What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-09 compared with 2021-03-11 · 211 added, 315 removed, 1605 unchanged (25% of the section changed)

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Based on this assessment, management concluded that, as of December 31, 2021, its system of internal control over financial reporting is effective and meets the criteria of the "Internal Control—Integrated Framework."

Crowe LLP, independent registered public accounting firm, has audited the Corporation's internal control over financial reporting as of December 31, 2020 and has issued a report dated March 11, 2021.

Crowe LLP (PCAOB ID:

173 ) , independent registered public accounting firm, has audited the Corporation's internal control over financial reporting as of December 31, 2021 and has issued a report dated March 9, 2022.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.

Basis for Opinions

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The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses on Loans

In accordance with Accounting Standards Update (the “ASU”) 2016-13, Financial Instruments —Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, the Company adopted Accounting Standards Codification (“ASC”) 326 as of January 1, 2020 as described in Note 1 of the consolidated financial statements using the modified retrospective method.

Also see the Change in Accounting Principle paragraph above.

As discussed in Notes 1, the allowance for credit losses (the “ACL”) is an accounting estimate of expected credit losses over the estimated life of financial assets carried at amortized cost and off-balance-sheet credit exposures in accordance with Accounting Standards Update (the “ASU”) 2016-13, Financial Instruments —Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The ASU requires financial assets, including the Company's loan portfolio, measured at amortized cost, to be presented at the net amount expected to be collected.

Estimates of expected credit losses for loans are based on relevant information about past events, current conditions, and reasonable and supportable forecasts related to macroeconomic conditions, resulting in recognition of lifetime expected credit losses upon loan origination.

The Company disclosed the impact of adoption of this standard on January 1, 2020 with a $20 million increase to the allowance for credit losses, which included a $6 million increase related to the acquired loan portfolio and a $10.5 million decrease to retained earnings for the cumulative effect adjustment recorded upon adoption.

Provision for credit loss

expense for the year ending December 31, 2020 was $10.5 million and the Allowance for Credit Losses at December 31, 2020 was $47.1 million.

Provision for credit loss expense for the year ending December 31, 2021 was $2.4 million and the Allowance for Credit Losses at December 31, 2021 was $48.3 million.

The Company utilizes the cohort or open pool methodology for determining the allowance for credit losses.

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Economic indicators that are used in determining the economic forecast factors include unemployment rate, gross domestic product, housing starts and interest rates.

The Allowance for Credit Losses was identified by us as a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management throughout the initial adoption and subsequent application processes.

The allowance for credit losses on loans was identified by us as a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management throughout the determination process.

The principal considerations resulting in our determination included the following:

• Significant audit effort to evaluate the appropriateness of selection of loss estimation model, loan segmentation and historical loss periods used in the calculation

• Significant auditor judgment and effort were used in evaluating the qualitative factors used in the calculation.

• Significant auditor judgment in evaluating the selection and application of the reasonable and supportable forecast of economic variables.

• Significant audit effort to test the completeness and accuracy of the critical data used in the cohort methodology, including accuracy of loan type, loan balance, origination date, renewal date, charge-off or recovery amount, charge-off or recovery date.

• Significant audit effort to test the relevance and reliability of the critical data used in the methodology.

The primary procedures performed to address this critical audit matter included:

• Testing the effectiveness of management’s internal controls over the Company’s significant model assumptions and judgments, loan segmentation, reasonable and supportable forecasts, qualitative factor adjustments, completeness and accuracy of data used in the model, charge-off approval, information systems and model validation

• Testing the effectiveness of management’s internal controls over the Company’s significant model assumptions and judgments, loan segmentation, reasonable and supportable forecasts, qualitative factor adjustments, relevance and reliability of data used in the model, charge-off approval, information systems and model validation

• Testing the effectiveness of controls over the Company’s preparation and review of the allowance for credit loss calculation, including data used as the basis for adjustments related to the qualitative factors, the development and reasonableness of qualitative factors and mathematical accuracy and appropriateness of the overall calculation

• Testing the completeness and accuracy of data used in the model and the mathematical accuracy of the calculation

• Evaluating management’s judgments in the selection of the loss estimation model as well as the loan segmentation and historical loss periods used in the model

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— 422 — — 829 1,251

ASU 2018-02 adjustment — — 2,366 (2,366) — —

Acquisition of HopFed, Inc.

(1,423,143 shares) 178 61,700 — — — 61,878

Cash Dividends, $ 1.04 per share

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Balance, December 31, 2019 2,005 139,694 492,055 ( 7,501 ) ( 68,645 ) 557,608

Cumulative change in accounting principle (Note 1) — — (10,483) — — (10,483)

Balance, January 1, 2020 2,005 139,694 481,572 (7,501) (68,645) 547,125

Net income — — 53,844 — — 53,844

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— 308 — — 1,163 1,471

Acquisition of HopFed, Inc.

(1,423,143 shares) 178 61,700 — — — 61,878

Cash Dividends, $ 1.05 per share

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Balance, December 31, 2020 2,007 140,820 521,103 9,764 ( 76,702 ) 596,992

Cumulative change in accounting principle (Note 1) — — (10,483) — — (10,483)

Balance, January 1, 2020 2,005 139,694 481,572 (7,501) (68,645) 547,125

Net income — — 52,987 — — 52,987

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Net change in federal funds sold 10,463 7,199 ( 7,500 )

Purchase of bank owned life insurance ( 10,000 ) — —

Redemption of restricted stock — 600 3,588

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The consolidated financial statements of First Financial Corporation and its subsidiaries (the Corporation) include the parent company and its wholly-owned subsidiaries, First Financial Bank, N.A.

headquartered in Vigo County, Indiana, The Morris Plan Company of Terre Haute (Morris Plan), First Chanticleer Corporation, a property rental entity headquartered in Terre Haute, Indiana, and FFB Risk Management Co., Inc., a captive insurance subsidiary headquartered in Las Vegas, Nevada.

headquartered in Vigo County, Indiana, The Morris Plan Company of Terre Haute (Morris Plan), First Chanticleer Corporation, a property rental entity headquartered in Terre Haute, Indiana, JBMM, LLC, Heritage USA Title LLC, and Fort Webb LP, LLC, and FFB Risk Management Co., Inc., a captive insurance subsidiary headquartered in Las Vegas, Nevada.

Inter-company transactions and balances have been eliminated.

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The Corporation's primary source of revenue is derived from loans to customers and investment activities.

The Corporation operates 81 branches in west-central Indiana, east-central Illinois, western Kentucky, and middle and western Tennessee.

The Corporation operates 78 branches in west-central Indiana, east-central Illinois, western Kentucky, and central Tennessee.

First Financial Bank is the largest bank in Vigo County.

It operates ten full-service banking branches within the county;

It operates nine full-service banking branches within the county;

one in Daviess County, Indiana.;

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one in Greene County, Indiana;

two in Knox County, Indiana;

four in Parke County, Indiana;

one in Knox County, Indiana;

two in Parke County, Indiana;

one in Putnam County, Indiana;

four in Sullivan County, Indiana;

three in Sullivan County, Indiana;

one in Vanderburgh County, Indiana,;

four in Vermillion County, Indiana;

three in Vermillion County, Indiana;

four in Champaign County, Illinois;

one in Clark County, Illinois;

three in Coles County, Illinois;

two in Coles County, Illinois;

two in Crawford County, Illinois;

two in Franklin County, Illinois;

one in Franklin County, Illinois;

one in Jasper County, Illinois;

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two in Marion County, Illinois;

three in McLean County, Illinois;

two in Richland County, Illinois;

two in McLean County, Illinois;

one in Richland County, Illinois;

six in Vermilion County, Illinois;

one in Wayne County, Illinois;

one in Breckinridge County, Kentucky;

two in Calloway County, Kentucky;

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two in Fulton County, Kentucky;

two in Hancock County, Kentucky;

two in Hopkins County, Kentucky;

two in Marshall County, Kentucky;

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one in Trigg County, Kentucky;

two in Warren County, Kentucky;

three in Cheatham County, Tennessee;

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and three in Montgomery County, Tennessee.

There are three loan production offices, one in Marion County, Indiana;

There are four loan production offices, one in Hamilton County, Indiana;

one in Vanderburgh County, Indiana;

one in Rutherford County, Tennessee;

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Cash flows are reported for customer loan and deposit transactions and short-term borrowings.

Non-cash transactions include loans transferred to other real estate of $ 0.6 million, $ 0.5 million and $ 0.6 million for the years ended December 31, 2020, 2019 and 2018 respectively.

Additionally, there was a non-cash transaction for lease liabilities arising from obtaining right-of-use assets of $6.7 million for the year ended December 31, 2019.

Non-cash transactions include loans transferred to other real estate of $ 43 thousand, $ 567 thousand and $ 458 thousand for the years ended December 31, 2021, 2020 and 2019 respectively.

The Corporation classifies all securities as "available for sale." Securities are classified as available for sale when they might be sold before maturity.

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The recorded investment in loans includes accrued interest receivable and net deferred loan fees and costs.

Interest income is not reported when full loan repayment is in doubt, typically when the loan is impaired or payments are significantly past due.

Interest income is not reported when full loan repayment is in doubt, typically when the loan is collateral dependent or payments are significantly past due.

Past-due status is based on the contractual terms of the loan.

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We have made a policy election to report accrued interest receivable as a separate line item on the balance sheet.

The Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13), on December 31, 2020 with an effective date of January 1, 2020.

As of the adoption date, the Corporation increased the allowance for credit losses for loan, by $20 million, since the ASU covers credit losses over the expected life of a loan as well as considering future changes in macroeconomic conditions.

As of January 1, 2020, the Corporation recorded a cumulative effect adjustment of $10.5 million to decrease retained earnings.

The allowance for credit loss estimation process involves procedures to appropriately consider the unique characteristics of the loan portfolio segments.

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A loan is individually evaluated when the loan no longer shares similar risk characteristics with other loans in its respective loan pool.

If a loan is individually evaluated, a portion of the allowance is allocated so that the loan is reported at the fair value of collateral, adjusted for selling costs, if repayment is expected solely from the collateral.

a loan is individually evaluated, a portion of the allowance is allocated so that the loan is reported at the fair value of collateral, adjusted for selling costs, if repayment is expected solely from the collateral.

The pooled component covers pools of loans that share similar risk characteristics, and is based on historical loss experienced since 2008.

This historical loss experience is supplemented with other current factors based on the risks present for each portfolio segment.

These current factors include items such as changes in lending policies or procedures, asset specific risks, the impact of COVID-19 on customers’ operations,

and economic uncertainty in forward-looking forecasts.

These current factors include items such as changes in lending policies or procedures, asset specific risks, the impact of COVID-19 on customers’ operations, and economic uncertainty in forward-looking forecasts.

Economic indicators utilized in forecasting include unemployment rate, gross domestic product, housing starts, and interest rates.

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The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a drawdown on the commitment.

The allowance for credit losses on unfunded commitments was $3.5 million at December 31, 2020.

The allowance for credit losses on unfunded commitments was $3.0 million at December 31, 2021, and $3.4 million at December 31, 2020.

Foreclosed Assets:

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relinquished.

exchange the transferred assets, and the Corporation does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Corporation, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Corporation does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Bank-Owned Life Insurance:

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The Corporation has selected December 31 as the date to perform the annual impairment test.

With the decrease in market value as a result of the pandemic, the Corporation engaged a third party to conduct an in-depth analysis of the Corporation as of October 31, 2020.

The Corporation engaged a third party to conduct an in-depth analysis of the Corporation as of October 31, 2021.

The final results determined that there was no impairment of goodwill.

From the effective date of the analysis to December 31, 2020, the Corporation's market value increased.

Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values.

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Accounting Pronouncements Adopted:

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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed by the President of the United States that included an option for entities to delay the implementation of ASU 2016-13 until the earlier of the termination date of the national emergency declaration by the President or December 31, 2020.

Due to the uncertainty on the economy and unemployment from COVID-19, the Corporation determined at that time to delay its implementation of ASU 2016-13 and calculated and recorded its provision for loan losses under the incurred loss model that existed prior to ASU 2016-13.

The Corporation adopted ASU 2016-13 on December 31, 2020 with an effective date of January 1, 2020.

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 continued to be utilized to refine our models and estimation techniques.

Documentation of new methodologies and internal controls implemented as part of CECL as well as model validation was finalized.

The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost and off balance sheet credit exposures.

Results for the reporting periods after January 1, 2020, are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

As of the adoption date, the Corporation increased the allowance for credit losses for loans, by $20 million, since the ASU covers credit losses over the expected life of a loan as well as considering future changes in macroeconomic conditions.

The increase included $6 million related to the acquired loan portfolio.

Under the previously applicable accounting guidance, any remaining loan discount on an individual loan could be used to offset a charge-off for that loan, so the allowance for credit losses needed for acquired loans was reduced by the remaining loan discounts.

ASU 2016-13 requires an allowance for credit losses to be recognized in addition to the loan discount.

The impact of adopting the ASU, and at each subsequent reporting period, is highly dependent on credit quality, macroeconomic conditions and forecasts, and loan composition, along with other management judgments.

As of January 1, 2020, the Corporation recorded a cumulative effect adjustment of $10.5 million to decrease retained earnings.

We adopted CECL using the prospective transition approach for financial assets purchased with credit deterioration that were previously classified as purchased credit impaired and accounted for under ASC 310-30.

In accordance with the standard, we did not reassess whether PCI assets meet the definition of PCD assets as of the date of adoption.

On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $6 million to the allowance for credit losses for loans.

The Corporation did not record an allowance for credit losses on its available-for-sale debt securities under the newly codified available-for-sale security impairment model, as the majority of these securities are government agency-backed securities for which the risk is minimal.

In January 2017, the FASB issued ASU No.

2017-04, Simplifying the Test for Goodwill Impairment.

The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation.

Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

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.

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

The Corporation adopted ASU 2017-04 on January 1, 2020.

There was not a significant impact to accounting and disclosures.

In August 2018, the FASB issued ASU No.

2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements.

Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019;

early adoption is permitted.

The Corporation adopted ASU 2018-13 on January 1, 2020.

2018-13 only revises disclosure requirements, it did not have a material impact on the Corporation’s financial statements.

In September 2018, the FASB issued ASU No.

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

This ASU requires an entity in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.

Capitalized implementation costs should be presented in the same line item on the balance sheet as amounts prepaid for the hosted service, if any (generally as an “other asset”).

The capitalized costs will be amortized over the term of the hosting arrangement, with the amortization expense being presented in the same income statement line item as the fees paid for the hosted service.

ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019;

early adoption is permitted.

The Corporation adopted ASU 2018-15 on January 1, 2020.

ASU 2018-15 did not have a material impact on the Corporation’s financial statements.

Recently Issued Not Yet Effective Accounting Pronouncements :

In August 2018, the FASB issued ASU No.

2018-14, Disclosure Framework - Changes to the Disclosure Requirements for

Defined Benefit Plans.

This ASU makes minor changes to the disclosure requirements for employers that sponsor defined

benefit pension and/or other postretirement benefit plans.

ASU 2018-14 is effective for fiscal years ending after December 15,

early adoption is permitted.

As ASU 2018-14 only revises disclosure requirements, it will not have a material impact on

the Corporation’s financial statements.

In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740):

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Early adoption is permitted.

The Corporation is assessing ASU 2019-12 and its impact on its accounting and disclosure.

The Corporation adopted ASU 2019-12 on January 1, 2021.

ASU 2019-12 did not have a material impact on the Corporation's financial statements.

Recently Issued Not Yet Effective Accounting Pronouncements :

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2020-04 “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform.

The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued.

It is intended to help stakeholders during the global market-wide reference rate transition period.

In January 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

The Corporation is evaluating the impacts of this ASU and has not yet determined whether LIBOR transition and this ASU will have material effects on the Corporation's business operations and consolidated financial statements.

FAIR VALUES OF FINANCIAL INSTRUMENTS:

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Collateralized debt obligations — — 3,359 3,359

Other securities — 3,477 1,743 5,220

TOTAL $ — $ 1,357,737 $ 6,997 $ 1,364,734

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December 31, 2021

State and municipal obligations Collateralized debt obligations Total

State and municipal obligations Collateralized debt obligations Other securities Total

Beginning balance, January 1 $ 1,895 $ 3,136 $ — $ 5,031

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Other real estate owned is valued at Level 3.

Other real estate owned at December 31, 2020 with a value of $ 1.0 million was reduced by zero for fair value adjustment.

Other real estate owned at December 31, 2021 with a value of $ 108 thousand was reduced by zero for fair value adjustment.

At December 31, 2021 other real estate owned was comprised of $ 68 thousand from commercial loans and $ 40 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.

At December 31, 2019 other real estate owned was comprised of $ 3.5 million from commercial loans and $ 142 thousand from residential loans.

Other real estate owned at December 31, 2020 with a value of $ 1.0 million was reduced zero for fair value adjustment.

At December 31, 2020 other real estate owned was comprised of $ 846 thousand from commercial loans and $ 167 thousand from residential loans.

Fair value is measured based on the value of the collateral securing those loans, and is determined using several methods.

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State and municipal obligations $ 1,895 Discounted cash flow Discount rate 3.41 %- 4.44 %

Probability of default — %

Other real estate $ 1,012 Sales comparison/income approach Discount rate for age of appraisal and market conditions 5.00 %- 20.00 %

Collateralized debt obligations $ 3,359 Discounted cash flow Discount rate 1.83 %

Other securities $ 1,743 Discounted cash flow Discount rate 0.65 %- 1.40 %

Collateral dependent loans $ 12,839 Discounted cash flows Discount rate for age of appraisal and market conditions 0.00 %- 50.00 %

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State and municipal obligations $ 1,895 Discounted cash flow Discount rate 3.41 %- 4.44 %

Probability of default — %

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 %

The following table presents impaired collateral dependent loans measured at fair value on a non-recurring basis by class of loans as of December 31, 2019.

December 31, 2019

(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 — — —

Motor Vehicle — — —

All Other Consumer — — —

TOTAL $ 148 $ 48 $ 100

Collateralized debt obligations $ 3,136 Discounted cash flow Discount rate 1.93 %

Collateral dependent loans $ 6,581 Sales comparison/income approach Discount rate for age of appraisal and market conditions 0.00 %- 50.00 %

The carrying amounts and estimated fair values of financial instruments are shown below.

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Certain affiliate banks are required to maintain average reserve balances with the Federal Reserve Bank.

The amount of those reserve balances was approximately zero and $ 16.9 million at December 31, 2020 and 2019, respectively.

The amount of those reserve balances was zero at December 31, 2021 and 2020.

The fair value of securities available-for-sale and related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

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Collateralized debt obligations — 3,359 — 3,359

Other securities 5,220 — — 5,220

TOTAL $ 1,344,790 $ 30,126 $ ( 10,182 ) $ 1,364,734

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Collateralized mortgage obligations 73,530 ( 1,327 ) 12,505 ( 441 ) 86,035 ( 1,768 )

State and municipal obligations 54,040 ( 578 ) — — 54,040 ( 578 )

Municipal taxable 15,048 ( 195 ) 729 ( 20 ) 15,777 ( 215 )

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Mortgage-backed securities, residential 76,962 ( 279 ) — — 76,962 ( 279 )

Mortgage-backed securities, commercial 4,391 (5) — — 4,391 (5)

Collateralized mortgage obligations 12,282 ( 108 ) 3,767 ( 49 ) 16,049 ( 157 )

State and municipal obligations 8,996 ( 61 ) 461 ( 47 ) 9,457 ( 108 )

Municipal taxable 747 ( 3 ) — — 747 ( 3 )

Treasury 250 — — — 250 —

Total temporarily impaired securities $ 90,241 $ ( 390 ) $ 4,711 $ ( 50 ) $ 94,952 $ ( 440 )

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The unrealized losses on collateralized mortgage obligations, all mortgage-backed securities and state and municipal obligations represent negative adjustments to fair value relative to the rate of interest paid on the securities and not losses related to the creditworthiness of the issuer.

Gross unrealized losses on investment securities were $ 440 thousand as of December 31, 2020 and $ 1.8 million as of December 31, 2019.

Gross unrealized losses on investment securities were $ 10.2 million as of December 31, 2021 and $ 440 thousand as of December 31, 2020.

Management does not intend to sell and it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery.

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In the normal course of business, the Corporation’s subsidiary banks make loans to directors and executive officers and to their associates.

In 2020, the aggregate dollar amount of these loans to directors and executive officers who held office amounted to $ 89.5 million at the beginning of the year.

During 2020, advances of $ 22.8 million, repayments of $ 54.8 million, and additions

for new directors of $0.0 million were made with respect to related party loans for an aggregate dollar amount outstanding of $ 57.5 million at December 31, 2020.

In 2021, the aggregate dollar amount of these loans to directors and executive officers who held office amounted to

$ 57.5 million at the beginning of the year.

During 2021, advances of $ 57.5 million, repayments of $ 64.1 million, and additions for new directors of $0.0 million were made with respect to related party loans for an aggregate dollar amount outstanding of $ 50.9 million at December 31, 2021.

Loans serviced for others, which are not reported as assets, total $ 542.8 million and $ 490.4 million at year-end 2021 and 2020.

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Mortgage servicing rights are amortized over 8 years, the expected life of the sold loans.

ACQUISITIONS, DIVESTITURES AND FDIC INDEMNIFICATION ASSET:

On July 27, 2019, the Corporation completed its acquisition of HopFed Bancorp, Inc.

and its banking subsidiary, Heritage Bank.

Therefore, the results of HopFed have been included in the results of operations beginning on July 27, 2019.

Pursuant to the terms of the merger agreement, each issued and outstanding share of HopFed common stock, $0.01 par value per share, was converted into the right to receive, at the stockholder's election, either (or a combination of) 0.444 shares of Corporation common stock, without par value, or $21.00 in cash, subject to proration provisions specified in the merger agreement that provide for an aggregate split of 50% of shares of HopFed Common Stock being exchanged for Corporation Common Stock and 50% for cash, with cash to be paid in lieu of fractional shares.

Each outstanding share of Corporation common stock remained outstanding and was unaffected by the merger.

ACQUISITIONS:

On November 5, 2021, the Corporation completed its acquisition of Hancock Bancorp, Inc.

and its banking subsidiary, Hancock Bank and Trust Company.

Therefore, the results of Hancock Bancorp have been included in the results of operations beginning on November 5, 2021.

Pursuant to the terms of the merger agreement, each issued and outstanding share of Hancock Bancorp, Inc.

common stock, issued and outstanding, was converted into the right to receive $18.38 per share in cash.

The aggregate value of the transaction was $31.36 million.

Acquisition-related costs of $1.2 million are included in the Corporation's income statement for the year ended December 31, 2021.

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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 As Adjusted

(Dollar amounts in thousands) 2021

Consideration

Cash consideration $ 31,358

Stock consideration 61,878 — 61,878

Fair value of total consideration transferred $ 31,358

Assets acquired

Cash $ 34,518 $ 34,518

Investment securities available-for-sale 57,054

Federal funds sold 10,470

Bank owned life insurance 9,753

3 unchanged sentences

Core deposit intangibles 652

Other real estate owned 3,364 3,364

Other assets 4,567

3 unchanged sentences

FHLB advances 11,042

Other borrowings 75,783 75,783

Other liabilities 1,956

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The fair value adjustments were determined using discounted contractual cash flows.

Corporation believes that all contractual cash flows related to these financial instruments will be collected.

However, the Corporation believes that all contractual cash flows related to these financial instruments will be collected.

As such, these receivables were not considered impaired at the acquisition date and were not subject to guidance relating to purchase credit impaired loans, which have shown evidence of credit deterioration since origination.

The following table presents supplemental pro forma information as if the acquisition had occurred at the beginning of 2020.

The unaudited pro forma information includes adjustments for interest income on loans and securities acquired, interest expense on deposits acquired, and the related income tax effects.

The unaudited pro forma information includes adjustments for interest income on loans and securities acquired, interest expense

on deposits acquired, and the related income tax effects.

The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effected on the assumed dates.

4 unchanged sentences

Basic and diluted earnings per share $ 4.07 $ 4.08

FASB ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable.

FASB ASC 310-30 prohibited carrying over or creating an allowance for loan losses upon initial recognition.

(Dollar amounts 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 December 31, 2019, are shown in the following table:

(Dollar amounts in thousands) Commercial Consumer Total

Beginning balance $ 1,530 $ — $ 1,530

Loans added, as initially reported 8,610 260 $ 8,870

Measurement period adjustments (1,597) (260) $ (1,857)

Disposals ( 1,274 ) — ( 1,274 )

ASC 310-30 Loans $ 7,269 $ — $ 7,269

The fair value of purchased financial assets with credit deterioration was $12.9 million on the date of acquisition.

The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $18.3 million.

The Corporation estimates, on the date of acquisition, that $4.4 million of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.

ALLOWANCE FOR CREDIT LOSSES:

2 unchanged sentences

December 31, 2021

(Dollar amounts in thousands) Commercial Residential Consumer Total

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Beginning balance $ 13,925 $ 19,142 $ 11,009 $ — $ 44,076

Impact of adopting ASC 326 8,427 9,515 2,118 20,060

PCD ACL on acquired loans 4,410 — — 4,410

Provision for credit losses 1,637 ( 630 ) 1,074 385 2,466

6 unchanged sentences

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

Impact of adopting ASC 326 6,843 9,515 2,118 17,084

Provision for credit losses ( 1,622 ) 8,612 3,538 — 10,528

10 unchanged sentences

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

The following tables present the allocation of the allowance for credit losses and the recorded investment in loans by portfolio segment and based on impairment method at December 31, 2019:

Allowance for Credit Losses:

December 31, 2019

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

Individually evaluated for impairment $ 48 $ — $ — $ — $ 48

Collectively evaluated for impairment 8,897 1,302 8,304 1,392 19,895

Acquired with deteriorated credit quality — — — — —

BALANCE AT END OF YEAR $ 8,945 $ 1,302 $ 8,304 $ 1,392 $ 19,943

(Dollar amounts in thousands) Commercial Residential Consumer Total

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

Collectively evaluated for impairment 1,584,169 680,069 387,655 2,651,893

Acquired with deteriorated credit quality 7,436 — — 7,436

BALANCE AT END OF YEAR $ 1,594,766 $ 684,021 $ 387,655 $ 2,666,442

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

December 31, 2019 Allowance Cash Basis

Unpaid for Credit Average Interest Interest

Principal Recorded Losses Recorded Income Income

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 — — — — — —

Motor Vehicle — — — — — —

All Other Consumer — — — — — —

With an allowance recorded:

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 — — — — — —

Motor Vehicle — — — — — —

All Other Consumer — — — — — —

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

December 31, 2018 Cash Basis

Average Interest Interest

Recorded Income Income

Investment Recognized Recognized

With no related allowance recorded:

Commercial & Industrial $ 698 $ — $ —

Farmland 1,579 — —

Non Farm, Non Residential 1,443 — —

Agriculture 49 — —

All Other Commercial 1,172 — —

First Liens 3,371 — —

Home Equity — — —

Junior Liens 23 — —

Multifamily — — —

All Other Residential — — —

Motor Vehicle — — —

All Other Consumer — — —

With an allowance recorded:

Commercial & Industrial 688 — —

Farmland 1,691 — —

Non Farm, Non Residential — — —

Agriculture 316 — —

All Other Commercial — — —

First Liens 88 — —

Home Equity — — —

Junior Liens — — —

Multifamily — — —

All Other Residential — — —

Motor Vehicle — — —

All Other Consumer — — —

TOTAL $ 11,118 $ — $ —

The following tables present the recorded investment in nonperforming loans by class of loans.

17 unchanged sentences

December 31, 2020

Loans Past Troubled Debt

90 Day Still Restructured

(Dollar amounts in thousands) Accruing Accrual Non-accrual Non-accrual

Loans Past Non-accrual

90 Day Still With No Allowance

(Dollar amounts in thousands) Accruing Non-accrual For Credit Loss

Commercial & Industrial $ — $ 4,838 $ 1,080

50 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.

As of December 31, 2020, 1,545 loans totaling

$305 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

As of December 31, 2021, 1,225 loans totaling $253 million were modified, related to COVID-19, that were not considered troubled debt restructurings.

As of December 31, 2020, 961 loans totaling $210 million have resumed normal scheduled payments.

1,184 remaining loans are still under a debt relief plan, which include 35 commercial loans totaling $54 million that have been provided additional payment relief since the initial payment relief plan.

134 loans totaling $13 million are under the original payment relief plan.

The following table presents the amortized cost basis of collateral dependent loans by class of loans as of December 31, 2020:

204 remaining loans are still under a debt

relief plan, which include 9 commercial loans totaling $36 million that have been provided additional payment relief since the initial payment relief plan.

1 loan totaling $17 thousand is under the original payment relief plan.

The following table presents the amortized cost basis of collateral dependent loans by class of loans:

December 31, 2021

Collateral Type

13 unchanged sentences

Total $ 28,506 $ 720

December 31, 2020

Collateral Type

(Dollar amounts in thousands) Real Estate Other

Commercial & Industrial $ 3,293 $ 2,221

Farmland 2,771

Non Farm, Non Residential 6,838

Agriculture — 599

All Other Commercial 528 24

First Liens 86 —

Home Equity — —

Junior Liens — —

Multifamily 1,380 —

All Other Residential — —

Motor Vehicle — —

All Other Consumer — —

Total $ 14,896 $ 2,844

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

48 unchanged sentences

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

The following tables present the recorded investment of the commercial loan portfolio by risk category as of December 31, 2020:

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

December 31, 2021

43 unchanged sentences

Total commercial loans $ 438,046 $ 268,791 $ 185,345 $ 145,077 $ 174,994 $ 423,148 $ 217,634 $ 1,853,035

December 31, 2020

Term Loans at Amortized Cost Basis by Origination Year Revolving

2020 2019 2018 2017 2016 Prior Loans Total

Commercial and Industrial Pass $ 159,494 $ 77,253 $ 64,298 $ 41,806 $ 20,564 $ 103,598 $ 91,615 $ 558,628

Special Mention 4,848 1,331 4,427 216 1,278 4,566 3,695 20,361

Substandard 3,780 323 4,187 1,148 3,543 2,565 3,124 18,670

Doubtful — — — — — — — —

Not Rated 2,618 1,772 1,446 580 105 2,255 — 8,776

Subtotal $ 170,740 $ 80,679 $ 74,358 $ 43,750 $ 25,490 $ 112,984 $ 98,434 $ 606,435

Farmland Pass $ 10,010 $ 12,775 $ 12,149 $ 10,089 $ 15,863 $ 40,338 $ 1,386 $ 102,610

Special Mention 988 947 — 230 1,900 2,656 — 6,721

Substandard 1,718 2,303 — 716 1,628 826 — 7,191

Doubtful — — — — — — — —

Not Rated — — — — — — — —

Subtotal $ 12,716 $ 16,025 $ 12,149 $ 11,035 $ 19,391 $ 43,820 $ 1,386 $ 116,522

Non Farm, Non Residential Pass $ 39,914 $ 33,261 $ 38,111 $ 63,371 $ 49,511 $ 83,052 $ 4,092 $ 311,312

Special Mention — 998 — 305 9,982 6,811 — 18,096

Substandard — 1,188 — 4,310 7,484 7,028 — 20,010

Doubtful — — — — — — — —

Not Rated — — — — — 682 — 682

Subtotal $ 39,914 $ 35,447 $ 38,111 $ 67,986 $ 66,977 $ 97,573 $ 4,092 $ 350,100

Agriculture Pass $ 13,336 $ 8,330 $ 3,485 $ 5,329 $ 3,732 $ 16,792 $ 67,052 $ 118,056

Special Mention — 1,483 1,203 664 5 428 7,611 11,394

Substandard — 3,834 18 223 2,435 1,988 5,926 14,424

Doubtful — — — — — — — —

Not Rated 159 216 110 6 13 — — 504

Subtotal $ 13,495 $ 13,863 $ 4,816 $ 6,222 $ 6,185 $ 19,208 $ 80,589 $ 144,378

Other Commercial Pass $ 44,673 $ 57,200 $ 41,470 $ 61,442 $ 40,196 $ 50,325 $ 5,162 $ 300,468

Special Mention — — — 7 — 2,786 — 2,793

Substandard — — — 24 528 24 — 576

Doubtful — — — — — — — —

Not Rated — 3 52 39 345 — — 439

Subtotal $ 44,673 $ 57,203 $ 41,522 $ 61,512 $ 41,069 $ 53,135 $ 5,162 $ 304,276

Multifamily >5 Residential Pass $ 44,599 $ 9,892 $ 36,563 $ 19,749 $ 4,676 $ 21,704 $ 1,293 $ 138,476

Special Mention — — — — 102 10,662 — 10,764

Substandard — — 1,380 — — — — 1,380

Doubtful — — — — — — — —

Not Rated — — — — — — — —

Subtotal $ 44,599 $ 9,892 $ 37,943 $ 19,749 $ 4,778 $ 32,366 $ 1,293 $ 150,620

Total Pass $ 312,026 $ 198,711 $ 196,076 $ 201,786 $ 134,542 $ 315,809 $ 170,600 $ 1,529,550

Special Mention 5,836 4,759 5,630 1,422 13,267 27,909 11,306 70,129

Substandard 5,498 7,648 5,585 6,421 15,618 12,431 9,050 62,251

Doubtful — — — — — — — —

Not Rated 2,777 1,991 1,608 625 463 2,937 — 10,401

Total commercial loans $ 326,137 $ 213,109 $ 208,899 $ 210,254 $ 163,890 $ 359,086 $ 190,956 $ 1,672,331

The Corporation evaluates the credit quality of its other loan portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity.

Accordingly, loans on non-accrual status, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings are considered to be nonperforming for purposes of credit quality evaluation.

The following table presents the recorded investment of our other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming as of December 31, 2020:

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

December 31, 2021

22 unchanged sentences

Total other loans $ 324,594 $ 230,462 $ 96,482 $ 58,314 $ 41,494 $ 140,936 $ 67,284 $ 959,566

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

(Dollar amounts in thousands) Pass 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

Motor Vehicle 2,880 — 538 — 350,780 354,198

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

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

December 31, 2020

Term Loans at Amortized Cost Basis by Origination Year Revolving

2020 2019 2018 2017 2016 Prior Loans Total

First Liens Performing $ 47,875 $ 33,737 $ 31,634 $ 36,426 $ 30,419 $ 135,456 $ 3,235 $ 318,782

Non-performing — 40 95 343 107 4,062 — 4,647

Subtotal $ 47,875 $ 33,777 $ 31,729 $ 36,769 $ 30,526 $ 139,518 $ 3,235 $ 323,429

Home Equity Performing $ 854 $ 135 $ 644 $ 20 $ — $ 1,525 $ 57,334 $ 60,512

Non-performing — — 1 — — 91 24 116

Subtotal $ 854 $ 135 $ 645 $ 20 $ — $ 1,616 $ 57,358 $ 60,628

Junior Liens Performing $ 13,125 $ 12,742 $ 11,139 $ 6,214 $ 3,948 $ 5,099 $ 1,333 $ 53,600

Non-performing — 129 48 198 9 66 — 450

Subtotal $ 13,125 $ 12,871 $ 11,187 $ 6,412 $ 3,957 $ 5,165 $ 1,333 $ 54,050

Other Residential Performing $ 9,773 $ 2,775 $ 1,372 $ 292 $ 178 $ 733 $ 651 $ 15,774

Non-performing — 62 50 — — 39 — 151

Subtotal $ 9,773 $ 2,837 $ 1,422 $ 292 $ 178 $ 772 $ 651 $ 15,925

Motor Vehicle Performing $ 245,839 $ 113,293 $ 51,649 $ 24,786 $ 10,026 $ 1,600 $ — $ 447,193

Non-performing 318 355 257 127 36 11 — 1,104

Subtotal $ 246,157 $ 113,648 $ 51,906 $ 24,913 $ 10,062 $ 1,611 $ — $ 448,297

Other Consumer Performing $ 15,298 $ 7,328 $ 2,622 $ 724 $ 854 $ 703 $ 3,352 $ 30,881

Non-performing 231 200 92 22 — 8 19 572

Subtotal $ 15,529 $ 7,528 $ 2,714 $ 746 $ 854 $ 711 $ 3,371 $ 31,453

Total Performing $ 332,764 $ 170,010 $ 99,060 $ 68,462 $ 45,425 $ 145,116 $ 65,905 $ 926,742

Non-performing 549 786 543 690 152 4,277 43 7,040

Total other loans $ 333,313 $ 170,796 $ 99,603 $ 69,152 $ 45,577 $ 149,393 $ 65,948 $ 933,782

PREMISES AND EQUIPMENT:

16 unchanged sentences

Management does not believe any amount of goodwill is impaired.

Goodwill was as follows at year-end:

2021 2020 2019

Beginning of year $ 78,592 $ 78,592 $ 34,355

Acquired goodwill 7,543 — 44,237

Impairment — — —

End of year $ 86,135 $ 78,592 $ 78,592

Intangible assets subject to amortization at December 31, 2021 and 2020 are as follows:

2 unchanged sentences

Core deposit intangible $ 21,205 $ 13,849 $ 21,205 $ 12,233

Acquired cored deposit intangible 652 (16) — —

$ 21,857 $ 13,833 $ 21,205 $ 12,233

Aggregate amortization expense was $ 1.7 million, $ 923 thousand and $ 433 thousand for 2020, 2019 and 2018, respectively.

Aggregate amortization expense was $ 1.6 million, $ 1.7 million and $ 923 thousand for 2021, 2020 and 2019, respectively.

Estimated amortization expense for the next five years is as follows:

17 unchanged sentences

The securities underlying these agreements are included in investment securities in the consolidated balance sheets.

The Corporation has no control over the market value of the securities,

which fluctuates due to market conditions.

The Corporation has no control over the market value of the securities, which fluctuates due to market conditions.

However, the Corporation is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price.

52 unchanged sentences

The Corporation earns asset management fees from its contracts with trust customers to manage assets for investment, and/or to transact on their accounts.

These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management at month-end.

These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of

assets under management at month-end.

Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e.

35 unchanged sentences

Loan loss provisions 12,476 12,150

Unfunded commitments 764 —

Deferred compensation 2,367 2,496

26 unchanged sentences

The Corporation does not expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next 12 months.

The total amount of interest and penalties recorded in the income statement for the years ended December 31, 2020, 2019 and 2018 was an expense increase of $ 11 thousand, a decrease of $ 9 thousand, and an increase of $ 23 thousand, respectively.

The total amount of interest and penalties recorded in the income statement for the years ended December 31, 2021, 2020 and 2019 was an expense increase of $ 21 thousand, an increase of $ 11 thousand, and an decrease of $ 9 thousand, respectively.

The amount accrued for interest and penalties at December 31, 2021, 2020 and 2019 was $ 85 thousand, $ 64 thousand and $ 53 thousand, respectively.

31 unchanged sentences

The fair value of these contracts combined was zero, as gains offset losses.

The gross gains and gross losses associated with these interest rate swaps was $ 2.5 million and $ 0.8 million at December 31, 2020 and 2019.

The gross losses associated with these interest rate swaps was $ 1.0 million and $ 2.5 million at December 31, 2021 and 2020.

RETIREMENT PLANS:

11 unchanged sentences

The Corporation contributed $ 1.40 million, $ 1.47 million and $ 1.25 million to the ESOP in 2021, 2020 and 2019.

There were contributions of $ 1.2 million, $ 926 thousand and $ 735 thousand to the ESOP for employees no longer participating in the defined benefit plan in 2020, 2019 and 2018 respectively.

There were contributions of $ 1.1 million, $ 1.2 million and $ 926 thousand to the ESOP for employees no longer participating in the defined benefit plan in 2021, 2020 and 2019 respectively.

The Corporation uses a measurement date of December 31.

11 unchanged sentences

Total recognized net periodic pension cost and other comprehensive income $ ( 6,610 ) $ 3,406 $ 7,459

The estimated net loss and prior service costs (credits) for the defined benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $ 2.1 million and $ 1 thousand.

The information below sets forth the change in projected benefit obligation, reconciliation of plan assets, and the funded status of the Corporation's retirement program.

86 unchanged sentences

Other equity securities are predominantly stocks in large cap U.S.

Contributions — The Corporation expects to contribute $ 2.3 million to its pension plan and $ 715 thousand to its ESOP in 2021.

Contributions — The Corporation expects to contribute $ 250 thousand to its pension plan and $ 703 thousand to its ESOP in 2022.

Estimated Future Payments — The following benefit payments, which reflect expected future service, are expected:

13 unchanged sentences

Amounts in accumulated other comprehensive income consist of $ 3.2 million net loss at December 31, 2021 and $ 3.6 million net loss at December 31, 2020.

The estimated loss for the SERP that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $ 357 thousand.

Estimated Future Payments — The following benefit payments, which reflect expected future service, are expected:

14 unchanged sentences

Funded status at December 31 $ 4,015 $ 4,147

Amounts recognized in accumulated other comprehensive income consist of a net loss of $ 266 thousand at December 31, 2020 and $ 27 thousand net gain at December 31, 2019.

Amounts recognized in accumulated other comprehensive income consist of a net loss of $ 212 thousand at December 31, 2021 and $ 266 thousand net loss at December 31, 2020.

The post-retirement benefits paid in 2021 and 2020 of $ 259 thousand and $ 305 thousand, respectively, were fully funded by company and participant contributions.

16 unchanged sentences

Total recognized net periodic benefit cost and other comprehensive income $ 93 $ 401 $ 806

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.

A one-percentage-point change in the assumed health care cost trend rates would have the following effects:

1% Point 1% Point

(Dollar amounts in thousands) Increase Decrease

Effect on total of service and interest cost components $ 1 $ 1

Effect on post-retirement benefit obligation 12 11

Contributions — The Corporation expects to contribute $ 248 thousand to its other post-retirement benefit plan in 2022.

3 unchanged sentences

STOCK BASED COMPENSATION:

On February 5, 2011, the Corporation's Board of Directors adopted and approved the First Financial Corporation 2011 Omnibus Equity Incentive Plan (the "2011 Stock Incentive Plan") effective upon the approval of the Plan by the Company's shareholders, which occurred on April 20, 2011 at the Corporation’s annual meeting of shareholders.

On February 5, 2011, the Corporation's Board of Directors adopted and approved the First Financial Corporation 2011 Omnibus Equity Incentive Plan (the "2011 Stock Incentive Plan") effective upon the approval of the Plan by the Corporation's shareholders, which occurred on April 20, 2011 at the Corporation’s annual meeting of shareholders.

The 2011 Stock Incentive Plan provides for the grant of non qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and incentive awards.

An aggregate of 700,000 shares of common stock are reserved for issuance under the 2011 Stock Incentive Plan.

Shares issuable under the 2011 Stock Incentive Plan may be authorized and unissued shares of common stock or treasury shares.

An aggregate of 700,000 shares of common stock were reserved for issuance under the 2011 Stock Incentive Plan.

A total of 205,760 shares of restricted common stock of the Corporation were granted under the 2011 Stock Incentive Plan.

On April 21, 2021 at the Corporation's annual meeting of shareholders, the shareholders approved the First Financial Corporation Amended and Restated 2011 Omnibus Equity Incentive Plan ("2011 Amended Plan").

An aggregate of 400,000 shares of common stock are reserved for issuance under the 2011 Amended Plan.

Shares issuable under the 2011 Amended Plan may be authorized and unissued shares of common stock or treasury shares.

During the first quarter of 2021 and 2020, the Compensation Committee of the Board of Directors of the Company granted restricted stock awards to certain executive officers pursuant to the Corporation's annual performance-based stock incentive bonus plan.

3 unchanged sentences

The Corporation has the right to retain shares to satisfy any withholding tax obligation.

A total of 205,760 shares of restricted common stock of the Company were granted under the 2011 Stock Incentive Plan.

A total of 21,159 shares of restricted common stock of the Corporation were granted under the 2011 Amended Plan.

A total of 378,841 remain to be granted under this plan.

125 unchanged sentences

Further, the Corporation's primary source of funds to pay dividends to shareholders is dividends from its subsidiary banks and compliance with these capital requirements can affect the ability of the Corporation and its banking affiliates to pay dividends.

At December 31, 2020, approximately $ 15.5 million of undistributed earnings of the subsidiary banks, included in consolidated retained earnings, were available for distribution to the Corporation without regulatory approval.

At December 31, 2021, approximately $ 8.4 million of undistributed earnings of the subsidiary banks, included in consolidated retained earnings, were available for distribution to the Corporation with regulatory approval.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and Banks must meet specific capital guidelines that involve quantitative measures of the Corporation's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.

1 unchanged sentence

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and Banks to maintain minimum amounts and ratios of Total, Common equity tier I capital and Tier I Capital to risk-weighted assets, and of Tier I Capital to average assets.

The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S.

banks (Basel lll rules) became effective for the Corporation on January 1, 2015 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019.

Under the Basel lll rules, the Corporation must hold a capital

conservation buffer above the adequately capitalized risk-based capital ratios.

The capital conservation buffer is being phased in from 0.0% for 2015 to 2.50% by 2019.

The capital conservation buffer for 2018 was 1.875%.

Under the Basel lll rules, the Corporation must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios.

The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital.

43 unchanged sentences

LIABILITIES AND SHAREHOLDERS' EQUITY

Borrowings $ — $ 10,177

Dividends payable 7,952 7,182

44 unchanged sentences

Income taxes $ 15,025 $ 7,549 $ 9,595

SELECTED QUARTERLY DATA (UNAUDITED):

(Dollar amounts in thousands) Interest

Income Interest

Expense Net Interest

Income Provision

Losses Net Income Net Income

March 31 $ 41,403 $ 5,053 $ 36,350 $ 2,690 $ 12,181 $ 0.89

June 30 $ 39,256 $ 3,361 $ 35,895 $ 2,965 $ 11,924 $ 0.87

September 30 $ 39,539 $ 3,008 $ 36,531 $ 4,425 $ 14,000 $ 1.02

December 31 $ 40,287 $ 2,717 $ 37,570 $ 448 $ 15,739 $ 1.15

(Dollar amounts in thousands) Interest

Income Interest

Income Provision

Losses Net Income (a) Net Income

March 31 $ 32,616 $ 3,190 $ 29,426 $ 1,470 $ 9,682 $ 0.79

June 30 $ 33,259 $ 3,507 $ 29,752 $ 230 $ 12,569 $ 1.02

September 30 $ 39,595 $ 5,596 $ 33,999 $ 1,500 $ 12,257 $ 0.93

December 31 $ 43,651 $ 5,176 $ 38,475 $ 1,500 $ 14,364 $ 1.06

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data