What changed in this filing

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Item 1. Financial Statements

2024-11-06 compared with 2024-08-07 · 202 added, 153 removed, 993 unchanged (26% of the section changed)

3 unchanged sentences

(Dollar amounts in thousands, except per share data)

September 30,

Cash and due from banks

34 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

INTEREST INCOME:

13 unchanged sentences

Other service charges and fees

Securities gains (losses), net

Interchange income

9 unchanged sentences

Provision for income taxes

OTHER COMPREHENSIVE INCOME

OTHER COMPREHENSIVE INCOME (LOSS)

Change in unrealized gains/(losses) on securities, net of reclassifications and taxes

Change in funded status of post retirement benefits, net of taxes

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME (LOSS)

PER SHARE DATA

5 unchanged sentences

Three Months Ended

June 30, 2024, and 2023

September 30, 2024, and 2023

(Dollar amounts in thousands, except per share data)

1 unchanged sentence

Income/(Loss)

Balance, April 1, 2023

Balance, July 1, 2023

Other comprehensive income (loss)

1 unchanged sentence

Treasury shares purchased ( 228,457 shares)

Cash dividends, $ .54 per share

Balance, June 30, 2023

Balance, April 1, 2024

Balance, September 30, 2023

Balance, July 1, 2024

Other comprehensive income (loss)

1 unchanged sentence

Cash dividends, $ .45 per share

Balance, June 30, 2024

Balance, September 30, 2024

See accompanying notes.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Six Months Ended

June 30, 2024, and 2023

Nine Months Ended

September 30, 2024, and 2023

(Dollar amounts in thousands, except per share data)

6 unchanged sentences

Cash dividends, $ .54 per share

Balance, June 30, 2023

Balance, September 30, 2023

Balance, January 1, 2024

4 unchanged sentences

Cash dividends, $ .90 per share

Balance, June 30, 2024

Balance, September 30, 2024

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:

2 unchanged sentences

Provision for credit losses

Securities (gains)/losses

Depreciation and amortization

4 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales of securities available-for-sale

Calls, maturities and principal reductions on securities available-for-sale

2 unchanged sentences

Net change in federal funds sold

Redemption of restricted stock

Purchase of restricted stock

Cash received (disbursed) from acquisitions, net

Proceeds from sales of other real estate owned

9 unchanged sentences

( 1,604,877 )

( 1,355,000 )

NET CASH FROM FINANCING ACTIVITIES

5 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying June 30, 2024 and 2023 consolidated financial statements are unaudited.

The accompanying September 30, 2024 and 2023 consolidated financial statements are unaudited.

The December 31, 2023 consolidated financial statements are as reported in the First Financial Corporation (the “Corporation”) 2023 annual report.

11 unchanged sentences

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

For the six months ended 2024 and 2023, 27,803 and 22,228 shares were awarded, respectively.

For the nine months ended 2024 and 2023, 27,803 and 22,228 shares were awarded, respectively.

These shares had a grant date value of $ 1.0 million and $ 1.0 million for 2024 and 2023, vest over three years , and their grant is not subject to future performance measures.

Outstanding shares are increased at the award date for the total shares awarded.

On July 1, 2024, the Corporation completed its acquisition of SimplyBank.

Therefore, the results of SimplyBank have been included in the results of operations beginning on July 1, 2024.

See footnote 12, Acquisitions, for more information.

New accounting standards

17 unchanged sentences

Early adoption is permitted.

A public entity should apply the amendments retrospectively to all periods presented in the financial statements.

A public entity should apply the amendments

retrospectively to all periods presented in the financial statements.

The Corporation is assessing ASU 2023-07 and its effect on its consolidated financial statements and related disclosures.

7 unchanged sentences

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, 2024

September 30, 2024

(Dollar amounts in thousands)

Beginning balance

PCD ACL on acquired loans

Provision for credit losses

2 unchanged sentences

Allowance for Credit Losses:

June 30, 2023

September 30, 2023

(Dollar amounts in thousands)

3 unchanged sentences

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, 2024

September 30, 2024

(Dollar amounts in thousands)

Beginning balance

PCD ACL on acquired loans

Provision for credit losses

2 unchanged sentences

Allowance for Credit Losses:

June 30, 2023

September 30, 2023

(Dollar amounts in thousands)

4 unchanged sentences

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

June 30, 2024

September 30, 2024

90 Days Still

18 unchanged sentences

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

June 30, 2024

September 30, 2024

Collateral Type

16 unchanged sentences

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

June 30, 2024

September 30, 2024

(Dollar amounts in thousands)

18 unchanged sentences

or a permanent reduction of the recorded investment in the loan.

The following table presents the amortized cost of loans and leases at June 30, 2024 that were both experiencing financial difficulty and modified during the twelve months ended June 30, 2024, by class and by type of modification.

The following table presents the amortized cost of loans and leases at September 30, 2024 that were both experiencing financial difficulty and modified during the twelve months ended September 30, 2024, by class and by type of modification.

The percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each class of financial receivable is also presented below.

6 unchanged sentences

The Corporation closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table presents the performance of such loans that have been modified in the last twelve months:

June 30, 2024

(Dollar amounts in thousands)

Motor Vehicle

The following table presents the financial effect of loan and lease modifications presented above to borrowers experiencing financial difficulty for the twelve months ended June 30, 2024.

All loans and leases that have been modified during the twelve months ended September 30, 2024 are in a current status of repayment.

The following table presents the financial effect of loan and lease modifications presented above to borrowers experiencing financial difficulty for the twelve months ended September 30, 2024.

Interest Rate

1 unchanged sentence

Motor Vehicle

The following table presents the amortized cost basis of loans that had a payment default during the twelve months ended June 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty .

The following table presents the amortized cost basis of loans that had a payment default during the twelve months ended September 30, 2024 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty .

Interest Rate

22 unchanged sentences

These balances do not include accrued interest:

June 30, 2024

September 30, 2024

Term Loans at Amortized Cost Basis by Origination Year

39 unchanged sentences

These balances do not include accrued interest:

June 30, 2024

September 30, 2024

Term Loans at Amortized Cost Basis by Origination Year

37 unchanged sentences

All securities are classified as available-for-sale.

June 30, 2024

September 30, 2024

(Dollar amounts in thousands)

15 unchanged sentences

Collateralized debt obligations

Contractual maturities of debt securities at June 30, 2024 were as follows.

Contractual maturities of debt securities at September 30, 2024 were as follows.

Available-for-Sale

5 unchanged sentences

Mortgage-backed securities and collateralized mortgage obligations

There were no gross gains and losses from investment sales/calls realized by the Corporation for the three and six months ended June 30, 2024, and June 30, 2023.

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, 2024 and December 31, 2023.

June 30, 2024

For the three and nine months ended September 30, 2024, there were $ 132 thousand and $ 133 thousand in gross gains and $ 29 thousand in gross losses for both periods.

There were no gross gains and losses from investment sales/calls realized by the Corporation for the three and nine months ended September 30, 2023.

September 30, 2024

Less Than 12 Months

25 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 $ 166.1 million as of June 30, 2024 and $ 157.8 million as of December 31, 2023.

Gross unrealized losses on investment securities were $ 127.5 million as of September 30, 2024 and $ 157.8 million as of December 31, 2023.

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.

5 unchanged sentences

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 month period ended June 30, 2024 and 2023:

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, 2024 and 2023:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollar amounts in thousands)

4 unchanged sentences

The Corporation invests in qualified affordable housing projects.

The balance of investment for qualified housing projects was $ 28.9 million at June 30, 2024 and $ 7.8 million at December 31, 2023.

The balance of investment for qualified housing projects was $ 28.0 million at September 30, 2024 and $ 7.8 million at December 31, 2023.

See footnote 2, New accounting standards, for the impact of the adoption of ASU 2023-02.

These balances are reflected in the other assets line on the consolidated balance sheets.

Total unfunded commitments related to the investments in qualified affordable housing projects totaled $ 20.6 million at June 30, 2024.

Total unfunded commitments related to the investments in qualified affordable housing projects totaled $ 19.9 million at September 30, 2024.

The Corporation expects to fulfill these commitments by the end of December 31, 2037.

The Corporation recognized amortization expense of $ 211 thousand during the six months ended June 30, 2024, and $ 390 thousand during the six months ended June 30, 2023, which was included within other noninterest expense on the consolidated statements of income.

The Corporation recognized amortization expense of $ 847 thousand during the six months ended June 30, 2024, which was included within income tax expense on the consolidated statements of income.

Additionally, the Corporation recognized tax credits and other benefits from its investment in affordable housing tax credits of $ 1.6 million during the six months ended June 30, 2024, and $ 674 thousand during the six months ended June 30, 2023.

The Corporation recognized amortization expense of $ 232 thousand during the nine months ended September 30, 2024, and $ 585 thousand during the nine months ended September 30, 2023, which was included within other noninterest expense on the consolidated statements of income.

The Corporation recognized amortization expense of $ 1.7 million during the nine months ended September 30, 2024, which was included within income tax expense on the consolidated statements of income.

Additionally, the Corporation recognized tax credits and other benefits from its investment in affordable housing tax credits of $ 2.4 million during the nine months ended September 30, 2024, and $ 1.4 million during the nine months ended September 30, 2023.

820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

15 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, 2024

September 30, 2024

Fair Value Measurements Using

24 unchanged sentences

There were no transfers between Level 1 and Level 2 during 2024 and 2023.

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, 2024 and the year ended December 31, 2023.

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, 2024 and the year ended December 31, 2023.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Three Months Ended

June 30, 2024

September 30, 2024

Collateralized

1 unchanged sentence

debt obligations

Beginning balance, April 1

Beginning balance, July 1

Total realized/unrealized gains or losses

1 unchanged sentence

Included in other comprehensive income

Ending balance, June 30

Ending balance, September 30

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

Six Months Ended

June 30, 2024

Nine Months Ended

September 30, 2024

Collateralized

5 unchanged sentences

Included in other comprehensive income

Ending balance, June 30

Ending balance, September 30

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

9 unchanged sentences

Other real estate owned is valued at Level 3.

Other real estate owned at June 30, 2024 with a value of $ 170 thousand was reduced by $ 32 thousand for fair value adjustment.

At June 30, 2024 other real estate owned was comprised of $ 170 thousand from residential loans.

Other real estate owned at September 30, 2024 with a value of $ 169 thousand was reduced by $ 45 thousand for fair value adjustment.

At September 30, 2024 other real estate owned was comprised of $ 28 thousand from commercial loans and $ 141 thousand from residential loans.

Other real estate owned at December 31, 2023 with a value of $ 107 thousand was reduced by $ 57 thousand for fair value adjustment.

16 unchanged sentences

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

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at June 30, 2024.

The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at September 30, 2024.

(Dollar amounts in thousands)

25 unchanged sentences

0.00 %- 100.00

The carrying amounts and estimated fair value of financial instruments at June 30, 2024 and December 31, 2023, are shown below.

The carrying amounts and estimated fair value of financial instruments at September 30, 2024 and December 31, 2023, 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, 2024

September 30, 2024

(Dollar amounts in thousands)

26 unchanged sentences

(Dollar amounts in thousands)

June 30, 2024

September 30, 2024

December 31, 2023

8 unchanged sentences

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

June 30, 2024

September 30, 2024

Repurchase Agreements

10 unchanged sentences

Other borrowings:

Other borrowings at June 30, 2024 and December 31, 2023 are summarized as follows:

Other borrowings at September 30, 2024 and December 31, 2023 are summarized as follows:

(Dollar amounts in thousands)

June 30, 2024

September 30, 2024

December 31, 2023

2 unchanged sentences

The aggregate minimum annual retirements of other borrowings are as follows:

Twelve Months Ended June 30,

At June 30, 2024 and December 31, 2023, other borrowings are summarized as follows:

Twelve Months Ended September 30,

At September 30, 2024 and December 31, 2023, other borrowings are summarized as follows:

The Corporation’s subsidiary bank is a member of the Federal Home Loan Bank (FHLB) and accordingly are permitted to obtain advances.

There are $ 83.6 million of advances from the FHLB at June 30, 2024, and $ 108.6 million of advances at December 31, 2023.

There are $ 7.5 million of advances from the FHLB at September 30, 2024, and $ 108.6 million of advances at December 31, 2023.

FHLB advances are, generally due in full at maturity.

They are secured by eligible securities and a blanket pledge on real estate loan collateral.

In addition the Corporation secured a note payable to a commercial bank in the quarter for $ 25 million.

In addition the Corporation secured a note payable to a commercial bank in the second quarter 2024.

The balance at September 30, 2024 is $ 23 million.

Components of Net Periodic Benefit Cost

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Post-Retirement

12 unchanged sentences

First Financial Corporation previously disclosed in its financial statements for the year ended December 31, 2023 that it expected to contribute $ 3.9 million and $ 604 thousand respectively to its Pension Plan and ESOP and $ 249 thousand to the Post Retirement Health Benefits Plan in 2024.

Contributions of $ 526 thousand have been made to the Pension Plan thus far in 2024.

Contributions of $ 134 thousand have been made through the first six months of 2024 for the Post Retirement Health Benefits plan.

Contributions of $ 3.0 million have been made to the Pension Plan thus far in 2024.

Contributions of $ 161 thousand have been made through the first nine months of 2024 for the Post Retirement Health Benefits plan.

No contributions have been made in 2024 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 2024 and 2023 there has been $ 1.6 million and $ 1.3 million of expense accrued for potential contributions to these alternative retirement benefit options.

In the first nine months of 2024 and 2023 there has been $ 2.4 million and $ 1.9 million of expense accrued for potential contributions to these alternative retirement benefit options.

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, 2024 and 2023.

The following table presents the Corporation’s sources of Non-Interest Income for the three and nine months ended September 30, 2024 and 2023.

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)

1 unchanged sentence

Service charges on deposits and debit card fee income

Asset management fees

Trust and financial services

Interchange income

1 unchanged sentence

Loan servicing fees (a)

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

Other service charges and fees (a)

1 unchanged sentence

(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, 2024 and June 30, 2023, totaling $ 79 thousand and $ ( 37 ) thousand, respectively, and for the six months ended for the same periods, totaling $ 87 thousand and $ ( 31 ) 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, 2024 and September 30, 2023, totaling $ ( 25 ) thousand and zero , respectively, and for the nine months ended for the same periods, totaling $ 61 thousand and $ ( 31 ) thousand, which is within the scope of ASC 606;

the remaining balance is outside the scope of ASC 606.

5 unchanged sentences

Service charges on deposits are withdrawn from the customer’s account balance.

Asset management fees :

Trust and financial services :

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

11 unchanged sentences

In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

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, 2024 and 2023.

Accumulated Other Comprehensive Income (Loss)

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, 2024 and 2023.

(Losses) on available-

(Dollar amounts in thousands)

Beginning balance, April 1,

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,

Ending balance, September 30,

(Losses) on available-

4 unchanged sentences

Net current period other comprehensive income (loss)

Ending balance, June 30,

Ending balance, September 30,

(Losses) on available-

(Dollar amounts in thousands)

Beginning balance, April 1,

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,

Ending balance, September 30,

(Losses) on available-

4 unchanged sentences

Net current period other comprehensive income (loss)

Ending balance, June 30,

Ending balance, September 30,

Current Period

22 unchanged sentences

Unrealized gain (loss) on retirement plans

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Details about accumulated

19 unchanged sentences

(see Footnote 7 for additional details).

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Details about accumulated

19 unchanged sentences

(see Footnote 7 for additional details).

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Details about accumulated

19 unchanged sentences

(see Footnote 7 for additional details).

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Details about accumulated

20 unchanged sentences

The Corporation leases certain branches under operating leases.

At June 30, 2024, the Corporation had lease liabilities totaling $ 5,468,000 and right-of-use assets totaling $ 5,396,000 related to these leases.

At September 30, 2024, the Corporation had lease liabilities totaling $ 8,067,000 and right-of-use assets totaling $ 7,978,000 related to these leases.

At December 31, 2023, the Corporation had lease liabilities totaling $ 5,456,000 and right-of-use assets totaling $ 5,392,000 related to these leases.

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

At June 30, 2024, the weighted average remaining lease term for operating leases was 8.5 years and the weighted average discount rate used in the measurement of operating lease liabilities was 2.28 %.

At September 30, 2024, the weighted average remaining lease term for operating leases was 11.0 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.19 %.

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:

Six Months Ended

Nine Months Ended

(Dollar amounts in thousands)

June 30, 2024

September 30, 2024

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, 2024 were as follows:

The right-of-use assets obtained above includes $ 2.8 million in assets acquired in the SimplyBank acquisition.

Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2024 were as follows:

(Dollar amounts in thousands)

June 30, 2024

Twelve Months Ended June 30,

September 30, 2024

Twelve Months Ended September 30,

Total Future Minimum Lease Payments

1 unchanged sentence

Present Value of Net Future Minimum Lease Payments

Subsequent Events

On July 1, 2024, First Financial Corporation, an Indiana corporation (“FFC”) and First Financial Bank, National Association, a national banking association and wholly-owned subsidiary of FFC (“First Financial Bank”) completed their previously announced acquisition of SimplyBank., a Tennessee-chartered commercial bank (“SimplyBank”), pursuant to the Agreement and Plan of Reorganization by and among FFC, First Financial Bank, SimplyBank, and FFB Interim Bank, National Association, a wholly owned subsidiary of FFC (“Merger Sub”) dated as of November 13, 2023 (the “Merger Agreement”).

On the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub merged with and into SimplyBank (the “Interim Merger”), with SimplyBank continuing as the surviving entity.

Immediately following the Interim Merger, SimplyBank merged with and into First Financial Bank, with First Financial Bank as the surviving entity (the “Bank Merger”).

On July 1, 2024, the Corporation completed its acquisition of SimplyBank.

Therefore, the results of SimplyBank have been included in the results of operations beginning on July 1, 2024.

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Interim Merger (the “Effective Time”), other than dissenting shares, each share of SimplyBank Common Stock issued and outstanding immediately prior to the Effective Time, was converted into the right to receive $ 718.38 per share in cash.

The aggregate value of the transaction was approximately $ 73.4 million.

Acquisition-related costs of $ 1.7 million are included in the Corporation’s income statement for the year-to-date period ended September 30, 2024.

Goodwill of $10.3 million arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies.

The goodwill value is subject to change pending receipt of the final valuation.

The goodwill for SimplyBank is deductible for income tax purposes as the transaction was accounted for as a taxable acquisition.

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)

Consideration

Cash consideration

Fair value of total consideration transferred

Assets acquired

Investment securities available-for-sale

Federal funds sold

Bank owned life insurance

Federal Home Loan Bank stock

Premises and equipment

Core deposit intangibles

Total assets acquired

Liabilities assumed

FHLB advances

Other liabilities

Total liabilities assumed

Net identifiable assets

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

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

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 deteriorated loans, which have shown evidence of credit deterioration since origination.

The fair value of purchased financial assets with credit deterioration was $ 1.7 million on the date of acquisition.

The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $ 4.7 million.

The Corporation estimates, on the date of acquisition, that $ 3.0 million of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.

The following table presents supplemental pro forma information as if the acquisition had occurred at the beginning of 2023.

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.

Nine Months Ended September 30,

(Dollar amounts in thousands, except per share data)

Net interest income

Basic and diluted earnings per share

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

55 unchanged sentences

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

The ACL and allowance for unfunded commitments were $38.3 million and $1.7 million, respectively at June 30, 2024, compared to $39.8 million and $2.0 million, respectively at December 31, 2023.

The qualitative amount of the reserve decreased $421 thousand to $10.5 million.

The quantitative amount is $27.8 million at June 30, 2024, compared to $28.4 million at December 31, 2023.

The ACL and allowance for unfunded commitments were $46.2 million and $1.8 million, respectively at September 30, 2024, compared to $39.8 million and $2.0 million, respectively at December 31, 2023.

The qualitative amount of the reserve increased $1.6 million to $12.6 million.

The quantitative amount is $33.3 million at September 30, 2024, compared to $28.4 million at December 31, 2023.

There was a decrease of $200 thousand in the allowance for unfunded commitments.

4 unchanged sentences

Summary of Operating Results

Net income for the three months ended June 30, 2024 was $11.4 million, compared to $16.0 million for the same period in 2023.

Basic earnings per share decreased to $0.96 for the second quarter of 2024 compared to $1.33 for the same period in 2023.

Return on average assets and return on average equity were 0.94% and 8.78% respectively, for the three months ended June 30, 2024 compared to 1.34% and 12.75% for the three months ended June 30, 2023.

Net income for the six months ended June 30, 2024 was $22.3 million, compared to $32.0 million for the same period in 2023.

Basic earnings per share decreased to $1.89 for the first six months of 2024 compared to $2.66 for the same period in 2023.

Return on average assets and return on average equity were 0.93% and 8.57% respectively, for the six months ended June 30, 2024 compared to 1.33% and 12.92% for the six months ended June 30, 2023.

Net income for the three months ended September 30, 2024 was $8.7 million, compared to $16.3 million for the same period in 2023.

Basic earnings per share decreased to $0.74 for the third quarter of 2024 compared to $1.37 for the same period in 2023.

Return on average assets and return on average equity were 0.64% and 6.39% respectively, for the three months ended September 30, 2024 compared to 1.35% and 13.19% for the three months ended September 30, 2023.

Net income for the nine months ended September 30, 2024 was $31.0 million, compared to $48.3 million for the same period in 2023.

Basic earnings per share decreased to $2.63 for the first nine months of 2024 compared to $4.02 for the same period in 2023.

Return on average assets and return on average equity were 0.82% and 7.80% respectively, for the nine months ended September 30, 2024 compared to 1.33% and 12.98% for the nine months ended September 30, 2023.

In light of events in the banking sector, including bank failures, continuing interest rate activity and recessionary concerns, the Corporation has proactively positioned the balance sheet to mitigate the risks affecting the Corporation and the overall banking industry in order to serve its clients and communities.

● Liquidity remains strong, with cash and available for sale securities representing approximately 26.7% of assets at June 30, 2024.

● Liquidity remains strong, with cash and available for sale securities representing approximately 24.6% of assets at September 30, 2024.

The Corporation maintains the ability to access considerable sources of contingent liquidity at the Federal Home Loan Bank and several correspondent banks.

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Refer to the section Capital Adequacy , included elsewhere in this report for additional details.

● Asset quality remains solid, with a non-performing asset ratio of 0.39% of total assets as of June 30, 2024 and net charge-offs of 0.39% to average loans and leases, reflecting the Company's disciplined underwriting and conservative lending philosophy

which has supported the Corporation’s strong credit performance during prior financial crises.

● Asset quality remains solid, with a non-performing asset ratio of 0.31% of total assets as of September 30, 2024 and net charge-offs of 0.43% to average loans and leases, reflecting the Company's disciplined underwriting and conservative lending philosophy which has supported the Corporation’s strong credit performance during prior financial crises.

Refer to the section Non-Performing Loan for additional information.

The Corporation will continue its safe and sound banking practices, but the continuing impact of the 2023 crisis and further extent on the Corporation’s operations and financial results for the remainder of 2024 is uncertain and cannot be predicted.

On November 13, 2023, First Financial Corporation, an Indiana corporation ("FFC"), First Financial Bank, National Association, a national banking association and wholly-owned subsidiary of FFC (“First Financial Bank”), and SimplyBank., a Tennessee-chartered commercial bank (“SimplyBank”), entered into an Agreement and Plan of Reorganization (the "Merger Agreement").

Pursuant to the terms of the Merger Agreement, FFC will form an interim national banking association as a wholly-owned subsidiary, which will merge with and into SimplyBank, with SimplyBank as the surviving entity (the "Interim Merger").

Immediately following the Interim Merger, SimplyBank will merge with and into First Financial Bank, with First Financial Bank as the surviving entity (the "Bank Merger," and together with the Interim Merger, the "Transactions").

See Subsequent Events footnote for discussion of the closing of the merger.

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

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

Net interest income decreased $2.9 million in the three months ended June 30, 2024 to $39.3 million from $42.2 million in the same period in 2023.

The net interest margin for the three months ended June 30, 2024 is 3.57% compared to 3.81% for the same period in 2023, a 6.18% decrease.

Net interest income decreased $8.3 million in the six months ended June 30, 2024 to $78.2 million from $86.5 million in the same period in 2023.

The net interest margin for the six months ended June 30, 2024 is 3.55% compared to 3.88% for the same period in 2023.

The increase in yields on net loans and leases of 46 basis points is the primary contributor to the improved yield on average earning assets for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, which was due to market conditions as a result of Federal Reserve interest rate increases.

Comparing the six months ended June 30, 2024 to the six months ended June 30, 2023, the effective rate paid on average interest-bearing deposits increased 82 basis points, due to rate competition in the market.

Net interest income increased $6.0 million in the three months ended September 30, 2024 to $47.2 million from $41.2 million in the same period in 2023.

The net interest margin for the three months ended September 30, 2024 is 3.78% compared to 3.74% for the same period in 2023, a 1.16% increase.

Net interest income decreased $2.3 million in the nine months ended September 30, 2024 to $125.4 million from $127.7 million in the same period in 2023.

The net interest margin for the nine months ended September 30, 2024 is 3.63% compared to 3.83% for the same period in 2023.

The increase in yields on net loans and leases of 44 basis points is the primary contributor to the improved yield on average earning assets for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, which was due to market conditions as a result of Federal Reserve interest rate increases.

Comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023, the effective rate paid on average interest-bearing deposits increased 72 basis points, due to rate competition in the market.

For the same period discussed above, interest paid on other borrowings increased 99 basis points due to higher borrowing rates.

Non-Interest Income

Non-interest income for the three months ended June 30, 2024 was $9.9 million compared to $10.5 million for the same period in 2023.

Non-interest income for the six months ended June 30, 2024 was $19.3 million compared to $19.8 million for the same period in 2023.

Non-interest income for the three months ended September 30, 2024 was $11.2 million compared to $11.6 million for the same period in 2023.

Non-interest income for the nine months ended September 30, 2024 was $30.6 million compared to $31.5 million for the same period in 2023.

Non-Interest Expenses

The Corporation’s non-interest expense for the quarter ended June 30, 2024 was $32.7 million compared to $31.3 million for the same period in 2023.

The Corporation’s non-interest expense for the six months ended June 30, 2024 increased $2.4 million to $66.1 milllion compared to the same period in 2023.

This includes $976 thousand of acquisition related expenses.

The Corporation’s non-interest expense for the quarter ended September 30, 2024 was $38.6 million compared to $32.3 million for the same period in 2023.

The Corporation’s non-interest expense for the nine months ended September 30, 2024 increased $8.7 million to $104.6 milllion compared to the same period in 2023.

This includes $1.7 million of acquisition related expenses, as well as an overall increase in operating expenses as a result of the acquisition.

Allowance for Credit Losses

The Corporation’s provision for credit losses for the three months ended June 30, 2024, was $3.0 million, compared to provision of $1.8 million for the same period of 2023.

Net charge-offs for the second quarter of 2024 were $4.7 million compared to net charge-offs of $1.5 million for the same period of 2023.

The provision for credit losses increased $1.2 million to $4.8 million for the six months ended June 30, 2024, compared to a provision of $3.6 million for the same period in 2023.

Net charge-offs for the first six months of 2024 increased $2.7 million to $6.2 million compared to the same period in 2023.

The increase in provision as well as charge-offs were related to one previously identified credit, reflecting further deterioration in collateral values in the quarter.

The Corporation’s provision for credit losses for the three months ended September 30, 2024, was $9.4 million, compared to provision of $1.2 million for the same period of 2023.

Net charge-offs for the third quarter of 2024 were $4.6 million compared to net charge-offs of $2.1 million for the same period of 2023.

The provision for credit losses increased $9.4 million to $14.2 million for the nine months ended September 30, 2024, compared to a provision of $4.8 million for the same period in 2023.

Net charge-offs for the first nine months of 2024 increased $5.2 million to $10.8 million compared to the same period in 2023.

The Corporation recorded $5.5 million in Day 2 provision on non-PCD loans acquired from SimplyBank.

Additionally, the increase in provision as well as charge-offs were related to one previously identified credit, reflecting further deterioration in collateral values in the quarter.

No further losses are expected on this credit.

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.

In the first six months of 2024, no significant changes were made.

In the first nine months of 2024, no significant changes were made.

Income Tax Expense

The Corporation’s effective income tax rate for the first six months of 2024 was 16.54% compared to 18.21% for the same period in 2023.

Pretax income for the first six months in 2023 was significantly higher than pretax income for first six months in 2024.

The Corporation’s effective income tax rate for the first nine months of 2024 was 16.44% compared to 17.37% for the same period in 2023.

Pretax income for the first nine months in 2023 was significantly higher than pretax income for first nine months in 2024.

Since our permanent differences remained similar, income was the driving factor for the decrease in effective tax rate.

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Non-performing loans consist of (1) non-accrual loans on which the ultimate collectability of the full amount of interest is uncertain, and (2) loans past due ninety days or more as to principal or interest.

Non-performing loans decreased to $15.9 million at June 30, 2024 compared to $24.6 million at December 31, 2023.

Nonperforming loans increased 19.7% compared to $13.3 million as of June 30, 2023.

A summary of non-performing loans at June 30, 2024 and December 31, 2023 follows:

June 30, 2024

Non-performing loans decreased to $14.1 million at September 30, 2024 compared to $24.6 million at December 31, 2023.

Nonperforming loans increased 12.3% compared to $12.6 million as of September 30, 2023.

A summary of non-performing loans at September 30, 2024 and December 31, 2023 follows:

September 30, 2024

December 31, 2023

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

June 30, 2024

September 30, 2024

December 31, 2023

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It is important to note that measures of interest rate risk have limitations and are dependent on various assumptions.

These assumptions are inherently uncertain and, as a result, the model cannot precisely predict the impact of interest rate fluctuations on net interest income.

These assumptions are

inherently uncertain and, as a result, the model cannot precisely predict the impact of interest rate fluctuations on net interest income.

Actual results will differ from simulated results due to timing, frequency and amount of interest rate changes as well as overall market conditions.

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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, 2024.

The table below shows the Corporation’s estimated sensitivity profile as of September 30, 2024.

The change in interest rates assumes a parallel shift in interest rates of 100, 200, and 300 basis points.

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Financial Condition

Comparing the first six months of 2024 to year-ended December 31, 2023, loans net of deferred loan costs, have increased $36 million to $3.2 billion.

Deposits increased 1.03% to $4.1 billion at June 30, 2024 compared to December 31, 2023.

Other borrowings remain unchanged at $108.6 million at June 30, 2024 compared to December 31, 2023.

Shareholders’ equity increased 0.51% or $2.7

This financial performance increased book value per share 0.36% to $44.92 at June 30, 2024 from $44.76 at December 31, 2023.

Comparing the first nine months of 2024 to year-ended December 31, 2023, loans net of deferred loan costs, have increased $547 million to $3.7 billion.

Deposits increased 15.3% to $4.7 billion at September 30, 2024 compared to December 31, 2023.

Other borrowings decreased $78.1 million to $30.5 million at September 30, 2024 compared to December 31, 2023.

Shareholders’ equity increased 7.19% or $38.0 million.

This financial performance increased book value per share 7.08% to $47.93 at September 30, 2024 from $44.76 at December 31, 2023.

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

Accumulated other comprehensive loss decreased $7.4 million primarily due to the market value of the securities portfolio, which reflected the decrease in securities pricing.

Accumulated other comprehensive loss increased $24.3 million primarily due to the market value of the securities portfolio, which reflected the increase in securities pricing.

Capital Adequacy

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Currently the Corporation exceeds all of these minimums.

June 30, 2024

September 30, 2024

December 31, 2023

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

What changed 10-Q

Item 1. Financial Statements