What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 154 added, 135 removed, 1193 unchanged (20% of the section changed)

3 unchanged sentences

(Dollar amounts in thousands, except per share data)

September 30,

2021 December 31,

44 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

44 unchanged sentences

Three Months Ended

June 30, 2021, and 2020

September 30, 2021, and 2020

(Dollar amounts in thousands, except per share data)

4 unchanged sentences

Income/(Loss) Treasury

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

Balance, July 1, 2020 $ 2,006 $ 140,103 $ 509,029 $ 9,515 $ ( 70,369 ) $ 590,284

Net income — — 14,000 — — 14,000

1 unchanged sentence

Omnibus Equity Incentive Plan — 205 — — — 205

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

Balance, April 1, 2021 $ 2,008 $ 141,024 $ 533,980 $ ( 832 ) $ ( 78,068 ) $ 598,112

Balance, September 30, 2020 $ 2,006 $ 140,308 $ 523,029 $ 12,121 $ ( 70,369 ) $ 607,095

Balance, July 1, 2021 $ 2,008 $ 141,240 $ 543,595 $ 1,412 $ ( 100,092 ) $ 588,163

Net income — — 16,098 — — 16,098

2 unchanged sentences

Treasury shares purchased (176,293 shares) — — — — (7,029) (7,029)

Cash dividends, $.53 per share — — (6,999) — — (6,999)

Balance, June 30, 2021 $ 2,008 $ 141,240 $ 543,595 $ 1,412 $ ( 100,092 ) $ 588,163

Balance, September 30, 2021 $ 2,009 $ 141,456 $ 559,693 $ ( 1,102 ) $ ( 107,121 ) $ 594,935

See accompanying notes.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Six Months Ended

June 30, 2021, and 2020

Nine Months Ended

September 30, 2021, and 2020

(Dollar amounts in thousands, except per share data)

10 unchanged sentences

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

Balance, September 30, 2020 $ 2,006 $ 140,308 $ 523,029 $ 12,121 $ ( 70,369 ) $ 607,095

Balance, January 1, 2021 $ 2,007 $ 140,820 $ 521,103 $ 9,764 $ ( 76,702 ) $ 596,992

4 unchanged sentences

Cash dividends, $.53 per share — — ( 6,999 ) — — ( 6,999 )

Balance, June 30, 2021 $ 2,008 $ 141,240 $ 543,595 $ 1,412 $ ( 100,092 ) $ 588,163

Balance, September 30, 2021 $ 2,009 $ 141,456 $ 559,693 $ ( 1,102 ) $ ( 107,121 ) $ 594,935

FIRST FINANCIAL CORPORATION

1 unchanged sentence

(Dollar amounts in thousands, except per share data)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

36 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying June 30, 2021 and 2020 consolidated financial statements are unaudited.

The accompanying September 30, 2021 and 2020 consolidated financial statements are unaudited.

The December 31, 2020 consolidated financial statements are as reported in the First Financial Corporation (the “Corporation”) 2020 annual report.

34 unchanged sentences

These shares vest over 3 years in increments of 33 %, 33 %, and 34 % respectively.

For the six months ended 2021 and 2020, 21,159 and 19,688 shares were awarded, respectively.

For the nine months ended 2021 and 2020, 21,159 and 19,688 shares were awarded, respectively.

shares had a grant date value of $ 885 thousand and $ 837 thousand for 2021 and 2020, vest over three years, and their grant is not subject to future performance measures.

1 unchanged sentence

Allowance for Credit Losses

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

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

Allowance for Credit Losses:

June 30, 2021

September 30, 2021

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

5 unchanged sentences

Allowance for Credit Losses:

June 30, 2020

September 30, 2020

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

4 unchanged sentences

Ending Balance $ 12,128 $ 1,782 $ 11,123 $ 1,927 $ 26,960

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

The following table presents the activity of the allowance for credit losses by portfolio segment for the nine months ended September 30.

Allowance for Credit Losses:

June 30, 2021

September 30, 2021

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

5 unchanged sentences

Allowance for Credit Losses:

June 30, 2020

September 30, 2020

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

6 unchanged sentences

Three Months Ended

June 30, 2020 Six Months Ended

June 30, 2020

September 30, 2020 Nine Months Ended

September 30, 2020

Recorded Interest

33 unchanged sentences

The tables below present the recorded investment in non-performing loans by class of loans.

June 30, 2021

September 30, 2021

90 Days Still Nonaccrual

30 unchanged sentences

The following tables present the amortized cost basis of collateral dependent loans by class of loans:

June 30, 2021

September 30, 2021

Collateral Type

30 unchanged sentences

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

June 30, 2021

30-59 Days 60-89 Days Greater

than 90 days Total

September 30, 2021

30-59 Days 60-89 Days 90 Days and Greater Total

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

13 unchanged sentences

December 31, 2020

30-59 Days 60-89 Days Greater

than 90 days Total

30-59 Days 60-89 Days 90 Days and Greater Total

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

12 unchanged sentences

TOTAL $ 14,216 $ 4,102 $ 7,408 $ 25,726 $ 2,592,827 $ 2,618,553

During the three and six months ended June 30, 2021 and 2020, the terms of certain loans were modified as troubled debt restructurings (TDRs).

During the three and nine months ended September 30, 2021 and 2020, the terms of certain loans were modified as troubled debt restructurings (TDRs).

The following tables present the activity for TDRs.

(Dollar amounts in thousands) Commercial Residential Consumer Total

April 1, $ — $ 3,888 $ 576 $ 4,464

July 1, $ — $ 3,904 $ 556 $ 4,460

Added — — 172 172

1 unchanged sentence

Payments — ( 91 ) ( 52 ) ( 143 )

June 30, $ — $ 3,904 $ 556 $ 4,460

September 30, $ — $ 3,813 $ 676 $ 4,489

(Dollar amounts in thousands) Commercial Residential Consumer Total

3 unchanged sentences

Payments — ( 240 ) ( 160 ) ( 400 )

June 30, $ — $ 3,904 $ 556 $ 4,460

September 30, $ — $ 3,813 $ 676 $ 4,489

(Dollar amounts in thousands) Commercial Residential Consumer Total

April 1, 4 3,438 714 4,156

July 1, — 3,231 668 3,899

Added — 313 81 394

1 unchanged sentence

Payments — ( 112 ) ( 54 ) ( 166 )

June 30, — 3,231 668 3,899

September 30, — 3,432 665 4,097

(Dollar amounts in thousands) Commercial Residential Consumer Total

3 unchanged sentences

Payments ( 11 ) ( 483 ) ( 169 ) ( 663 )

June 30, — 3,231 668 3,899

September 30, — 3,432 665 4,097

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 June 30, 2021 and 2020 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, 2021 and 2020.

The Corporation has not committed to lend additional amounts as of June 30, 2021 and 2020 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, 2021 and 2020 were of restructurings that had occurred in the previous 12 months.

Troubled debt restructurings during the three months ended September 30, 2021 and 2020 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 September 30, 2021 and 2020.

The Corporation has not committed to lend additional amounts as of September 30, 2021 and 2020 to customers with outstanding loans that are classified as troubled debt restructurings.

None of the charge-offs during the three and nine months ended September 30, 2021 and 2020 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”).

1 unchanged sentence

(2) executed on a loan that was not more than 30 days past due as of December 31, 2019;

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.

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.

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.

As of June 30, 2021, 1,454 loans totaling $285 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

From the inception of the CARES Act through September 30, 2021, 1,332 loans totaling $268 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

1,053 loans totaling $224 million have resumed normal scheduled payments.

217 remaining loans are still under a debt relief plan, which include 12 commercial loans totaling $36 million that have been provided additional payment relief since the initial payment relief plan.

14 loans totaling $2 million are under the original payment relief plan.

5 loans totaling $232 thousand are under the original payment relief plan.

Credit Quality Indicators:

16 unchanged sentences

The following tables present the commercial loan portfolio by risk category:

June 30, 2021

September 30, 2021

Term Loans at Amortized Cost Basis by Origination Year Revolving

90 unchanged sentences

The following table presents the balance of our other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming:

June 30, 2021

September 30, 2021

Term Loans at Amortized Cost Basis by Origination Year Revolving

47 unchanged sentences

All securities are classified as available-for-sale.

June 30, 2021

September 30, 2021

(Dollar amounts in thousands) Amortized

25 unchanged sentences

TOTAL $ 977,830 $ 43,354 $ ( 440 ) $ 1,020,744

Contractual maturities of debt securities at June 30, 2021 were as follows.

Contractual maturities of debt securities at September 30, 2021 were as follows.

Available-for-Sale

8 unchanged sentences

TOTAL $ 1,242,760 $ 1,270,820

There were $ 258 thousand and $263 thousand in gross gains and zero and $157 thousand in losses from investment sales/calls realized by the Corporation for the three and six months ended June 30, 2021.

For the three and six months ended June 30, 2020 there were $ 34 thousand and $278 thousand in gross gains and $3 thousand and $53 thousand in losses on sales/calls 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 June 30, 2021 and December 31, 2020.

June 30, 2021

There were $ 5 thousand and $268 thousand in gross gains and zero and $157 thousand in losses from investment sales/calls realized by the Corporation for the three and nine months ended September 30, 2021.

For the three and nine months ended September 30, 2020 there were $ 5 thousand and $283 thousand in gross gains and zero and $53 thousand in losses on sales/calls of investment securities.

September 30, 2021

Less Than 12 Months More Than 12 Months Total

24 unchanged sentences

Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.

Gross unrealized losses on investment securities were $5.4 million as of June 30, 2021 and $440 thousand as of December 31, 2020.

Gross unrealized losses on investment securities were $7.1 million as of September 30, 2021 and $440 thousand as of December 31, 2020.

Management believes 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.

1 unchanged sentence

Management does not intend to sell these securities and it is not more likely than not that we will be required to sell them before their anticipated recovery.

The table below presents a rollforward of the credit losses recognized in earnings for the three and six month periods ended June 30, 2021 and 2020:

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

The table below presents a rollforward of the credit losses recognized in earnings for the three and nine month periods ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

(Dollar amounts in thousands) 2021 2020 2021 2020

21 unchanged sentences

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

June 30, 2021

September 30, 2021

Fair Value Measurements Using Significant

28 unchanged sentences

There were no transfers between Level 1 and Level 2 during 2021 and 2020.

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, 2021 and the year ended December 31, 2020.

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 nine months ended September 30, 2021 and the year ended December 31, 2020.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

(Dollar amounts in thousands) State and

1 unchanged sentence

obligations Total

Beginning balance, January 1 $ 1,895 $ 3,328 $ 5,223

Beginning balance, July 1 $ 1,895 $ 3,265 $ 5,160

Total realized/unrealized gains or losses

3 unchanged sentences

Settlements — — —

Ending balance, June 30 $ 1,895 $ 3,265 $ 5,160

Six Months Ended June 30, 2021

Ending balance, September 30 $ 1,895 $ 3,244 $ 5,139

Nine Months Ended September 30, 2021

(Dollar amounts in thousands) State and

7 unchanged sentences

Settlements — — —

Ending balance, June 30 $ 1,895 $ 3,265 $ 5,160

Ending balance, September 30 $ 1,895 $ 3,244 $ 5,139

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

10 unchanged sentences

Ending balance, December 31 $ 1,895 $ 3,136 $ 5,031

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at June 30, 2021.

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at September 30, 2021.

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

23 unchanged sentences

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

The following tables presents collateral dependent loans measured at fair value on a non-recurring basis, as of June 30, 2021 and December 31, 2020, which are all considered Level 3.

June 30, 2021

The following tables presents collateral dependent loans measured at fair value on a non-recurring basis, as of September 30, 2021 and December 31, 2020, which are all considered Level 3.

September 30, 2021

(Dollar amounts in thousands) Carrying

31 unchanged sentences

TOTAL $ 11,367 $ 4,786 $ 6,581

The carrying amounts and estimated fair value of financial instruments at June 30, 2021 and December 31, 2020, are shown below.

The carrying amounts and estimated fair value of financial instruments at September 30, 2021 and December 31, 2020, 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.

7 unchanged sentences

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

June 30, 2021

September 30, 2021

Carrying Fair Value

25 unchanged sentences

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

(Dollar amounts in thousands) June 30, 2021 December 31, 2020

(Dollar amounts in thousands) September 30, 2021 December 31, 2020

Federal Funds Purchased $ 1,575 $ 6,500

8 unchanged sentences

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

June 30, 2021

September 30, 2021

Repurchase Agreements Remaining Contractual Maturity of the Agreements

6 unchanged sentences

Components of Net Periodic Benefit Cost

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

Three Months Ended September 30, Nine Months Ended September 30,

(Dollar amounts in thousands) Pension Benefits Post-Retirement

10 unchanged sentences

First Financial Corporation previously disclosed in its financial statements for the year ended December 31, 2020 that it expected to contribute $ 2.3 million and $ 715 thousand respectively to its Pension Plan and ESOP and $ 240 thousand to the Post Retirement Health Benefits Plan in 2021.

Contributions of $ 574 thousand have been made to the Pension Plan thus far in 2021.

Contributions of $ 111 thousand have been made through the first six months of 2021 for the Post Retirement Health Benefits plan.

Contributions of $ 1.5 million have been made to the Pension Plan thus far in 2021.

Contributions of $ 167 thousand have been made through the first nine months of 2021 for the Post Retirement Health Benefits plan.

No contributions have been made in 2021 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 six months of 2021 and 2020 there has been $ 1.4 million and $ 870 thousand of expense accrued for potential contributions to these alternative retirement benefit options.

In the first nine months of 2021 and 2020 there has been $ 2.3 million and $ 1.4 million of expense accrued for potential contributions to these alternative retirement benefit options.

New accounting standards

26 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 and six months ended June 30, 2021 and 2020.

The following table presents the Corporation's sources of Non-Interest Income for the three and nine months ended September 30, 2021 and 2020.

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

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

Three Months Ended September 30, Nine Months Ended September 30,

(Dollar amounts in thousands) 2021 2020 2021 2020

8 unchanged sentences

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

258 31 106 225

Other service charges and fees (a)

3 unchanged sentences

(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 June 30, 2021 and June 30, 2020, totaling $16 thousand and $(2) thousand, respectively, and for the six months ended for the same periods, totaling $16 thousand and $(8) thousand,

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 September 30, 2021 and September 30, 2020, totaling $(11) thousand and $5 thousand, respectively, and for the nine months ended for the same periods, totaling $16 thousand and $(3) thousand, which is within the scope of ASC 606;

the remaining balance is outside the scope of ASC 606.

20 unchanged sentences

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 and six months ended June 30, 2021 and 2020.

The following tables summarize the changes, net of tax, within each classification of accumulated other comprehensive income/(loss) for the three and nine months ended September 30, 2021 and 2020.

gains and 2021

1 unchanged sentence

(Dollar amounts in thousands) Securities plans Total

Beginning balance, April 1, $ 23,094 $ ( 23,926 ) $ ( 832 )

Beginning balance, July 1, $ 24,866 $ ( 23,454 ) $ 1,412

Change in other comprehensive income (loss) before reclassification ( 2,981 ) — ( 2,981 )

1 unchanged sentence

Net current period other comprehensive income (loss) ( 2,985 ) 471 ( 2,514 )

Ending balance, June 30, $ 24,866 $ ( 23,454 ) $ 1,412

Ending balance, September 30, $ 21,881 $ ( 22,983 ) $ ( 1,102 )

gains and 2021

5 unchanged sentences

Net current period other comprehensive income (loss) (12,281) 1,415 (10,866)

Ending balance, June 30, $ 24,866 $ ( 23,454 ) $ 1,412

Ending balance, September 30, $ 21,881 $ ( 22,983 ) $ ( 1,102 )

gains and 2020

1 unchanged sentence

(Dollar amounts in thousands) Securities plans Total

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

Beginning balance, July 1, $ 31,121 $ ( 21,606 ) $ 9,515

Change in other comprehensive income (loss) before reclassification 2,227 — 2,227

1 unchanged sentence

Net current period other comprehensive income (loss) 2,223 383 2,606

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

Ending balance, September 30, $ 33,344 $ ( 21,223 ) $ 12,121

gains and 2020

5 unchanged sentences

Net current period other comprehensive income (loss) 18,451 1,171 19,622

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

Ending balance, September 30, $ 33,344 $ ( 21,223 ) $ 12,121

Period Balance

34 unchanged sentences

TOTAL $ ( 7,501 ) $ 19,622 $ 12,121

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Details about accumulated Amount reclassified from Affected line item in

11 unchanged sentences

(see Footnote 6 for additional details).

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Details about accumulated Amount reclassified from Affected line item in

9 unchanged sentences

Total reclassifications for the period $ ( 1,332 ) Net of tax

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Details about accumulated Amount reclassified from Affected line item in

11 unchanged sentences

(see Footnote 6 for additional details).

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Details about accumulated Amount reclassified from Affected line item in

10 unchanged sentences

The Corporation leases certain branches under operating leases.

At June 30, 2021, the Corporation had lease liabilities totaling $4,933,000 and right-of-use assets totaling $4,926,000 related to these leases.

At September 30, 2021, the Corporation had lease liabilities totaling $6,863,000 and right-of-use assets totaling $6,845,000 related to these leases.

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

At June 30, 2021, the weighted average remaining lease term for operating leases was 10.3 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.92%.

At September 30, 2021, the weighted average remaining lease term for operating leases was 9.8 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.31%.

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.

6 unchanged sentences

Lease costs were as follows:

(Dollar amounts in thousands) Six Months Ended June 30, 2021

(Dollar amounts in thousands) Nine Months Ended September 30, 2021

Operating lease cost $ 721

5 unchanged sentences

Right-of-use assets obtained in exchange for new operating lease liabilities 9,293

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2021 were as follows:

(Dollar amounts in thousands) June 30, 2021

Twelve Months Ended June 30,

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2021 were as follows:

(Dollar amounts in thousands) September 30, 2021

Twelve Months Ended September 30,

Thereafter 3,181

2 unchanged sentences

Present Value of Net Future Minimum Lease Payments $ 6,863

Subsequent Events

On August 10, 2021, First Financial Corporation, an Indiana corporation ("FFC"), HB Subsidiary, Inc., a Kentucky corporation and wholly owned subsidiary of FFC ("Merger Sub"), and Hancock Bancorp, Inc., a Kentucky corporation ("HBI"), entered into an Agreement and Plan of Merger (the "Merger Agreement").

Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into HBI, with HBI as the surviving entity (the "Merger") under the name HB Subsidiary, Inc.

Immediately following the Merger, or simultaneously therewith, Hancock Bank and Trust Company, a Kentucky chartered commercial bank and wholly owned subsidiary of HBI ("Hancock Bank & Trust") will merge with and into First Financial Bank, N.A., a national banking association and wholly owned subsidiary of FFC ("First Financial Bank"), with First Financial Bank as the surviving entity (the "Bank Merger").

As soon as practicable following the Bank Merger, HB Subsidiary, Inc.

(f/k /a HBI) will merge with and into FFC, with FFC as the surviving corporation (the "Holdco Merger", and together with the Merger and the Bank Merger, the "Transactions").

Merger Consideration

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the "Effective Time") other than dissenting shares, each share of HBI Common Stock issued and outstanding immediately prior to the Effective Time, except for certain shares held by HBI, will be converted into the right to receive $18.38 per share in cash.

The aggregate value of the transaction is $31.35 million..

Management's Discussion and Analysis of Financial Condition and Results of Operations

26 unchanged sentences

Critical Accounting Policies

Certain of the Corporation’s accounting policies are important to the portrayal of the Corporation’s financial condition and results of operations, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain.

may relate to matters that are inherently uncertain.

Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances.

3 unchanged sentences

Summary of Operating Results

Net income for the three months ended June 30, 2021 was $16.6 million, compared to $11.9 million for the same period in 2020.

Basic earnings per share increased to $1.24 for the second quarter of 2021 compared to $0.87 for the same period in 2020.

Return on Assets and Return on Equity were 1.40% and 11.06% respectively, for the three months ended June 30, 2021 compared to 1.10% and 8.06% for the three months ended June 30, 2020.

Net income for the six months ended June 30, 2021 was $29.5 million, compared to $24.1 million for the same period in 2020.

Basic earnings per share increased to $2.19 for the first six months of 2021 compared to $1.76 for the same period in 2020.

Return on Assets and Return on Equity were 1.26% and 9.82% respectively, for the six months ended June 30, 2021, compared to 1.16% and 8.30% for the six months ended June 30, 2020.

Net income for the three months ended September 30, 2021 was $16.1 million, compared to $14.0 million for the same period in 2020.

Basic earnings per share increased to $1.24 for the third quarter of 2021 compared to $1.02 for the same period in 2020.

Return on Assets and Return on Equity were 1.34% and 10.75% respectively, for the three months ended September 30, 2021 compared to 1.28% and 9.29% for the three months ended September 30, 2020.

Net income for the nine months ended September 30, 2021 was $45.6 million, compared to $38.1 million for the same period in 2020.

Basic earnings per share increased to $3.42 for the first nine months of 2021 compared to $2.78 for the same period in 2020.

Return on Assets and Return on Equity were 1.28% and 10.10% respectively, for the nine months ended September 30, 2021, compared to 1.20% and 8.62% for the nine months ended September 30, 2020.

In March 2020, the outbreak of the Coronavirus Disease 2019 (COVID-19) was recognized as a pandemic by the World Health Organization.

The spread of COVID-19 has caused economic and social disruption resulting in unprecedented uncertainty, volatility and disruption in financial markets, and has placed significant health, economic and other major pressures throughout the communities we serve, the United States and globally.

While some industries have been impacted more severely

than others, all businesses have been impacted to some degree.

While some industries have been impacted more severely than others, all businesses have been impacted to some degree.

This disruption has resulted in the shuttering of businesses across the country, significant job loss, material decreases in oil and gas prices and in business valuations, changes in consumer behavior related to pandemic fears, and aggressive measures by the federal government.

7 unchanged sentences

economy and financial market.

Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into HBI, with HBI as the surviving entity (the "Merger") under the name HB Subsidiary, Inc.

As soon as practicable following the Bank Merger, HB Subsidiary, Inc.

(f/k /a HBI) will merge with and into FFC, with FFC as the surviving corporation (the "Holdco Merger", and together with the Merger and the Bank Merger, the "Transactions").

On September 27, 2021, First Financial Corporation issued a press release announcing that its Board of Directors has approved the merger of subsidiary, The Morris Plan Company of Terre Haute, into subsidiary, First Financial Bank N.A.

The merger will be effective on December 31, 2021, subject to regulatory approval.

The merger will result in increased efficiencies, which will be recognized beginning in the first quarter of 2022.

On September 30, 2021, First Financial Corporation issued a press release announcing plans to optimize its banking center network as part of a plan to improve operating efficiencies and accommodate changing customer preferences.

Subject to regulatory requirements, over the next two quarters the Corporation will close and consolidate nine of its eighty branches.

These consolidations are projected to save the Company approximately $2.3 million per year in operating expenses, commencing in the first quarter of 2022.

The primary components of income and expense affecting net income are discussed in the following analysis.

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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 decreased $267 thousand in the three months ended June 30, 2021 to $35.6 million from $35.9 million in the same period in 2020.

The net interest margin for the three months ended June 30, 2021 is 3.23% compared to 3.97% for the same period in 2020, a 18.64% decrease.

Net interest income decreased $1.7 million in the six months ended June 30, 2021 to $70.5 million from $72.2 million in the same period in 2020.

The net interest margin for the six months ended June 30, 2021 is 3.25% compared to 4.05% for the same period in 2020.

Net interest income decreased $503 thousand in the three months ended September 30, 2021 to $36.0 million from $36.5 million in the same period in 2020.

The net interest margin for the three months ended September 30, 2021 is 3.22% compared to 3.99% for the same period in 2020, a 19.30% decrease.

Net interest income decreased $2.2 million in the nine months ended September 30, 2021 to $106.6 million from $108.8 million in the same period in 2020.

The net interest margin for the nine months ended September 30, 2021 is 3.24% compared to 4.03% for the same period in 2020.

Interest rates dropped significantly from 2020 to 2021, due to federal rate adjustments in response to the COVID-19 pandemic.

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Non-Interest Income

Non-interest income for the three months ended June 30, 2021 was $10.9 million compared to $8.8 million for the same period of 2020.

Non-interest income for the six months ended June 30, 2021 was $20.2 million compared to $17.9 million for the same period in 2020.

The increase in service charges and fees from 2020 to 2021 is primarily due to increases in debit card fee income.

Non-interest income for the three months ended September 30, 2021 was $11.1 million compared to $11.7 million for the same period of 2020.

Non-interest income for the nine months ended September 30, 2021 was $31.3 million compared to $29.6 million for the same period in 2020.

The change in non-interest income from 2020 to 2021 was primarily driven by increases in other service charges and fees as a result of increased debit card fee income.

Non-Interest Expenses

The Corporation’s non-interest expense for the quarter ended June 30, 2021 was $28.0 million compared to $26.9 million for the same period in 2020.

The Corporation's non-interest expense for the six months ended June 30, 2021 increased $1.2 million to $55.6 million compared to the same period in 2020.

The Corporation’s non-interest expense for the quarter ended September 30, 2021 was $28.5 million compared to $27.1 million for the same period in 2020.

The Corporation's non-interest expense for the nine months ended September 30, 2021 increased $2.5 million to $84.1 million compared to the same period in 2020.

Allowance for Credit Losses

The Corporation’s provision for credit losses decreased to $(2.2) million for the second quarter of 2021 as compared to $3.0 million for the same period in 2020.

Net recoveries for the second quarter of 2021 were $152 thousand compared to net charge offs of $743 thousand for the same period of 2020.

The provision for loan losses decreased $7.4 million to $(1.7) million for the six months ended June 30, 2021 compared to $5.7 million for the same period in 2020.

Net charge offs for the first six months of 2021 decreased $1.7 million to $576 thousand compared to the same period in 2020.

The Corporation’s provision for credit losses decreased to $(1.5) million for the third quarter of 2021 as compared to $4.4 million for the same period in 2020.

Net charge offs for the third quarter of 2021 were $270 thousand compared to $750 thousand for the same period of 2020.

The provision for loan losses decreased $13.3 million to $(3.2) million for the nine months ended September 30, 2021 compared to $10.1 million for the same period in 2020.

Net charge offs for the first nine months of 2021 decreased $2.2 million to $846 thousand compared to the same period in 2020.

In the first three quarters of 2020 the provision was calculated using the incurred loss basis.

Beginning in the fourth quarter 2020, the provision was calculated using CECL.

In 2020 the provision was adjusted to add in a component for potential losses due to COVID-19.

In 2020 the provision was adjusted to add in a component for probable losses due to COVID-19.

In 2021 those potential losses have not been realized, and the economy has shown improvements which allowed for the decrease in provision.

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Income Tax Expense

The Corporation’s effective income tax rate for the first six months of 2021 was 20.02% compared to 19.71% for the same period in 2020.

The Corporation’s effective income tax rate for the first nine months of 2021 was 20.07% compared to 18.47% for the same period in 2020.

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 decreased to $20.0 million at June 30, 2021 compared to $21.9 million at December 31, 2020.

Nonperforming loans decreased 12.9% compared to $23.0 million as of June 30, 2020.

A summary of non-performing loans at June 30, 2021 and December 31, 2020 follows:

June 30, 2021 December 31, 2020

Non-performing loans decreased to $19.5 million at September 30, 2021 compared to $21.9 million at December 31, 2020.

Nonperforming loans decreased 17.7% compared to $23.7 million as of September 30, 2020.

A summary of non-performing loans at September 30, 2021 and December 31, 2020 follows:

September 30, 2021 December 31, 2020

Non-accrual loans $ 13,650 $ 15,367

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Non-accrual loans

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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.

As of June 30, 2021, 1,454 loans totaling $285 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

From the inception of the CARES Act through September 30, 2021, 1,332 loans totaling $268 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

1,053 loans totaling $224 million have resumed normal scheduled payments.

217 remaining loans are still under a debt relief plan, which include 12 commercial loans totaling $36 million that have been provided additional payment relief since the initial payment relief plan.

14 loans totaling $2 million are under the original payment relief plan.

5 loans totaling $232 thousand are under the original payment relief plan.

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

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Responsibility for management of these functions resides with the Asset Liability Committee.

The primary goal of the Asset Liability Committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors.

The primary goal

of the Asset Liability Committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors.

Interest Rate Risk

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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 June 30, 2021.

The table below shows the Corporation’s estimated sensitivity profile as of September 30, 2021.

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

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Financial Condition

Comparing the first six months of 2021 to the same period in 2020, loans, net of deferred loan costs, have decreased $208 million to $2.6 billion.

Deposits increased 11.7% to $3.99 billion at June 30, 2021 compared to June 30, 2020.

Comparing the first nine months of 2021 to the same period in 2020, loans, net of deferred loan costs, have decreased $274 million to $2.5 billion.

Deposits increased 11.8% to $4.03 billion at September 30, 2021 compared to September 30, 2020.

Shareholders' equity decreased 2.00% or $12.2 million.

This financial performance increased book value per share 4.73% to $45.08 at June 30, 2021 from $43.04 at June 30, 2020.

This financial performance increased book value per share 4.41% to $46.22 at September 30, 2021 from $44.27 at September 30, 2020.

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

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 2020.

Through June 30, 2021, we processed approximately $253 million of approved PPP loans.

Through September 30, 2021, we processed approximately $253 million of approved PPP loans.

The carrying value of these loans is $41 million as of September 30, 2021.

Capital Adequacy

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Currently the Corporation exceeds all of these minimums.

June 30, 2021 December 31, 2020 To Be Well Capitalized

September 30, 2021 December 31, 2020 To Be Well Capitalized

Common equity tier 1 capital

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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