an allowance on acquired loan portfolios, previously recorded at fair value.

Once finalized, the cumulative effect adjustment, as a result of the adoption of this guidance, was originally to be recorded on January 1, 2020, net of tax, as an adjustment to retained earnings.

This estimate is subject to change as key assumptions are refined and model validations are finalized.

23 unchanged sentences

All of the Corporation's revenue from contracts with customers in the scope of ASC 606 is recognized within Non-Interest Income.

The following table presents the Corporation's sources of Non-Interest Income for the three months ended March 31, 2020 and 2019 .

The following table presents the Corporation's sources of Non-Interest Income for the three months ended June 30, 2020 and 2019.

Items outside the scope of ASC 606 are noted as such.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(Dollar amounts in thousands) 2020 2019 2020 2019

4 unchanged sentences

Net gains on sales of loans (a)

1,205 496 1,903 916

Loan servicing fees (a)

327 378 652 697

Net gains/(losses) on sales of securities (a)

Other service charges and fees (a)

498 491 890 955

495 2,072 1,117 2,321

Total non-interest income $ 8,776 $ 9,743 $ 17,871 $ 17,379

(a) Not within the scope of ASC 606.

(b) The Other category includes gains/(losses) on the sale of OREO for the three months ended March 31, 2020 and March 31, 2019, totaling $(6) thousand and $(20) thousand , respectively, which is within the scope of ASC 606;

(b) The Other category includes gains/(losses) on the sale of OREO for the three months ended June 30, 2020 and June 30, 2019, totaling $(2) thousand and $(20) thousand, respectively, and for the six months ended for the same periods, totaling $(8) thousand and $(40) thousand, which is within the scope of ASC 606;

the remaining balance is outside the scope of ASC 606.

28 unchanged sentences

The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

(Dollar amounts in thousands)

As Initially Reported

Measurement Period Adjustments

(Dollar amounts in thousands) As Initially Reported Measurement Period Adjustments As Adjusted

Consideration

3 unchanged sentences

Assets acquired

Cash $ 34,518 $ 34,518

Investment securities available-for-sale 174,851 174,851

1 unchanged sentence

Federal Home Loan Bank stock 4,428 4,428

Loans 657,179 1,719 658,898

Premises and equipment 25,316 (6,494) 18,822

1 unchanged sentence

Other real estate owned 3,364 3,364

Other assets 6,596 1,600 8,196

Total assets acquired 927,314 (3,175) 924,139

Liabilities assumed

Deposits 735,526 735,526

FHLB advances 20,775 20,775

3 unchanged sentences

Net identifiable assets 88,164 (3,175) 84,989

Goodwill $ 41,062 $ 3,175 $ 44,237

The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date.

8 unchanged sentences

Net interest income $ 147,581 $ 145,136

Net income $ 51,088 $ 52,252

Basic and diluted earnings per share $ 3.97 $ 4.26

2 unchanged sentences

Purchase credit impaired loans purchased during the year ended December 31, 2019, for which it was probable at acquisition that all contractually required payments would not be collected are as follows:

(Dollar amount in thousands)

As Initially Reported

Measurement Period Adjustments

(Dollar amount in thousands) As Initially Reported Measurement Period Adjustments As Adjusted

Contractually required payments receivable of loans purchased during the year:

Commercial $ 16,530 $ (3,523) $ 13,007

Consumer 391 (296) 95

$ 16,921 $ (3,819) $ 13,102

Fair value of acquired loans at acquisition $ 8,870 $ (1,857) $ 7,013

The carrying amount of loans accounted for in accordance with FASB ASC 310-30 at March 31, 2020 and 2019 are shown in the following tables:

(Dollar amounts in thousands)

The carrying amount of loans accounted for in accordance with FASB ASC 310-30 at June 30, 2020 and 2019 are shown in the following tables:

(Dollar amounts in thousands) Commercial Consumer Total

Beginning balance, April 1, $ 6,347 $ — $ 6,347

Discount accretion — — —

Disposals ( 1,511 ) — ( 1,511 )

ASC 310-30 Loans, June 30, $ 4,836 $ — $ 4,836

(Dollar amounts in thousands) Commercial Consumer Total

Beginning balance, January 1, $ 7,269 $ — $ 7,269

Loans added — — —

Discount accretion — — —

ASC 310-30 Loans, March 31,

(Dollar amounts in thousands)

Disposals ( 2,433 ) — ( 2,433 )

ASC 310-30 Loans, June 30, $ 4,836 $ — $ 4,836

(Dollar amounts in thousands) Commercial Consumer Total

Beginning balance, April 1, $ 1,494 $ — $ 1,494

Discount accretion — — —

Disposals ( 36 ) — ( 36 )

ASC 310-30 Loans, June 30, $ 1,458 $ — $ 1,458

(Dollar amounts in thousands) Commercial Consumer Total

Beginning balance, January 1, $ 1,530 $ — $ 1,530

Discount accretion — — —

ASC 310-30 Loans, March 31,

Disposals ( 72 ) — ( 72 )

ASC 310-30 Loans, June 30, $ 1,458 $ — $ 1,458

Accumulated Other Comprehensive Income

The following tables summarize the changes, net of tax, within each classification of accumulated other comprehensive income/(loss) for the three months ended March 31, 2020 and 2019 .

(Dollar amounts in thousands)

The following tables summarize the changes, net of tax, within each classification of accumulated other comprehensive income/(loss) for the three and six months ended June 30, 2020 and 2019.

gains and 2020

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

Beginning balance, April 1, $ 27,991 $ ( 21,990 ) $ 6,001

Change in other comprehensive income (loss) before reclassification 3,153 — 3,153

Amounts reclassified from accumulated other comprehensive income ( 23 ) 384 361

Net current period other comprehensive income (loss) 3,130 384 3,514

Ending balance, June 30, $ 31,121 $ ( 21,606 ) $ 9,515

gains and 2020

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

Beginning balance, January 1, $ 14,893 $ ( 22,394 ) $ ( 7,501 )

1 unchanged sentence

Amounts reclassified from accumulated other comprehensive income ( 169 ) 788 619

Net current period other comprehensive loss — — —

Net current period other comprehensive income (loss) 16,228 788 17,016

Ending balance, March 31,

(Dollar amounts in thousands)

Ending balance, June 30, $ 31,121 $ ( 21,606 ) $ 9,515

gains and 2019

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

Beginning balance, April 1, $ 4,119 $ ( 17,046 ) $ ( 12,927 )

Change in other comprehensive income (loss) before reclassification 8,353 — 8,353

Amounts reclassified from accumulated other comprehensive income ( 12 ) 304 292

Net current period other comprehensive income (loss) 8,341 304 8,645

Ending balance, June 30, $ 12,460 $ ( 16,742 ) $ ( 4,282 )

gains and 2019

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

Beginning balance, January 1, $ ( 6,105 ) $ ( 17,349 ) $ ( 23,454 )

2 unchanged sentences

Net current period other comprehensive income (loss) 18,565 607 19,172

Ending balance, March 31,

(Dollar amounts in thousands)

ASU 2018-02 adjustment — — —

Ending balance, June 30, $ 12,460 $ ( 16,742 ) $ ( 4,282 )

Period Balance

(Dollar amounts in thousands) 4/1/2020 Change 6/30/2020

Unrealized gains (losses) on securities available-for-sale

4 unchanged sentences

Unrealized gain (loss) on retirement plans ( 21,990 ) 384 ( 21,606 )

(Dollar amounts in thousands)

TOTAL $ 6,001 $ 3,514 $ 9,515

Period Balance

(Dollar amounts in thousands) 1/1/2020 Change 6/30/2020

Unrealized gains (losses) on securities available-for-sale

4 unchanged sentences

Unrealized loss on retirement plans ( 22,394 ) 788 ( 21,606 )

Three Months Ended March 31, 2020

Details about accumulated

Amount reclassified from

Affected line item in

other comprehensive

accumulated other

the statement where

income components

comprehensive income

net income is presented

TOTAL $ ( 7,501 ) $ 17,016 $ 9,515

Period Balance

(Dollar amounts in thousands) 4/1/2019 Change 6/30/2019

Unrealized gains (losses) on securities available-for-sale

without other than temporary impairment $ 1,720 $ 8,278 $ 9,998

Unrealized gains (losses) on securities available-for-sale

with other than temporary impairment 2,399 63 2,462

Total unrealized gain (loss) on securities available-for-sale $ 4,119 $ 8,341 $ 12,460

Unrealized loss on retirement plans ( 17,046 ) 304 ( 16,742 )

TOTAL $ ( 12,927 ) $ 8,645 $ ( 4,282 )

Period Balance

(Dollar amounts in thousands) 1/1/2019 Change 6/30/2019

Unrealized gains (losses) on securities available-for-sale

without other than temporary impairment $ ( 8,446 ) $ 18,444 $ 9,998

Unrealized gains (losses) on securities available-for-sale

with other than temporary impairment 2,341 121 2,462

Total unrealized income (loss) on securities available-for-sale $ ( 6,105 ) $ 18,565 $ 12,460

Unrealized gain (loss) on retirement plans ( 17,349 ) 607 ( 16,742 )

TOTAL $ ( 23,454 ) $ 19,172 $ ( 4,282 )

Three Months Ended June 30, 2020

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

(in thousands)

Unrealized gains and losses

Net securities gains (losses)

on available-for-sale

Income tax expense

Amortization of

(a) Salary and benefits

retirement plan items

Income tax expense

Total reclassifications for the period

Unrealized gains and losses $ 31 Net securities gains (losses)

on available-for-sale ( 8 ) Income tax expense

securities $ 23 Net of tax

Amortization of $ ( 492 ) (a) Salary and benefits

retirement plan items 108 Income tax expense

$ ( 384 ) Net of tax

Total reclassifications for the period $ ( 361 ) Net of tax

(a) Included in the computation of net periodic benefit cost.

(see Footnote 6 for additional details).

Three Months Ended March 31, 2019

Details about accumulated

Amount reclassified from

Affected line item in

other comprehensive

accumulated other

the statement where

income components

comprehensive income

net income is presented

Six Months Ended June 30, 2020

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

(in thousands)

Unrealized gains and losses

Net securities gains (losses)

on available-for-sale

Income tax expense

Amortization of

(a) Salary and benefits

retirement plan items

Income tax expense

Total reclassifications for the period

Unrealized gains and losses $ 225 Net securities gains (losses)

on available-for-sale ( 56 ) Income tax expense

securities $ 169 Net of tax

Amortization of $ ( 984 ) (a) Salary and benefits

retirement plan items 196 Income tax expense

$ ( 788 ) Net of tax

Total reclassifications for the period $ ( 619 ) Net of tax

(a) Included in the computation of net periodic benefit cost.

(see Footnote 6 for additional details).

Three Months Ended June 30, 2019

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

(in thousands)

Unrealized gains and losses $ 16 Net securities gains (losses)

on available-for-sale ( 4 ) Income tax expense

securities $ 12 Net of tax

Amortization of $ ( 390 ) (a) Salary and benefits

retirement plan items 86 Income tax expense

$ ( 304 ) Net of tax

Total reclassifications for the period $ ( 292 ) Net of tax

(a) Included in the computation of net periodic benefit cost.

(see Footnote 6 for additional details).

Six Months Ended June 30, 2019

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

(in thousands)

Unrealized gains and losses $ 12 Net securities gains (losses)

on available-for-sale ( 3 ) Income tax expense

securities $ 9 Net of tax

Amortization of $ ( 779 ) (a) Salary and benefits

retirement plan items 172 Income tax expense

$ ( 607 ) Net of tax

Total reclassifications for the period $ ( 598 ) Net of tax

(a) Included in the computation of net periodic benefit cost.

(see Footnote 6 for additional details).

The Corporation leases certain branches under operating leases.

At March 31, 2020 , the Corporation had lease liabilities totaling $5,845,000 and right-of-use assets totaling $5,831,000 related to these leases.

At June 30, 2020, the Corporation had lease liabilities totaling $5,817,000 and right-of-use assets totaling $5,802,000 related to these leases.

Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively.

For the three months ended March 31, 2020 , the weighted average remaining lease term for operating leases was 11.4 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.92%.

For the three months ended June 30, 2020, the weighted average remaining lease term for operating leases was 11.1 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.92%.

The calculated amount of the lease liabilities and right-of-use assets are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments.

7 unchanged sentences

Lease costs were as follows:

(Dollar amounts in thousands)

Three Months Ended March 31, 2020

(Dollar amounts in thousands) Six Months Ended June 30, 2020

Operating lease cost $ 464

5 unchanged sentences

Right-of-use assets obtained in exchange for new operating lease liabilities 6,786

Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2020 were as follows:

(Dollar amounts in thousands)

March 31, 2020

Twelve Months Ended March 31,

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2020 were as follows:

(Dollar amounts in thousands) June 30, 2020

Twelve Months Ended June 30,

Thereafter 3,123

Total Future Minimum Lease Payments 6,839

35 unchanged sentences

Summary of Operating Results

Net income for the three months ended March 31, 2020 was $ 12.2 million , compared to $9.7 million for the same period of 2019 .

Basic earnings per share increased to $0.89 for the first quarter of 2020 compared to $0.79 for the same period in 2019 .

Return on Assets and Return on Equity were 1.21 % and 8.55 % respectively, for the three months ended March 31, 2020 compared to 1.29 % and 8.59 % for the three months ended March 31, 2019 .

Net income for the three months ended June 30, 2020 was $11.9 million, compared to $12.6 million for the same period in 2019.

Basic earnings per share decreased to $0.87 for the second quarter of 2020 compared to $1.02 for the same period in 2019.

Return on Assets and Return on Equity were 1.10% and 8.06% respectively, for the three months ended June 30, 2020 compared to 1.66% and 10.67% for the three months ended June 30, 2019.

Net income for the six months ended June 30, 2020 was $24.1 million, compared to $22.3 million for the same period in 2019.

Basic earnings per share decreased to $1.76 for the first six months of 2020 compared to $1.81 for the same period in 2019.

Return on Assets and Return on Equity were 1.16% and 8.30% respectively, for the six months ended June 30, 2020, compared to 1.47% and 9.66% for the six months ended June 30, 2019.

These quarterly comparisons and the ones following include the Corporation's acquisition of HopFed Bancorp, Hopkinsville, Kentucky on July 27, 2019.

16 unchanged sentences

The Corporation's primary source of earnings is net interest income, which is the difference between the interest earned on loans and other investments and the interest paid for deposits and other sources of funds.

Net interest income increased $6.9 million in the three months ended March 31, 2020 to $36.4 million from $29.4 million in the same period in 2019 .

The net interest margin for the three months ended March 31, 2020 is 4.13 % compared to 4.31 % for the same period of 2019 , a 4.18% decrease.

Net interest income increased $6.1 million in the three months ended June 30, 2020 to $35.9 million from $29.8 million in the same period in 2019.

The net interest margin for the three months ended June 30, 2020 is 3.97% compared to 4.33% for the same period in 2019, a 8.31% decrease.

Net interest income increased $13.1 million in the six months ended June 30, 2020 to $72.2 million from $59.2 million in the same period in 2019.

The net interest margin for the six months ended June 30, 2020 is 4.05% compared to 4.32% for the same period in 2019.

The Corporation deferred fees through the Paycheck Protection Program (“PPP”) totaling $6.2 million.

Interest income increased by $171 thousand in the three months ended June 30, 2020 as a result of the accretion of PPP fees.

Non-Interest Income

Non-interest income for the three months ended March 31, 2020 was $9.1 million compared to $7.6 million for the same period of 2019 .

Non-interest income for the three months ended June 30, 2020 was $8.8 million compared to $9.7 million for the same period of 2019.

Non-interest income for the six months ended June 30, 2020 was $17.9 million compared to $17.4 million for the same period in 2019.

Non-Interest Expenses

The Corporation’s non-interest expense for the quarter ended March 31, 2020 was $27.6 million compared to $ 23.7 million for the same period in 2019 .

The Corporation’s non-interest expense for the quarter ended June 30, 2020 was $26.9 million compared to $23.5 million for the same period in 2019.

The Corporation's non-interest expense for the six months ended June 30, 2020 increased $7.3 million to $54.4 million compared to the same period in 2019.

Allowance for Loan Losses

The Corporation’s provision for loan losses increased to $ 2.7 million for first quarter of 2020 as compared to $ 1.5 million for the same period of 2019 .

The Corporation established a $1.0 million allowance for loan and lease losses in the first quarter of 2020 directly related to the initial estimate of losses resulting from the COVID-19 pandemic.

The Corporation’s provision for loan losses increased to $3.0 million for the second quarter of 2020 as compared to $0.2 million for the same period in 2019.

The Corporation increased the allowance for loan losses by $1.0 million in the second quarter of 2020 directly related to the initial estimate of losses resulting from the COVID-19 pandemic.

Also, as provided by the Coronavirus Aid Relief and Economic Security Act, the Corporation elected to delay the implementation of the Current Expected Credit Loss accounting standard.

Net charge offs for the first quarter of 2020 were $1.57 million compared to $496 thousand for the same period of 2019 .

Net charge offs for the second quarter of 2020 were $743 thousand compared to $940 thousand for the same period of 2019.

The provision for loan losses increased $4.0 million to $5.7 million for the six months ended June 30, 2020 compared to $1.7 million for the same period in 2019.

Net charge offs for the first six months of 2020 increased $427 thousand to $2.3 million compared to the same period in 2019.

Based on management’s analysis of the current portfolio, an evaluation that includes consideration of historical loss experience, non-performing loans trends, and probable incurred losses on identified problem loans, management believes the allowance is adequate with the adjustments made for the estimates relating to the COVID-19 pandemic.

Income Tax Expense

The Corporation’s effective income tax rate for the first three months of 2020 was 19.87% compared to 18.63% for the same period in 2019 .

The Corporation’s effective income tax rate for the first six months of 2020 was 19.71% compared to 19.59% for the same period in 2019.

Non-performing Loans

Non-performing loans consist of (1) non-accrual loans on which the ultimate collectability of the full amount of interest is uncertain, (2) loans which have been renegotiated to provide for a reduction or deferral of interest or principal because of a deterioration in the financial position of the borrower, and (3) loans past due ninety days or more as to principal or interest.

Non-performing loans increased to $ 17.6 million at March 31, 2020 compared to $ 15.3 million at December 31, 2019 .

Nonperforming loans increased 9.4% compared to $ 16.1 million as of March 31, 2019 .

A summary of non-performing loans at March 31, 2020 and December 31, 2019 follows:

March 31, 2020

December 31, 2019

Non-performing loans increased to $23.0 million at June 30, 2020 compared to $15.3 million at December 31, 2019.

Nonperforming loans increased 51.0% compared to $15.2 million as of June 30, 2019.

A summary of non-performing loans at June 30, 2020 and December 31, 2019 follows:

June 30, 2020 December 31, 2019

Non-accrual loans $ 14,634 $ 9,535

2 unchanged sentences

Accruing loans past due over 90 days 4,438 1,610

$ 22,971 $ 15,339

Ratio of the allowance for loan losses

1 unchanged sentence

The following loan categories comprise significant components of the nonperforming non-restructured loans:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Non-accrual loans

2 unchanged sentences

Consumer loans 937 590

$ 14,634 $ 9,535

Past due 90 days or more

2 unchanged sentences

Consumer loans 325 222

$ 4,438 $ 1,610

5 unchanged sentences

Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

In the first quarter ending March 31, 2020, 81 loans totaling $110 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

As of June 30, 2020, 1,341 loans totaling $343 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

On these modifications, we have granted payment deferrals, generally for up to three months.

Interest Rate Sensitivity and Liquidity

17 unchanged sentences

Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Corporation’s risk management strategy.

The table below shows the Corporation’s estimated sensitivity profile as of March 31, 2020 .

The table below shows the Corporation’s estimated sensitivity profile as of June 30, 2020.

The change in interest rates assumes a parallel shift in interest rates of 100 and 200 basis points.

2 unchanged sentences

These estimates assume all rate changes occur overnight and management takes no action as a result of this change.

Percentage Change in Net Interest Income

Interest Rate Change

Basis Point Percentage Change in Net Interest Income

Interest Rate Change 12 months 24 months 36 months

Down 100 -3.83 -6.65 -8.42

Up 100 4.59 9.57 13.77

Up 200 5.64 14.70 22.97

Typical rate shock analysis does not reflect management’s ability to react and thereby reduce the effect of rate changes, and represents a worst-case scenario.

8 unchanged sentences

Financial Condition

Comparing the first three months of 2020 to the same period in 2019 , loans, net of deferred loan costs, have increased $639 million to $ 2.6 billion.

Deposits increased 36.03% to $ 3.3 billion at March 31, 2020 compared to March 31, 2019 .

Comparing the first six months of 2020 to the same period in 2019, loans, net of deferred loan costs, have increased $767 million to $2.8 billion.

Deposits increased 44.9% to $3.6 billion at June 30, 2020 compared to June 30, 2019.

Shareholders' equity increased 23.5% or $112.5 million.

This financial performance increased book value per share 12.65% to$ 42.42 at March 31, 2020 from $ 37.66 at March 31, 2019 .

This financial performance increased book value per share 10.71% to$43.04 at June 30, 2020 from $38.88 at June 30, 2019.

Book value per share is calculated by dividing the total shareholders' equity by the number of shares outstanding.

2 unchanged sentences

The acquisition also included $736 million in deposits.

As a Small Business Administration lender, we were well positioned to assist business customers in accessing funds available through the Paycheck Protection Program (“PPP”) implemented in April.

Through June 30, 2020, we processed approximately $170 million of approved PPP loans.

Goodwill is reviewed for impairment annually.

If there are changes or events that indicate the asset may be impaired, goodwill is reviewed for impairment on an interim basis.

The pandemic created an event that requires that the Corporation review goodwill for impairment.

The market value of the Corporation's stock experienced declines similar to other financial institutions.

We have not seen a significant impact on loans, deposits, or operating performance as a result of the pandemic.

Deposits and loans have both increased.

Loan modifications to date are at similar levels experienced by other financial institutions.

While the Corporation does anticipate higher losses to occur as a result of the pandemic, we believe those to be in line with past economic cycles.

Based on these factors, we have determined that goodwill was not impaired as of June 30, 2020.

Capital Adequacy

19 unchanged sentences

Currently the Corporation exceeds all of these minimums.

March 31, 2020

December 31, 2019

To Be Well Capitalized

June 30, 2020 December 31, 2019 To Be Well Capitalized

Common equity tier 1 capital

Corporation 15.44 % 15.51 % N/A

First Financial Bank 15.28 % 15.40 % 6.50 %

Total risk-based capital

Corporation 16.17 % 16.16 % N/A

First Financial Bank 15.87 % 15.91 % 10.00 %

Tier I risk-based capital

Corporation 15.44 % 15.51 % N/A

First Financial Bank 15.28 % 15.40 % 8.00 %

Tier I leverage capital

Corporation 11.64 % 12.04 % N/A

First Financial Bank 11.40 % 11.93 % 5.00 %

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements