What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-02 compared with 2022-08-03 · 386 added, 540 removed, 802 unchanged (54% of the section changed)

3 unchanged sentences

(Dollar amounts in thousands, except per share data)

2022 December 31,

September 30,

Cash and due from banks

1 unchanged sentence

Securities available-for-sale

Commercial 1,707,105 1,674,066

Residential 670,641 664,509

Consumer 509,781 474,026

2,887,527 2,812,601

Net deferred loan (fees)/costs

Allowance for credit losses

2,851,020 2,767,590

Restricted stock

2 unchanged sentences

Bank-owned life insurance

Goodwill 86,985 86,135

Other intangible assets

Other real estate owned

Other assets 80,378 45,728

TOTAL ASSETS $ 5,006,648 $ 5,175,099

LIABILITIES AND SHAREHOLDERS’ EQUITY

3 unchanged sentences

Other interest-bearing deposits

4,383,257 4,409,569

Short-term borrowings

4 unchanged sentences

Common stock, $ 0.125 stated value per share;

Authorized shares-40,000,000

Issued shares-16,114,992 in 2022 and 16,096,313 in 2021

Outstanding shares-12,031,123 in 2022 and 12,629,893 in 2021 2,011 2,009

Authorized shares- 40,000,000 Issued shares- 16,114,992 in 2022 and 16,096,313 in 2021 Outstanding shares- 12,021,998 in 2022 and 12,629,893 in 2021

Additional paid-in capital

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

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

Nine Months Ended

September 30,

INTEREST INCOME:

Loans, including related fees

Taxable 6,048 3,355 10,631 6,434

Tax-exempt 2,492 2,163 4,840 4,237

Other 358 387 723 733

TOTAL INTEREST INCOME

INTEREST EXPENSE:

Deposits 2,473 2,090 4,149 4,376

Short-term borrowings

13 unchanged sentences

Gain on sales of mortgage loans

Other 547 586 5,009 886

TOTAL NON-INTEREST INCOME

3 unchanged sentences

Equipment expense

FDIC Expense 542 287 970 585

Other 9,133 7,236 17,278 14,173

TOTAL NON-INTEREST EXPENSE

1 unchanged sentence

Provision for income taxes

NET INCOME 15,613 16,614 36,537 29,491

OTHER COMPREHENSIVE INCOME (LOSS)

9 unchanged sentences

Three Months Ended

June 30, 2022, and 2021

September 30, 2022, and 2021

(Dollar amounts in thousands, except per share data)

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income/(Loss) Treasury

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

Net income — — 16,614 — — 16,614

Income/(Loss)

Balance, July 1, 2021

Other comprehensive income (loss)

1 unchanged sentence

Treasury shares purchased ( 176,293 shares)

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, April 1, 2022 $ 2,010 $ 142,185 $ 580,063 $ ( 71,025 ) $ ( 127,789 ) $ 525,444

Net income — — 15,613 — — 15,613

Balance, September 30, 2021

Balance, July 1, 2022

Other comprehensive income (loss)

2 unchanged sentences

Cash dividends, $ 0 per share

Balance, June 30, 2022 $ 2,011 $ 142,390 $ 589,169 $ ( 126,630 ) $ ( 145,409 ) $ 461,531

Balance, September 30, 2022

See accompanying notes.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Six Months Ended

June 30, 2022, and 2021

Nine Months Ended

September 30, 2022, and 2021

(Dollar amounts in thousands, except per share data)

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income/(Loss) Treasury

Income/(Loss)

Balance, January 1, 2021

Net income — — 29,491 — — 29,491

Other comprehensive income (loss)

2 unchanged sentences

Cash dividends, $ .53 per share

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

Balance, September 30, 2021

Balance, January 1, 2022

Net income — — 36,537 — — 36,537

Other comprehensive income (loss)

2 unchanged sentences

Cash dividends, $ .54 per share

Balance, June 30, 2022 $ 2,011 $ 142,390 $ 589,169 $ ( 126,630 ) $ ( 145,409 ) $ 461,531

Balance, September 30, 2022

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:

Net Income $ 36,537 $ 29,491

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

6 unchanged sentences

Depreciation and amortization

Other, net ( 3,990 ) ( 4,937 )

NET CASH FROM OPERATING ACTIVITIES

3 unchanged sentences

Purchases of securities available-for-sale

Proceeds from loans held for sale previously classified as portfolio loans

Loans made to customers, net of repayment

10 unchanged sentences

Maturities of other borrowings

Proceeds from other borrowings

Purchase of treasury stock

7 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying June 30, 2022 and 2021 consolidated financial statements are unaudited.

The accompanying September 30, 2022 and 2021 consolidated financial statements are unaudited.

The December 31, 2021 consolidated financial statements are as reported in the First Financial Corporation (the “Corporation”) 2021 annual report.

11 unchanged sentences

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

For the six months ended 2022 and 2021, 18,679 and 21,159 shares were awarded, respectively.

For the nine months ended 2022 and 2021, 18,679 and 21,159 shares were awarded, respectively.

These shares had a grant date value of $ 847 thousand and $ 885 thousand for 2022 and 2021, 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, 2022

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

September 30, 2022

(Dollar amounts in thousands)

Beginning balance

1 unchanged sentence

Loans charged-off

Recoveries 931 94 1,588 — 2,613

Ending Balance

Allowance for Credit Losses:

June 30, 2021

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

September 30, 2021

(Dollar amounts in thousands)

Beginning balance

1 unchanged sentence

Loans charged-off

Recoveries 149 169 985 — 1,303

Ending Balance

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, 2022

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

September 30, 2022

(Dollar amounts in thousands)

Beginning balance

1 unchanged sentence

Loans charged -off

Recoveries 1,271 623 2,734 — 4,628

Ending Balance

Allowance for Credit Losses:

June 30, 2021

(Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total

September 30, 2021

(Dollar amounts in thousands)

Beginning balance

1 unchanged sentence

Loans charged -off

Recoveries 627 316 1,970 — 2,913

Ending Balance

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

June 30, 2022

90 Days Still Nonaccrual

(Dollar amounts in thousands) Accruing Nonaccrual For Credit Loss

September 30, 2022

90 Days Still

(Dollar amounts in thousands)

For Credit Loss

Commercial & Industrial

Farmland — 304 —

Non Farm, Non Residential

Agriculture — 451 —

All Other Commercial

First Liens 755 1,687 5

Home Equity 75 85 —

Junior Liens 106 208 —

Multifamily — 241 —

All Other Residential

1 unchanged sentence

All Other Consumer

TOTAL $ 1,007 $ 8,383 $ 2,835

December 31, 2021

90 Days Still Nonaccrual

(Dollar amounts in thousands) Accruing Nonaccrual For Credit Loss

90 Days Still

(Dollar amounts in thousands)

For Credit Loss

Commercial & Industrial

Farmland — 15 —

Non Farm, Non Residential

Agriculture — 111 —

All Other Commercial

First Liens 346 2,339 33

Home Equity — 84 —

Junior Liens 89 294 —

Multifamily — 225 —

All Other Residential

1 unchanged sentence

All Other Consumer

TOTAL $ 543 $ 9,590 $ 4,593

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

June 30, 2022

September 30, 2022

Collateral Type

(Dollar amounts in thousands) Real Estate Other

(Dollar amounts in thousands)

Commercial & Industrial

Farmland 3,330

Non Farm, Non Residential

Agriculture — —

All Other Commercial

First Liens 5 —

Home Equity — —

Junior Liens — —

Multifamily 916 —

All Other Residential

1 unchanged sentence

All Other Consumer

Total $ 23,602 $ 323

December 31, 2021

Collateral Type

(Dollar amounts in thousands) Real Estate Other

(Dollar amounts in thousands)

Commercial & Industrial

Farmland 3,669

Non Farm, Non Residential

Agriculture — —

All Other Commercial

First Liens 33 —

Home Equity — —

Junior Liens — —

Multifamily 935 —

All Other Residential

1 unchanged sentence

All Other Consumer

Total $ 28,506 $ 720

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

June 30, 2022

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

September 30, 2022

(Dollar amounts in thousands)

Commercial & Industrial

Farmland 116 56 289 461 125,314 125,775

Non Farm, Non Residential

Agriculture — — — — 117,755 117,755

All Other Commercial

First Liens 1,062 857 1,174 3,093 330,319 333,412

Home Equity 147 190 114 451 62,484 62,935

Junior Liens 213 108 189 510 53,079 53,589

Multifamily 68 67 — 135 191,493 191,628

All Other Residential

1 unchanged sentence

All Other Consumer

TOTAL $ 17,365 $ 3,725 $ 2,450 $ 23,540 $ 2,874,583 $ 2,898,123

December 31, 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

(Dollar amounts in thousands)

Commercial & Industrial

Farmland 57 — — 57 141,189 141,246

Non Farm, Non Residential

Agriculture 90 42 89 221 141,682 141,903

All Other Commercial

First Liens 4,686 680 949 6,315 336,064 342,379

Home Equity 131 24 58 213 62,085 62,298

Junior Liens 179 120 283 582 50,048 50,630

Multifamily 342 146 — 488 178,849 179,337

All Other Residential

1 unchanged sentence

All Other Consumer

TOTAL $ 15,178 $ 2,833 $ 3,479 $ 21,490 $ 2,802,479 $ 2,823,969

During the three and six months ended June 30, 2022 and 2021, the terms of certain loans were modified as troubled debt restructurings (TDRs).

During the three and nine months ended September 30, 2022 and 2021, 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, $ 407 $ 3,445 $ 690 $ 4,542

(Dollar amounts in thousands)

Added/(Disposed)

Charged Off — — — —

Payments ( 40 ) ( 72 ) ( 11 ) ( 123 )

June 30, $ 672 $ 3,474 $ — $ 4,146

(Dollar amounts in thousands) Commercial Residential Consumer Total

January 1, $ 407 $ 3,686 $ 706 $ 4,799

September 30,

(Dollar amounts in thousands)

Added/(Disposed)

Charged Off — — — —

Payments ( 40 ) ( 340 ) ( 95 ) ( 475 )

June 30, $ 672 $ 3,474 $ — $ 4,146

(Dollar amounts in thousands) Commercial Residential Consumer Total

April 1, — 3,888 576 4,464

Added — 113 74 187

Charged Off — ( 27 ) ( 32 ) ( 59 )

Payments — ( 70 ) ( 62 ) ( 132 )

June 30, — 3,904 556 4,460

(Dollar amounts in thousands) Commercial Residential Consumer Total

January 1, — 3,589 617 4,206

Added — 491 122 613

Charged Off — ( 27 ) ( 75 ) ( 102 )

Payments — ( 149 ) ( 108 ) ( 257 )

June 30, — 3,904 556 4,460

September 30,

(Dollar amounts in thousands)

September 30,

(Dollar amounts in thousands)

September 30,

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, 2022 and 2021 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, 2022 and 2021.

The Corporation has not committed to lend additional amounts as of June 30, 2022 and 2021 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, 2022 and 2021 were of restructurings that had occurred in the previous 12 months.

Troubled debt restructurings during the three months ended September 30, 2022 and 2021 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, 2022 and 2021.

The Corporation has not committed to lend additional amounts as of September 30, 2022 and 2021 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, 2022 and 2021 were of restructurings that had occurred in the previous 12 months.

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

2 unchanged sentences

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

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

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

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

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

3 unchanged sentences

113 remaining loans are still under a debt relief plan, which include no commercial loans that have been provided additional payment relief since the initial payment relief plan.

There are no loans 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, 2022

Term Loans at Amortized Cost Basis by Origination Year Revolving

2022 2021 2020 2019 2018 Prior Loans Total

Commercial and Industrial Pass $81,025 $149,492 $61,094 $65,887 $31,721 $109,210 $140,793 $639,222

September 30, 2022

Term Loans at Amortized Cost Basis by Origination Year

Commercial and Industrial

Special Mention

Substandard — 424 1,497 447 2,648 6,096 14,596 $25,708

Doubtful — — — 52 — — — $52

Not Rated 6,798 1,879 1,085 736 270 146 — $10,914

Subtotal $89,312 $154,960 $63,882 $71,245 $37,486 $119,715 $155,461 $692,061

Farmland Pass $7,471 $23,441 $10,308 $10,610 $11,128 $52,240 $290 $115,488

Special Mention

Substandard — — — 289 56 2,261 — $2,606

Doubtful — — — — — 76 — $76

Not Rated — — — — — 20 — $20

Subtotal $7,471 $23,441 $11,499 $11,781 $11,184 $58,519 $290 $124,185

Non Farm, Non Residential Pass $53,042 $78,738 $32,040 $21,975 $32,250 $125,503 $8,012 $351,560

Non Farm, Non Residential

Special Mention

Substandard — 1,738 — 543 2,408 16,476 — $21,165

Doubtful — — — — — — — $0

Not Rated — — — — — 311 — $311

Subtotal $53,042 $80,476 $32,040 $23,459 $34,658 $142,666 $8,012 $374,353

Agriculture Pass $5,818 $10,025 $8,730 $9,156 $1,996 $19,726 $53,576 $109,027

Special Mention

Substandard — — — 597 — 393 1,370 $2,360

Doubtful — — — — — — — $0

Not Rated 79 101 89 75 32 — — $376

Subtotal $5,986 $10,126 $8,829 $9,833 $2,028 $20,918 $58,682 $116,402

Other Commercial Pass $97,758 $64,636 $82,886 $20,245 $29,738 $89,207 $3,282 $387,752

Other Commercial

Special Mention

Substandard — — — — 462 8 — $470

Doubtful — — — — — — — $0

Not Rated 18 85 — — 33 575 — $711

Subtotal $97,776 $64,721 $82,886 $20,245 $30,233 $100,961 $3,282 $400,104

Multifamily >5 Residential Pass $50,963 $31,102 $44,676 $12,281 $5,191 $37,204 $951 $182,368

Multifamily >5 Residential

Special Mention

Substandard — — — — — 964 — $964

Doubtful — — — — — — — $0

Not Rated — 1,137 — — — 267 — $1,404

Subtotal $50,963 $32,239 $44,676 $12,281 $5,191 $44,841 $951 $191,142

Total Pass $296,077 $357,434 $239,734 $140,154 $112,024 $433,090 $206,904 $1,785,417

Special Mention

Substandard — 2,162 1,497 1,876 5,574 26,198 15,966 $53,273

Doubtful — — — 52 — 76 — $128

Not Rated 6,895 3,202 1,174 811 335 1,319 — $13,736

Total commercial loans

December 31, 2021

Term Loans at Amortized Cost Basis by Origination Year Revolving

2021 2020 2019 2018 2017 Prior Loans Total

Commercial and Industrial Pass $163,588 $71,271 $80,668 $40,441 $37,739 $113,887 $111,594 $619,188

Term Loans at Amortized Cost Basis by Origination Year

Commercial and Industrial

Special Mention

Substandard 4,521 896 348 5,148 2,325 7,934 2,648 $23,820

Doubtful — — — — — — — $0

Not Rated 21,134 1,610 959 466 189 140 — $24,498

Subtotal $196,804 $74,170 $83,816 $51,430 $40,516 $126,484 $121,724 $694,944

Farmland Pass $25,673 $12,060 $13,111 $13,246 $11,049 $49,158 $1,418 $125,715

Special Mention

Substandard 3,455 444 — 326 558 2,876 — $7,659

Doubtful — — — — — — — $0

Not Rated — — — — — — — $0

Subtotal $29,128 $13,695 $14,025 $13,572 $11,949 $55,281 $1,418 $139,068

Non Farm, Non Residential Pass $81,203 $37,971 $24,716 $32,775 $54,732 $97,241 $10,548 $339,186

Non Farm, Non Residential

Special Mention

Substandard — — 910 — 1,440 13,391 — $15,741

Doubtful — — — — — — — $0

Not Rated — — — — — 402 — $402

Subtotal $81,203 $37,971 $26,729 $32,957 $58,120 $113,030 $10,548 $360,558

Agriculture Pass $14,426 $10,386 $10,135 $2,585 $4,932 $15,755 $68,937 $127,156

Special Mention

Substandard — 20 216 — 46 485 4,828 $5,595

Doubtful — — — — — — — $0

Not Rated 110 120 131 55 1 — — $417

Subtotal $14,536 $10,526 $11,482 $2,640 $5,516 $16,511 $79,022 $140,233

Other Commercial Pass $77,821 $69,117 $33,231 $36,495 $53,479 $58,819 $3,488 $332,450

Other Commercial

Special Mention

Substandard 72 — 25 475 — 9 — $581

Doubtful — — — — — — — $0

Not Rated 89 — — 37 — — — $126

Subtotal $77,982 $69,117 $33,256 $37,007 $53,479 $64,934 $3,488 $339,263

Multifamily >5 Residential Pass $37,244 $63,312 $16,037 $7,471 $5,370 $35,284 $1,434 $166,152

Multifamily >5 Residential

Special Mention

Substandard — — — — — 958 — $958

Doubtful — — — — — — — $0

Not Rated 1,149 — — — 44 384 — $1,577

Subtotal $38,393 $63,312 $16,037 $7,471 $5,414 $46,908 $1,434 $178,969

Total Pass $399,955 $264,117 $177,898 $133,013 $167,301 $370,144 $197,419 $1,709,847

Special Mention

Substandard 8,048 1,360 1,499 5,949 4,369 25,653 7,476 $54,354

Doubtful — — — — — — — $0

Not Rated 22,482 1,730 1,090 558 234 926 — $27,020

Total commercial loans

2 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, 2022

Term Loans at Amortized Cost Basis by Origination Year Revolving

2022 2021 2020 2019 2018 Prior Loans Total

First Liens Performing $41,977 $68,440 $43,841 $19,263 $21,173 $133,208 $2,121 $330,023

September 30, 2022

Term Loans at Amortized Cost Basis by Origination Year

Non-performing

Subtotal $41,977 $68,440 $43,841 $19,297 $21,239 $135,627 $2,121 $332,542

Home Equity Performing $1,411 $862 $8 $122 $129 $1,284 $58,829 $62,645

Non-performing

Subtotal $1,411 $862 $88 $122 $144 $1,334 $58,844 $62,805

Junior Liens Performing $10,470 $12,055 $8,695 $6,818 $6,395 $7,667 $1,064 $53,164

Non-performing

Subtotal $10,470 $12,055 $8,761 $6,818 $6,469 $7,840 $1,064 $53,477

Other Residential Performing $6,103 $15,578 $4,997 $1,375 $598 $1,911 $0 $30,562

Other Residential

Non-performing

Subtotal $6,103 $15,578 $4,997 $1,427 $637 $1,933 $0 $30,675

Motor Vehicle Performing $145,103 $150,683 $116,862 $42,134 $14,775 $5,561 $— $475,118

Motor Vehicle

Non-performing

Subtotal $145,168 $151,224 $117,337 $42,387 $14,838 $5,613 $— $476,567

Other Consumer Performing $7,956 $10,825 $5,678 $1,920 $626 $1,022 $4,571 $32,598

Other Consumer

Non-performing

Subtotal $7,975 $11,110 $5,880 $1,986 $649 $1,039 $4,575 $33,214

Total Performing $213,020 $258,443 $180,081 $71,632 $43,696 $150,653 $66,585 $984,110

Non-performing

1 unchanged sentence

December 31, 2021

Term Loans at Amortized Cost Basis by Origination Year Revolving

2021 2020 2019 2018 2017 Prior Loans Total

First Liens Performing $86,224 $49,633 $22,262 $24,377 $26,437 $126,828 $3,061 $338,822

Term Loans at Amortized Cost Basis by Origination Year

Non-performing

Subtotal $86,224 $49,633 $22,297 $24,446 $26,597 $129,249 $3,061 $341,507

Home Equity Performing $757 $9 $152 $719 $62 $1,332 $59,059 $62,090

Non-performing

Subtotal $757 $34 $152 $719 $65 $1,389 $59,059 $62,175

Junior Liens Performing $13,255 $10,189 $8,124 $7,888 $4,158 $5,554 $968 $50,136

Non-performing

Subtotal $13,255 $10,195 $8,188 $7,985 $4,277 $5,648 $968 $50,516

Other Residential Performing $20,218 $6,665 $1,697 $662 $883 $1,092 $0 $31,217

Other Residential

Non-performing

Subtotal $20,218 $6,665 $1,752 $705 $883 $1,119 $0 $31,342

Motor Vehicle Performing $188,675 $155,156 $60,676 $23,367 $9,307 $2,384 $— $439,565

Motor Vehicle

Non-performing

Subtotal $188,874 $155,529 $60,867 $23,476 $9,350 $2,407 $— $440,503

Other Consumer Performing $14,924 $8,225 $3,119 $948 $304 $1,121 $4,194 $32,835

Other Consumer

Non-performing

Subtotal $15,266 $8,406 $3,226 $983 $322 $1,124 $4,196 $33,523

Total Performing $324,053 $229,877 $96,030 $57,961 $41,151 $138,311 $67,282 $954,665

Non-performing

2 unchanged sentences

All securities are classified as available-for-sale.

June 30, 2022

(Dollar amounts in thousands) Amortized

Cost Unrealized

Gains Unrealized

Losses Fair Value

September 30, 2022

(Dollar amounts in thousands)

Government agencies

4 unchanged sentences

Municipal taxable

Treasury 2,084 — ( 9 ) 2,075

Collateralized debt obligations

Other securities

TOTAL $ 1,480,872 $ 4,339 $ ( 146,759 ) $ 1,338,452

December 31, 2021

(Dollar amounts in thousands) Amortized

Cost Unrealized

Gains Unrealized

Losses Fair Value

(Dollar amounts in thousands)

Government agencies

4 unchanged sentences

Municipal taxable

Treasury 205 — ( 1 ) 204

Collateralized debt obligations

Other securities

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

Contractual maturities of debt securities at June 30, 2022 were as follows.

Contractual maturities of debt securities at September 30, 2022 were as follows.

Available-for-Sale

Amortized Fair

(Dollar amounts in thousands) Cost Value

(Dollar amounts in thousands)

Due in one year or less

2 unchanged sentences

Due after ten years

556,872 510,173

Mortgage-backed securities and collateralized mortgage obligations

TOTAL $ 1,480,872 $ 1,338,452

There were zero and $5 thousand in gross gains and zero in losses from investment sales/calls realized by the Corporation for the three and six months ended June 30, 2022.

For the three and six months ended June 30, 2021 there were $ 258 thousand and $263 thousand in gross gains and zero and $157 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, 2022 and December 31, 2021.

June 30, 2022

Less Than 12 Months More Than 12 Months Total

Unrealized Unrealized Unrealized

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

There were zero and $ 5 thousand in gross gains and zero in losses from investment sales/calls realized by the Corporation for the three and nine months ended September 30, 2022.

For the three and nine months ended September 30, 2021 there were $ 5 thousand and $ 268 thousand in gross gains and zero and $ 157 thousand in losses on sales/calls of investment securities.

September 30, 2022

Less Than 12 Months

More Than 12 Months

(Dollar amounts in thousands)

Government agencies

4 unchanged sentences

Municipal taxable

Treasury 2,075 ( 9 ) — — 2,075 ( 9 )

Total temporarily impaired securities

December 31, 2021

Less Than 12 Months More Than 12 Months Total

Unrealized Unrealized Unrealized

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

Less Than 12 Months

More Than 12 Months

(Dollar amounts in thousands)

Government agencies

3 unchanged sentences

Municipal taxable

Treasury 204 ( 1 ) — — 204 ( 1 )

Total temporarily impaired securities

5 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 $146.8 million as of June 30, 2022 and $10.2 million as of December 31, 2021.

Gross unrealized losses on investment securities were $ 199.3 million as of September 30, 2022 and $ 10.2 million as of December 31, 2021.

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.

The portfolio contains primarily government agency, agency backed mortgage backed securities (“MBS”), and collateralized mortgage obligations (“CMO”), which are issued by government sponsored enterprises and are backed by the full faith and credit of the United States government.

Secondarily, the Corporation invests in municipal securities issued by state and local governments.

Of these, the majority are either insured or contain state enhancements.

On the remaining, credit is monitored by the investment committee.

Based upon our review of the issuers, we do not believe these investments to be other than temporarily impaired.

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, 2022 and 2021:

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, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollar amounts in thousands)

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, 2022

Fair Value Measurements Using Significant

Unobservable Inputs (Level 3)

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

September 30, 2022

Fair Value Measurements Using

Significant Unobservable Inputs (Level 3)

(Dollar amounts in thousands)

Government agencies

4 unchanged sentences

Municipal taxable

Treasury — 2,075 — 2,075

Collateralized debt obligations

Other securities

TOTAL $ — $ 1,332,326 $ 6,126 $ 1,338,452

Derivative Assets

1 unchanged sentence

December 31, 2021

Fair Value Measurements Using Significant

Unobservable Inputs (Level 3)

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

Fair Value Measurements Using

Significant Unobservable Inputs (Level 3)

(Dollar amounts in thousands)

Government agencies

4 unchanged sentences

Municipal taxable

Treasury — 204 — 204

Collateralized debt obligations

Other securities

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

Derivative Assets

1 unchanged sentence

There were no transfers between Level 1 and Level 2 during 2022 and 2021.

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, 2022 and the year ended December 31, 2021.

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, 2022 and the year ended December 31, 2021.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Three Months Ended June 30, 2022

(Dollar amounts in thousands) State and

obligations Collateralized

obligations Other securities Total

Beginning balance, April 1 $ 1,545 $ 3,531 $ 1,743 $ 6,819

Three Months Ended

September 30, 2022

Collateralized

(Dollar amounts in thousands)

debt obligations

Other securities

Beginning balance, July 1

Total realized/unrealized gains or losses

1 unchanged sentence

Included in other comprehensive income

Transfers — — — —

Settlements — — (249) ( 249 )

Ending balance, June 30 $ 1,545 $ 3,087 $ 1,494 $ 6,126

Six Months Ended June 30, 2022

(Dollar amounts in thousands) State and

obligations Collateralized

obligations Other securities Total

Ending balance, September 30

Nine Months Ended

September 30, 2022

Collateralized

(Dollar amounts in thousands)

debt obligations

Other securities

Beginning balance, January 1

2 unchanged sentences

Included in other comprehensive income

Transfers — — — —

Settlements ( 350 ) — (249) ( 599 )

Ending balance, June 30 $ 1,545 $ 3,087 $ 1,494 $ 6,126

Ending balance, September 30

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Year Ended December 31, 2021

(Dollar amounts in thousands) State and

obligations Collateralized

obligations Other securities Total

December 31, 2021

Collateralized

(Dollar amounts in thousands)

debt obligations

Other securities

Beginning balance, January 1

2 unchanged sentences

Included in other comprehensive income

Purchases — — 1,743 1,743

Settlements — — — —

Ending balance, December 31

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at June 30, 2022.

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

State and municipal obligations $ 1,545 Discounted cash flow Discount rate 3.73%-4.44%

Collateralized debt obligations $ 3,087 Discounted cash flow Discount rate 2.67%

Other securities $ 1,494 Discounted cash flow Discount rate 0.65%-1.15%

Collateral dependent loans $ 11,525 Discounted cash flow Discount rate for age of appraisal and market conditions 0.00%-50.00%

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at September 30, 2022.

(Dollar amounts in thousands)

Valuation Technique(s)

Unobservable Input(s)

State and municipal obligations

Discounted cash flow

Discount rate

Collateralized debt obligations

Discounted cash flow

Discount rate

Other securities

Discounted cash flow

Discount rate

Collateral dependent loans

Discounted cash flow

Discount rate for age of appraisal and market conditions

0.00 %- 50.00

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at December 31, 2021.

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

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

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 flow Discount rate for age of appraisal and market conditions 0.00%-50.00%

(Dollar amounts in thousands)

Valuation Technique(s)

Unobservable Input(s)

State and municipal obligations

Discounted cash flow

Discount rate

Collateralized debt obligations

Discounted cash flow

Discount rate

Other securities

Discounted cash flow

Discount rate

Collateral dependent loans

Discounted cash flow

Discount rate for age of appraisal and market conditions

0.00 %- 50.00

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

14 unchanged sentences

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

The carrying amounts and estimated fair value of financial instruments at June 30, 2022 and December 31, 2021, are shown below.

The carrying amounts and estimated fair value of financial instruments at September 30, 2022 and December 31, 2021, 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, 2022

Carrying Fair Value

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

September 30, 2022

(Dollar amounts in thousands)

Cash and due from banks

1 unchanged sentence

Securities available-for-sale

Restricted stock 15,620 n/a n/a n/a n/a

Loans, net 2,851,020 — — 2,613,980 2,613,980

Restricted stock

Accrued interest receivable

Deposits ( 4,383,257 ) — ( 4,390,916 ) — ( 4,390,916 )

( 4,407,506 )

( 4,389,442 )

Short-term borrowings

2 unchanged sentences

December 31, 2021

Carrying Fair Value

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

(Dollar amounts in thousands)

Cash and due from banks

1 unchanged sentence

Securities available-for-sale

Restricted stock 16,200 n/a n/a n/a n/a

Loans, net 2,767,590 — — 2,682,257 2,682,257

Restricted stock

Accrued interest receivable

Deposits ( 4,409,569 ) — ( 4,418,117 ) — ( 4,418,117 )

( 4,409,569 )

( 4,418,117 )

Short-term borrowings

3 unchanged sentences

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

(Dollar amounts in thousands) June 30, 2022 December 31, 2021

(Dollar amounts in thousands)

September 30, 2022

December 31, 2021

Federal Funds Purchased

Repurchase Agreements

$ 84,232 $ 93,374

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

5 unchanged sentences

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

June 30, 2022

Repurchase Agreements Remaining Contractual Maturity of the Agreements

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

Mortgage Backed Securities - Residential and Collateralized Mortgage Obligations $ 76,142 $ 150 $ 143 $ 5,447 $ 81,882

September 30, 2022

Repurchase Agreements

Remaining Contractual Maturity of the Agreements

(Dollar amounts in thousands)

Mortgage Backed Securities - Residential and Collateralized

Mortgage Obligations

December 31, 2021

Repurchase Agreements Remaining Contractual Maturity of the Agreements

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

Mortgage Backed Securities - Residential and Collateralized Mortgage Obligations $ 83,576 $ — $ 5,816 $ 707 $ 90,099

Repurchase Agreements

Remaining Contractual Maturity of the Agreements

(Dollar amounts in thousands)

Mortgage Backed Securities - Residential and Collateralized

Mortgage Obligations

Components of Net Periodic Benefit Cost

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

(Dollar amounts in thousands) Pension Benefits Post-Retirement

Health Benefits Pension Benefits Post-Retirement

Three Months Ended September 30,

Nine Months Ended September 30,

Post-Retirement

Pension Benefits

Health Benefits

2022 2021 2022 2021 2022 2021 2022 2021

Service cost $ 298 $ 338 $ 9 $ 11 $ 595 $ 677 $ 17 $ 22

Pension Benefits

Health Benefits

(Dollar amounts in thousands)

Interest cost

6 unchanged sentences

Contributions of $ 95 thousand have been made to the Pension Plan thus far in 2022.

Contributions of $ 116 thousand have been made through the first six months of 2022 for the Post Retirement Health Benefits plan.

Contributions of $ 171 thousand have been made through the first nine months of 2022 for the Post Retirement Health Benefits plan.

No contributions have been made in 2022 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 2022 and 2021 there has been $ 1.3 million and $ 1.4 million of expense accrued for potential contributions to these alternative retirement benefit options.

In the first nine months of 2022 and 2021 there has been $ 1.7 million and $ 2.3 million of expense accrued for potential contributions to these alternative retirement benefit options.

New accounting standards

6 unchanged sentences

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.

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

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

The Corporation has discontinued originating LIBOR based loans and has a plan in place to transition all LIBOR indexed loans to term SOFR.

5 unchanged sentences

The Corporation is evaluating the effect that ASU 2022-02 will have on its consolidated financial statements and related disclosures.

In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2022-03 “Fair Value Measurements (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” These amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

ASU 2022-03 is effective for the Corporation for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption is permitted.

The Corporation is evaluating the effect that ASU 2022-03 will have on its consolidated financial statements and related disclosures.

Revenue from Contracts with Customers

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, 2022 and 2021.

The following table presents the Corporation’s sources of Non-Interest Income for the three and nine months ended September 30, 2022 and 2021.

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)

4 unchanged sentences

Net gains on sales of loans (a)

603 1,450 1,265 2,843

Loan servicing fees (a)

368 788 727 1,141

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

Other service charges and fees (a)

222 406 328 822

586 5,009 (c) 886

Total non-interest income

(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, 2022 and June 30, 2021, totaling $17 thousand and $16 thousand, respectively, and for the six months ended for the same periods, totaling $85 thousand and $16 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, 2022 and September 30, 2021, totaling zero and $( 11 ) thousand, respectively, and for the nine months ended for the same periods, totaling $ 85 thousand and $ 5 thousand, which is within the scope of ASC 606;

the remaining balance is outside the scope of ASC 606.

30 unchanged sentences

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

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

(Dollar amounts in thousands)

Consideration

2 unchanged sentences

Assets acquired

Cash $ 3,046 $ — $ 3,046

Investment securities available-for-sale

2 unchanged sentences

Federal Home Loan Bank stock

Loans 227,827 — 227,827

Premises and equipment

Core deposit intangibles

Other assets 4,567 (850) 3,717

Total assets acquired

Liabilities assumed

Deposits 286,098 — 286,098

FHLB advances

2 unchanged sentences

Net identifiable assets

Goodwill $ 7,543 $ 850 $ 8,393

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

11 unchanged sentences

Net interest income

Net income $ 53,714 $ 55,958

Basic and diluted earnings per share

3 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, 2022 and 2021.

gains and 2022

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

Beginning balance, April 1, $ ( 53,240 ) $ ( 17,785 ) $ ( 71,025 )

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, 2022 and 2021.

(Losses) on available-

(Dollar amounts in thousands)

Beginning balance, July 1,

Change in other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current period other comprehensive income (loss)

Ending balance, June 30, $ ( 109,159 ) $ ( 17,471 ) $ ( 126,630 )

gains and 2022

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

Ending balance, September 30,

(Losses) on available-

(Dollar amounts in thousands)

Beginning balance, January 1,

1 unchanged sentence

Amounts reclassified from accumulated other comprehensive income

Net current period other comprehensive loss — — —

Net current period other comprehensive income (loss)

Ending balance, June 30, $ ( 109,159 ) $ ( 17,471 ) $ ( 126,630 )

gains and 2021

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

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

Ending balance, September 30,

(Losses) on available-

(Dollar amounts in thousands)

Beginning balance, July 1,

Change in other comprehensive income (loss) before reclassification

1 unchanged sentence

Net current period other comprehensive income (loss)

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

gains and 2021

for-sale Retirement

(Dollar amounts in thousands) Securities plans Total

Ending balance, September 30,

(Losses) on available-

(Dollar amounts in thousands)

Beginning balance, January 1,

2 unchanged sentences

Net current period other comprehensive income (loss)

ASU 2018-02 adjustment — — —

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

Period Balance

(Dollar amounts in thousands) 4/1/2022 Change 6/30/2022

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

without other than temporary impairment $ ( 55,888 ) $ ( 55,586 ) $ ( 111,474 )

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

with other than temporary impairment 2,648 ( 333 ) 2,315

Ending balance, September 30,

Current Period

(Dollar amounts in thousands)

Unrealized gains (losses) on securities available-for-sale without other than temporary impairment

Unrealized gains (losses) on securities available-for-sale with other than temporary impairment

Total unrealized loss on securities available-for-sale

Unrealized gain (loss) on retirement plans

TOTAL $ ( 71,025 ) $ ( 55,605 ) $ ( 126,630 )

Period Balance

(Dollar amounts in thousands) 1/1/2022 Change 6/30/2022

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

without other than temporary impairment $ 13,155 $ ( 124,629 ) $ ( 111,474 )

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

with other than temporary impairment 2,519 ( 204 ) 2,315

Current Period

(Dollar amounts in thousands)

Unrealized gains (losses) on securities available-for-sale without other than temporary impairment

Unrealized gains (losses) on securities available-for-sale with other than temporary impairment

Total unrealized gain (loss) on securities available-for-sale

Unrealized loss on retirement plans

TOTAL $ ( 2,426 ) $ ( 124,204 ) $ ( 126,630 )

Period Balance

(Dollar amounts in thousands) 4/1/2021 Change 6/30/2021

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

without other than temporary impairment $ 20,598 $ 1,819 $ 22,417

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

with other than temporary impairment 2,496 ( 47 ) 2,449

Current Period

(Dollar amounts in thousands)

Unrealized gains (losses) on securities available-for-sale without other than temporary impairment

Unrealized gains (losses) on securities available-for-sale with other than temporary impairment

Total unrealized gain (loss) on securities available-for-sale

Unrealized loss on retirement plans

TOTAL $ ( 832 ) $ 2,244 $ 1,412

Period Balance

(Dollar amounts in thousands) 1/1/2021 Change 6/30/2021

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

without other than temporary impairment $ 31,810 $ ( 9,393 ) $ 22,417

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

with other than temporary impairment 2,352 97 2,449

Current Period

(Dollar amounts in thousands)

Unrealized gains (losses) on securities available-for-sale without other than temporary impairment

Unrealized gains (losses) on securities available-for-sale with other than temporary impairment

Total unrealized income (loss) on securities available-for-sale

Unrealized gain (loss) on retirement plans

TOTAL $ 9,764 $ ( 8,352 ) $ 1,412

Three Months Ended June 30, 2022

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

Three Months Ended September 30, 2022

Details about accumulated

Amount reclassified from

Affected line item in

other comprehensive

accumulated other

the statement where

income components

comprehensive income

net income is presented

(in thousands)

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

on available-for-sale — Income tax expense

securities $ — Net of tax

Amortization of $ ( 420 ) (a) Salary and benefits

retirement plan items 106 Income tax expense

$ ( 314 ) Net of tax

Total reclassifications for the period $ ( 314 ) Net of tax

Unrealized gains and losses

Net securities gains (losses)

on available-for-sale

Income tax expense

Amortization of

Salary and benefits

retirement plan items

Income tax expense

Total reclassifications for the period

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

(see Footnote 6 for additional details).

Six Months Ended June 30, 2022

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

Nine Months Ended September 30, 2022

Details about accumulated

Amount reclassified from

Affected line item in

other comprehensive

accumulated other

the statement where

income components

comprehensive income

net income is presented

(in thousands)

Unrealized gains and losses $ 5 Net securities gains (losses)

on available-for-sale ( 1 ) Income tax expense

securities $ 4 Net of tax

Amortization of $ ( 840 ) (a) Salary and benefits

retirement plan items 211 Income tax expense

$ ( 629 ) Net of tax

Total reclassifications for the period $ ( 625 ) Net of tax

Unrealized gains and losses

Net securities gains (losses)

on available-for-sale

Income tax expense

Amortization of

Salary and benefits

retirement plan items

Income tax expense

Total reclassifications for the period

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

(see Footnote 6 for additional details).

Three Months Ended June 30, 2021

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

Three Months Ended September 30, 2021

Details about accumulated

Amount reclassified from

Affected line item in

other comprehensive

accumulated other

the statement where

income components

comprehensive income

net income is presented

(in thousands)

Unrealized gains and losses $ 258 Net securities gains (losses)

on available-for-sale ( 65 ) Income tax expense

securities $ 193 Net of tax

Amortization of $ ( 518 ) (a) Salary and benefits

retirement plan items 46 Income tax expense

$ ( 472 ) Net of tax

Total reclassifications for the period $ ( 279 ) Net of tax

Unrealized gains and losses

Net securities gains (losses)

on available-for-sale

Income tax expense

Amortization of

Salary and benefits

retirement plan items

Income tax expense

Total reclassifications for the period

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

(see Footnote 6 for additional details).

Six Months Ended June 30, 2021

Details about accumulated Amount reclassified from Affected line item in

other comprehensive accumulated other the statement where

income components comprehensive income net income is presented

Nine Months Ended September 30, 2021

Details about accumulated

Amount reclassified from

Affected line item in

other comprehensive

accumulated other

the statement where

income components

comprehensive income

net income is presented

(in thousands)

Unrealized gains and losses $ 106 Net securities gains (losses)

on available-for-sale ( 27 ) Income tax expense

securities $ 79 Net of tax

Amortization of $ ( 1,036 ) (a) Salary and benefits

retirement plan items 92 Income tax expense

$ ( 944 ) Net of tax

Total reclassifications for the period $ ( 865 ) Net of tax

Unrealized gains and losses

Net securities gains (losses)

on available-for-sale

Income tax expense

Amortization of

Salary and benefits

retirement plan items

Income tax expense

Total reclassifications for the period

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

1 unchanged sentence

The Corporation leases certain branches under operating leases.

At June 30, 2022, the Corporation had lease liabilities totaling $6,304,000 and right-of-use assets totaling $6,271,000 related to these leases.

At September 30, 2022, the Corporation had lease liabilities totaling $ 6,095,000 and right-of-use assets totaling $ 6,056,000 related to these leases.

At December 31, 2021, the Corporation had lease liabilities totaling $ 6,218,000 and right-of-use assets totaling $ 6,197,000 related to these leases.

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

At June 30, 2022, 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 2.19%.

At September 30, 2022, the weighted average remaining lease term for operating leases was 9.7 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.19 %.

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, 2022

Nine Months Ended

(Dollar amounts in thousands)

September 30, 2022

Operating lease cost

5 unchanged sentences

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

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2022 were as follows:

(Dollar amounts in thousands) June 30, 2022

Twelve Months Ended June 30,

Thereafter 2,962

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2022 were as follows:

(Dollar amounts in thousands)

September 30, 2022

Twelve Months Ended September 30,

Total Future Minimum Lease Payments

1 unchanged sentence

Present Value of Net Future Minimum Lease Payments

Subsequent Event

On July 12, 2022, the Corporation sold seven classified non farm non residential commercial loans, which were acquired in the two acquisitions in 2019 and 2021, with a total principal balance of $14.9 million.

The net recovery on the sale of $361,000 was a result of the charge-off of the seven loans of $2.1 million, netted by the reserve on those loans and the unamortized discount remaining from the acquisitions.

The loan sale was evaluated to determine if it should be classified as held for sale as of June 30, 2022.

The loan sale did not meet the criteria to be classified as held for sale as of June 30, 2022.

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

and Quantitative and Qualitative Disclosures About Market Risk

Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk

The purpose of this discussion is to point out key factors in the Corporation’s recent performance compared with earlier periods.

34 unchanged sentences

The allowance for credit losses is determined based on management’s assessment of several factors:

reviews and evaluations of specific loans, changes in the nature and volume of the

loan portfolio, current economic conditions, nonperforming loans, determination of acquired loans as purchase credit deteriorated, and reasonable and supportable forecasts.

reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions, nonperforming loans, determination of acquired loans as purchase credit deteriorated, and reasonable and supportable forecasts.

Loans are individually evaluated when they do not share risk characteristics with other loans in the respective pool.

3 unchanged sentences

Management utilizes a cohort methodology to determine the allowance for credit losses.

This method identifies and

captures the balance of a pool of loans with similar risk characteristics, as of a particular point in time to form a cohort, then tracks the respective losses generated by that cohort of loans over their remaining life.

This method identifies and captures the balance of a pool of loans with similar risk characteristics, as of a particular point in time to form a cohort, then tracks the respective losses generated by that cohort of loans over their remaining life.

The cohorts track loan balances and historical loss experience since 2008, and management extends the look back period each quarter to capture all available data points in the historical loss rate calculation.

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As such, reversion from forecast rates to historical loss rates is immediate.

The ACL and allowance for unfunded commitments were $48.3 million and $3.0 million, respectively at December 31, 2021, compared to $43.6 million and $3.4 million, respectively at December 31, 2020.

The $4.7 million increase in the ACL was primarily attributable to the acquisition completed during 2021, offset by a reduction in our qualitative factors related to the COVID pandemic.

The qualitative amount of the reserve increased $631 thousand to $14.3 million.

The quantitative amount is $33.6 million compared to $29.9 million for the previous period.

The $400 thousand decrease in the allowance for unfunded commitments was primarily a result of the removal of our COVID related qualitative factors.

The ACL and allowance for unfunded commitments were $39.5 million and $2.1 million, respectively at September 30, 2022, compared to $48.3 million and $3.0 million, respectively at December 31, 2021.

The $8.8 million decrease in the ACL was the result of several factors.

The first was the annual model recalibration.

Additionally, the qualitative factors were lower from the seasoning of the acquired loans, as well as lower qualitative factors, due to the sale of non farm non residential commercial loans in the third quarter.

Finally, the reserve was impacted by improved portfolio performance.

The qualitative amount of the reserve decreased $3.9 million to $10.4 million.

The quantitative amount is $28.9 million at September 30, 2022, compared to $33.6 million at December 31, 2021.

There was a $900 thousand decrease in the allowance for unfunded commitments.

See additional discussion of ACL in the Allowance for Credit Losses section below.

Based on management’s analysis of the current portfolio, management believes the allowance is adequate.Changes in the financial condition of individual borrowers, economic conditions, historical loss experience, or the condition of the various markets in which collateral may be sold may affect the required level of the allowance for credit losses and the associated provision for credit losses.

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Summary of Operating Results

Net income for the three months ended June 30, 2022 was $15.6 million, compared to $16.6 million for the same period in 2021.

Basic earnings per share increased to $1.27 for the first quarter of 2022 compared to $1.24 for the same period in 2021.

Return on Assets and Return on Equity were 1.24% and 12.64% respectively, for the three months ended June 30, 2022 compared to 1.40% and 11.06% for the three months ended June 30, 2021.

Net income for the six months ended June 30, 2022 was $36.5 million, compared to $29.5 million for the same period in 2021.

Basic earnings per share increased to $2.95 for the first six months of 2022 compared to $2.19 for the same period in 2021.

Return on Assets and Return on Equity were 1.43% and 13.80% respectively, for the six months ended June 30, 2022, compared to 1.26% and 9.82% for the six months ended June 30, 2021.

Net income for the three months ended September 30, 2022 was $18.1 million, compared to $16.1 million for the same period in 2021.

Basic earnings per share increased to $1.50 for the third quarter of 2022 compared to $1.24 for the same period in 2021.

Return on Assets and Return on Equity were 1.43% and 15.00% respectively, for the three months ended September 30, 2022 compared to 1.34% and 10.75% for the three months ended September 30, 2021.

Net income for the nine months ended September 30, 2022 was $54.6 million, compared to $45.6 million for the same period in 2021.

Basic earnings per share increased to $4.45 for the first nine months of 2022 compared to $3.42 for the same period in 2021.

Return on Assets and Return on Equity were 1.43% and 14.14% respectively, for the nine months ended September 30, 2022, compared to 1.28% and 10.10% for the nine months ended September 30, 2021.

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

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The merger resulted in increased efficiencies, which were recognized in the first quarter of 2022.

On October 31, 2022, 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 consolidated seven of its seventy-two branches.

These consolidations are projected to save the Corporation approximately $1.5 million per year in operating expenses, commencing in the first quarter of 2023.

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 increased $4.8 million in the three months ended June 30, 2022 to $40.5 million from $35.6 million in the same period in 2021.

The net interest margin for the three months ended June 30, 2022 is 3.46% compared to 3.23% for the same period in 2021, a 7.17% increase.

Net interest income increased $7.7 million in the six months ended June 30, 2022 to $78.3 million from $70.5 million in the same period in 2021.

The net interest margin for the six months ended June 30, 2022 is 3.31% compared to 3.25% for the same period in 2021.

Net interest income increased $7.1 million in the three months ended September 30, 2022 to $43.1 million from $36.0 million in the same period in 2021.

The net interest margin for the three months ended September 30, 2022 is 3.71% compared to 3.22% for the same period in 2021, a 15.37% increase.

Net interest income increased $14.8 million in the nine months ended September 30, 2022 to $121.4 million from $106.6 million in the same period in 2021.

The net interest margin for the nine months ended September 30, 2022 is 3.44% compared to 3.24% for the same period in 2021.

Interest rates increased significantly from 2021 to 2022, due to federal rate adjustments.

Non-Interest Income

Non-interest income for the three months ended June 30, 2022 was $10.3 million compared to $10.9 million for the same period of 2021.

Non-interest income for the six months ended June 30, 2022 was $24.0 million compared to $20.2 million for the same period in 2021.

Non-interest income for the three months ended September 30, 2022 was $12.1 million compared to $11.1 million for the same period of 2021.

Non-interest income for the nine months ended September 30, 2022 was $36.1 million compared to $31.3 million for the same period in 2021.

The change in non-interest income from 2021 to 2022 was primarily driven by a $4.0 million legal settlement received in February, 2022.

The Corporation does not expect this income to reoccur.

In addition gains from the sale of mortgage loans declined $1.0 million for the three months ended September 30, 2022 compared to September 30, 2021, and $2.6 million for the nine months ended September 30, 2022 compared to September 30, 2021.

Non-Interest Expenses

The Corporation’s non-interest expense for the quarter ended June 30, 2022 was $30.7 million compared to $28.0 million for the same period in 2021.

The Corporation's non-interest expense for the six months ended June 30, 2022 increased $6.4 million to $62.0 million compared to the same period in 2021.

The Corporation’s non-interest expense for the quarter ended September 30, 2022 was $31.5 million compared to $28.5 million for the same period in 2021.

The Corporation’s non-interest expense for the nine months ended September 30, 2022 increased $9.4 million to $93.5 million compared to the same period in 2021.

The year-over-year changes are, in part, impacted by the acquisition of Hancock Bancorp in the fourth quarter of 2021.

Allowance for Credit Losses

The Corporation’s provision for credit losses increased to $750 thousand for the first quarter of 2022 as compared to $(2.2) million for the same period in 2021.

Net recoveries for the second quarter of 2022 were $202 thousand compared to $152 thousand for the same period of 2021.

The Corporation’s provision for credit losses increased to $1.1 million for the third quarter of 2022 as compared to $(1.5) million for the same period in 2021.

Net charge-offs for the third quarter of 2022 were $3.0 million compared to $270 thousand for the same period of 2021.

In 2021 the potential losses from the original CECL calculation were not realized, and the economy had shown improvements which allowed for the decrease in provision.

The provision for loan losses decreased $4.1 million to $(5.8) million for the six months ended June 30, 2022 compared to $(1.7) million for the same period in 2021.

Net charge offs for the first six months of 2022 increased $461 thousand to $1.0 million compared to the same period in 2021.

The provision for loan losses decreased $1.5 million to $(4.8) million for the nine months ended September 30, 2022 compared to $(3.2) million for the same period in 2021.

Net charge offs for the first nine months of 2022 increased $3.2 million to $4.1 million compared to the same period in 2021.

The negative provision for the year was the result of several factors.

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Based on management’s analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate.

The net recovery on the sale of $361 thousand includes the charge-off of the seven loans of $2,145 thousand, netted by the $2,072 thousand reserve on those loans, previously charged off in the period, and the $434 thousand unamortized discount remaining from the acquisitions.

As the related charge offs were previously reserved for and related to acquired loans, the increase in net charge offs for the quarter does not have a significant impact on the future expected losses.

Income Tax Expense

The Corporation’s effective income tax rate for the first six months of 2022 was 20.69% compared to 20.02% for the same period in 2021.

The Corporation’s effective income tax rate for the first nine months of 2022 was 20.61% compared to 20.07% for the same period in 2021.

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 $13.5 million at June 30, 2022 compared to $14.9 million at December 31, 2021.

Nonperforming loans decreased 32.5% compared to $20.0 million as of June 30, 2021.

A summary of non-performing loans at June 30, 2022 and December 31, 2021 follows:

June 30, 2022 December 31, 2021

Non-performing loans decreased to $14.3 million at September 30, 2022 compared to $14.9 million at December 31, 2021.

Nonperforming loans decreased 26.8% compared to $19.5 million as of September 30, 2021.

A summary of non-performing loans at September 30, 2022 and December 31, 2021 follows:

September 30, 2022

December 31, 2021

Non-accrual loans

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Accruing loans past due over 90 days

$ 13,509 $ 14,904

Ratio of the allowance for credit losses

as a percentage of non-performing loans 307.0 % 324.1 %

Ratio of the allowance for credit losses as a percentage of non-performing loans

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

June 30, 2022 December 31, 2021

September 30, 2022

December 31, 2021

Non-accrual loans

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Consumer loans

$ 8,383 $ 9,590

Past due 90 days or more

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113 remaining loans are still under a debt relief plan, which include no commercial loans that have been provided additional payment relief since the initial payment relief plan.

There are no loans under the original payment relief plan.

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

Interest Rate Sensitivity and Liquidity

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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, 2022.

The table below shows the Corporation’s estimated sensitivity profile as of September 30, 2022.

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

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

Basis Point Percentage Change in Net Interest Income

Interest Rate Change 12 months 24 months 36 months

Down 200 -11.45 % -21.62 % -27.44 %

Down 100 -4.95 -9.69 -12.71

Up 100 3.98 7.25 10.01

Up 200 4.37 10.73 16.30

Percentage Change in Net Interest Income

Interest Rate Change

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

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Financial Condition

Comparing the first six months of 2022 to year-ended December 31, 2021, loans net of deferred loan costs, have increased $72 million to $2.9 billion.

Deposits decreased 0.6% to $4.4 billion at June 30, 2022 compared to December 31, 2021.

Comparing the first nine months of 2022 to year-ended December 31, 2021, loans net of deferred loan costs, have increased $155 million to $3.0 billion.

Deposits decreased 0.05% to $4.4 billion at September 30, 2022 compared to December 31, 2021.

Shareholders’ equity decreased 24.71% or $144.0 million.

This financial performance decreased book value per share 16.84% to $38.36 at June 30, 2022 from $46.13 at December 31, 2021.

Comparing the first six months of 2022 to the same period in 2021, loans, net of deferred loan costs, have increased $319 million to $2.9 billion.

Deposits increased 9.9% to $4.4 billion at June 30, 2022 compared to June 30, 2021.

This financial performance decreased book value per share 20.90% to $36.49 at September 30, 2022 from $46.13 at December 31, 2021.

Comparing the first nine months of 2022 to the same period in 2021, loans, net of deferred loan costs, have increased $491 million to $3.0 billion.

Deposits increased 9.4% to $4.4 billion at September 30, 2022 compared to September 30, 2021.

Shareholders’ equity decreased 26.27% or $156.3 million.

This financial performance decreased book value per share 14.90% to $38.36 at June 30, 2022 from $45.08 at June 30, 2021.

This financial performance decreased book value per share 21.06% to $36.49 at September 30, 2022 from $46.22 at September 30, 2021.

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

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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, 2022, we processed approximately $272 million of approved PPP loans.

The carrying value of these loans is $5 million as of June 30, 2022.

Through September 30, 2022, we processed approximately $272 million of approved PPP loans.

The carrying value of these loans is $880 thousand as of September 30, 2022.

Capital Adequacy

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Currently the Corporation exceeds all of these minimums.

June 30, 2022 December 31, 2021 To Be Well Capitalized

September 30, 2022

December 31, 2021

To Be Well Capitalized

Common equity tier 1 capital

Corporation 13.51 % 14.37 % N/A

First Financial Bank

Total risk-based capital

Corporation 14.65 % 15.63 % N/A

First Financial Bank

Tier I risk-based capital

Corporation 13.51 % 14.37 % N/A

First Financial Bank

Tier I leverage capital

Corporation 9.97 % 9.83 % N/A

First Financial Bank

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