annual report
2023
133
CONSECUTIVE
QUARTERS OF
PROFITABILITY
YEARS OF
STRENGTH &
STABILITY
160
Net Income
(dollars in millions)
$255.9
$217.6
$205.2
$198.1
$155.8
2019
2020
2021
2022
2023
Total Assets
(dollars in billions)
$16.0
$16.3
$17.0
$17.5
$14.5
Total Loans
(dollars in billions)
$9.9
$9.2
$9.3
$10.9
$10.3
Total Deposits
(dollars in billions)
$13.4
$12.9
$12.7
$12.2
$10.2
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Diluted Earnings
Per Share
Return
On Assets
$2.69
Return On Equity
$2.30
$2.14
$2.00
1.51%
1.39%
1.33%
1.28%
$1.59
1.00%
12.01%
10.34%
9.11%
9.08%
7.02%
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
dear fellow
shareholders,
It is with tremendous pride that I share with you First
Financial Bancorp’s 2023 annual report.
We came into the year with a sense of confidence
in our First Financial team, a group of dedicated
professionals who have endured consecutive years of
daunting challenges, only to deliver outstanding results
time and time again. We looked forward to celebrating
First Financial’s 160th anniversary in August, a testament
to our company’s strength, stability, and legacy of
serving our clients and communities with integrity
and a commitment to excellence.
Our enthusiasm entering 2023 was tempered by the
continuing challenges of a shifting economy, fluctuating
business conditions, and changing world dynamics. In
March, several high-profile bank failures raised questions
about the overall stability of the banking industry. While
the failures had more to do with the structure of the
affected banks, the entire industry was challenged to
maintain consumer confidence as these events played
out. I am proud that our First Financial team successfully
maintained the well-earned confidence of clients, investors,
and analysts due to our sound business practices,
investments, and consistent focus on customer care.
In the end, 2023 was another year of record-setting
earnings and profitability. We delivered record adjusted
earnings per share of $2.77, a net interest margin of
4.40%, adjusted return on assets of 1.55%, adjusted
return on average tangible common equity of 25%,
loan growth of $634 million, and $213 million in
adjusted non-interest income, representing more than
25% of our revenue.
Archie M. Brown
President &
Chief Executive
Officer
Driving this production was a bank-wide commitment
to our top corporate priorities – core client growth,
putting clients first, simplifying processes and generating
greater efficiencies throughout the business, and an
emphasis on improving associate engagement. Like our
balance sheet, the results were impressive.
Our three core banking lines of business – Consumer
Banking, Commercial Banking, and Wealth Management
– moved to regional sales and service models, aligning
our physical and associate resources within our
communities. These regional models align decision-
making to a local level, enabling us to meet our clients’
needs more efficiently and offering more immediate
access to our experienced financial advisors. Additionally,
our lines of business are able to collaborate more
effectively, sharing market-specific insights into the needs
of individual clients and our communities, which leads
to more comprehensive, total-bank financial solutions.
We delivered record adjusted earnings per share of $2.77,
a net interest margin of 4.40%, adjusted return on assets
of 1.55%, adjusted return on average tangible common
equity of 25%, loan growth of $634 million, and $213
million in adjusted non-interest income, representing
more than 25% of our revenue.
2023 annual report 1
One of First Financial’s most significant competitive
differentiators is our specialty business strategy,
adding niche financial services to our core banking
capabilities. This strategy creates extensive areas of
expertise to support businesses and their owners,
helping us deepen existing relationships and take
advantage of growth opportunities in new markets.
Led by our Consumer Banking team, we launched our
new and improved online banking platform and mobile
app in June. The impact was positive and immediate,
with increases in credit card applications through the
mobile app, e-statement enrollments, new bill pay
enrollments, and online banking enrollments.
Our Commercial Banking presence in the Chicago,
Cleveland, and Evansville, IN markets is progressing
well. We now have permanent office space in downtown
Cleveland and in Chicago’s Fulton Market community,
with established banking teams in all three markets
strengthening existing client relationships and
uncovering new opportunities.
One of First Financial’s most significant competitive
differentiators is our specialty business strategy, adding
niche financial services to our core banking capabilities.
This strategy creates extensive areas of expertise to
support businesses and their owners, helping us
deepen existing relationships and take advantage of
growth opportunities in new markets. Our past
successes include the acquisition of Summit Funding
Group, Bannockburn Global Forex and Oak Street
Funding. We made a number of advancements in
our specialty strategy during the past year.
In January, we acquired Brady Ware Capital, a merger
and acquisition advisory service. The Brady Ware team
joined Yellow Cardinal Business Succession Services,
which is a part of the Yellow Cardinal Advisory Group.
This team acts as a conduit between our Commercial
Banking and Wealth Management lines of business,
offering businesses and their owners a deeper set of
niche business succession planning and M&A services
than is available with many of our competitors.
The Yellow Cardinal team also added a dedicated group
of highly experienced and seasoned financial
professionals to work exclusively with our ultra-high net
worth clients. This team focuses on delivering a full
spectrum of personal finance and wealth management
services for business owners and individuals with
substantial assets. We are truly excited about the
expertise these individuals bring to Yellow Cardinal
and we look forward to expanding our reach to this
important market segment.
2
first financial Bancorp
In January of 2024, we announced the acquisition of
Lincolnshire, IL-based Agile Premium Finance, a
national insurance premium finance business that
extends credit to small businesses to facilitate the
purchase of property and casualty insurance products.
We are excited to add all of these specialized capabilities
to the First Financial team.
What truly sets us apart is First Financial’s ongoing
commitment to the communities in which we live and
work. In 2023, we completed a five-year community
benefits agreement (CBA) with the National Community
Reinvestment Coalition, establishing goals for lending
and investments to low- and moderate-income (LMI)
clients and census tracts. The CBA included
commitments in mortgage lending, small business
lending, community development lending and
investments, philanthropy, marketing, and access
to financial centers located in LMI communities.
I am proud to report that we achieved 192% of the
agreement’s $1.75 billion goal. Earlier this year, we
further demonstrated our community commitment
by entering a new five-year, $2.4 billion CBA.
Finally, I want to call specific attention to our team of
2,100 First Financial associates. As I mentioned, their
professionalism and dedication have helped the Bank
deliver exceptional financial results and client care in
the face of generational challenges. In 2023, our
associates helped us achieve the Bank’s most successful
United Way giving campaign, with more than $875,000
in pledges. And they made a direct impact in our
communities by completing nearly 15,000 hours of
volunteer service. The accomplishments listed here
would never have been realized without their commitment
to our company and our mission – to be a positive
influence to help our clients and communities thrive.
I am grateful for the opportunity to lead this outstanding
team, and to present you with this report of our 2023
efforts. It is a privilege to serve our clients, communities,
and shareholders.
Archie M. Brown
President & Chief Executive Officer
2023 annual report 3
leadership
Executive Management
Archie M. Brown
President and Chief
Executive Officer
Gregory A. Harris
President, Yellow Cardinal Advisory
Services and Affluent Banking
Matthew D. Reckman
Chief Commercial Banking Officer
James M. Anderson
Chief Financial Officer and
Chief Operating Officer
Richard S. Dennen
Chief Corporate Banking Officer
William R. Harrod
Chief Credit Officer
Amanda N. Neeley
Chief Consumer Banking and
Strategy Officer
James R. Shank
Chief Internal Auditor
Karen B. Woods
General Counsel and
Chief Administrative Officer
Board of Directors
Claude E. Davis
Board Chair, First Financial Bancorp
Co-Managing Partner, Brixey and Meyer Capital
William G. Barron
Past Chairman and Past President
William G. Barron Enterprises
Vincent A. Berta
Lead Independent Director
Board of Directors of First Financial Bancorp
President and Managing Director
Covington Capital, LLC
Cynthia O. Booth
President and Chief Executive Officer
Emerge Manufacturing
William J. Kramer
Vice President of Finance and
Chief Financial Officer
Valco Industries, Inc.
Dawn C. Morris
Founder and CEO
Growth Partners Group
Thomas M. O’Brien
Founder
Simpactful Consulting
Andre T. Porter
Senior Vice President, General Counsel &
Chief Strategy Officer
Midcontinent Independent System Operator, Inc.
Archie M. Brown
President and Chief Executive Officer
First Financial Bancorp and First Financial Bank
Maribeth S. Rahe
President and Chief Executive Officer
Fort Washington Investment Advisors, Inc.
Susan L. Knust
Owner, Managing Partner or President
K.P. Properties of Ohio, K.P. Properties of Colorado,
K.P. Properties of Florida
Gary W. Warzala
Executive Partner
Gartner, Inc.
4
first financial Bancorp
AFS
AOCI
ASC
ASU
ATM
Bank
Basel III
Bp/bps
BOLI
CDs
C&I
CMOs
CRE
Company
DDA
Dodd-Frank
EAD
ERISA
ERM
EVE
FASB
FDIC
FDM
FHLB
Glossary of Abbreviations and Acronyms
First Financial Bancorp has identified the following list of abbreviations and acronyms that are used in the Notes to
Consolidated Financial Statements and the Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ABL
Asset backed loans
ACL or Allowance Allowance for credit losses
Accounting standards codification
Insignificant
Less than $0.1 million
Available-for-sale
Accumulated other comprehensive income
Accounting standards update
Automated teller machine
First Financial Bank
Basel Committee regulatory capital reforms, Third
Basel Accord
Basis point(s)
Bank owned life insurance
Certificates of deposit
Commercial & industrial
Collateralized mortgage obligations
Commercial real estate
First Financial Bancorp.
Demand deposit account
Dodd-Frank Wall Street Reform and Consumer
Protection Act
Exposure at Default
Employee Retirement Income Security Act
Enterprise Risk Management
Economic value of equity
GAAP
GNMA
HTC
HTM
U.S. Generally Accepted Accounting Principles
Government National Mortgage Association
Historic tax credit
Held-to-maturity
IRLC
LGD
LIHTC
LTV
MBSs
MD&A
MSFG
N/A
NII
NMTC
N/M
ODFI
OREO
PCA
PCD
PCI
PD
PPP
R&S
ROU
SEC
Interest Rate Lock Commitment
Loss given default
Low income housing tax credit
Loan to value
Mortgage-backed securities
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
MainSource Financial Group, Inc.
Not applicable
Net interest income
New markets tax credit
Not meaningful
Ohio Department of Financial Institutions
Other real estate owned
Prompt corrective action
Purchase credit deteriorated
Purchase credit impaired
Probability of default
Paycheck Protection Program
Reasonable and supportable
Right-of-use
United States Securities and Exchange Commission
Fair Value Topic
FASB ASC Topic 825, Financial Instruments
Financial Accounting Standards Board
Federal Deposit Insurance Corporation
Financial Difficulty Modification
Federal Home Loan Bank
SFG or Summit
Summit Funding Group, Inc
FHLMC
Federal Home Loan Mortgage Corporation
SOFR
Secured Overnight Financing Rate
First Financial
First Financial Bancorp.
Topic 842
FASB ASC Topic 842, Leasing
FNMA
Federal National Mortgage Association
TDR
Troubled debt restructuring
Form 10-K
First Financial Bancorp. Annual Report on Form 10-K TTC
Through the cycle
FRB
Federal Reserve Bank
USD
United States dollars
First Financial Bancorp 2023 Annual Report 5
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This annual report contains forward-looking statements. See the Forward-Looking Statements section that follows for further
information on the risks and uncertainties associated with forward-looking statements.
The following discussion and analysis is presented by management to facilitate the understanding of the financial condition,
cash flows, changes in financial condition and results of operations of First Financial Bancorp. Management's discussion and
analysis identifies trends and material changes that occurred during the reporting periods presented and should be read in
conjunction with the Consolidated Financial Statements and accompanying Notes.
Certain reclassifications of prior years' amounts have been made to conform to current year presentation. Such reclassifications
had no effect on net earnings, total assets, liabilities and shareholders' equity.
EXECUTIVE SUMMARY
First Financial Bancorp. is a $17.5 billion financial holding company headquartered in Cincinnati, Ohio. The Company
primarily operates through First Financial Bank, an Ohio-chartered commercial bank with 130 full service banking centers.
First Financial provides banking and financial services products to business and retail clients through its six lines of business:
Commercial, Retail Banking, Mortgage Banking, Wealth Management, Investment Commercial Real Estate and Commercial
Finance. The Commercial Finance business lends to targeted industry verticals on a nationwide basis. Operating under the
brand of Yellow Cardinal Advisory Group, Wealth Management had $3.5 billion in assets under management as of
December 31, 2023 and provides the following services: financial planning, investment management, trust administration,
estate settlement, business succession planning, brokerage services and retirement planning.
Additional information about First Financial, including its products, services and banking locations, is available on the
Company's website at www.bankatfirst.com.
The major components of First Financial’s operating results for the previous three years are summarized in Table 1 – Financial
Summary and are discussed in greater detail in the sections that follow.
MARKET STRATEGY
First Financial develops a competitive advantage by utilizing a local market focus to provide superior service and build long-
term relationships with clients while helping them achieve greater financial success. First Financial serves a combination of
metropolitan and community markets in Ohio, Indiana, Kentucky and Illinois through its full-service banking centers. First
Financial also has certain lending platforms that extend beyond the geographic banking center footprint to provide financing to
franchise owners and clients within the financial services industry as well as equipment lease financing to commercial
businesses. First Financial's investment in community markets is an important part of the Bank's core funding base and has
historically provided stable, low-cost funding sources.
First Financial’s market selection process includes multiple factors, but markets are primarily chosen for their potential for
long-term profitability and growth. First Financial intends to concentrate plans for future growth and capital investment within
its current markets, and will continue to evaluate additional growth opportunities in metropolitan markets located within, or in
close proximity to, the Company's current geographic footprint. Additionally, First Financial may seek strategic acquisitions
that provide product line extensions or additional industry verticals that complement its existing business and diversify its
product suite and revenue streams.
BUSINESS COMBINATIONS
In the first quarter of 2023, First Financial purchased the assets of Brady Ware Capital, LLC (Brady Ware). Located in
Miamisburg, Ohio, Brady Ware was an advisory firm for mergers and acquisitions, focusing primarily on business succession
planning. First Financial acquired all of the assets of Brady Ware for aggregate consideration of approximately $4.3 million,
consisting of $3.4 million in cash and a $0.9 million earn-out payment. Pursuant to the purchase agreement, the earn-out
payment is payable in installments for each of the five years following the closing of the acquisition, contingent upon the results
of Brady Ware's operations.
The transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities
assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB
6 First Financial Bancorp 2023 Annual Report
ASC Topic 805, Business Combinations. Goodwill arising from the Brady Ware acquisition was $4.2 million and reflects the
business’s growth potential and the expectation that the acquisition will provide additional revenue growth with the expansion
of the Bank's advisory business. In May 2023, First Financial also acquired Brady Ware Corporate Finance, a broker-dealer
and member of FINRA. First Financial recorded $0.1 million of goodwill in connection with the acquisition of Brady Ware
Corporate Finance. The fair value measurements of Brady Ware assets and liabilities are subject to refinement for up to one
year after the closing date of the acquisition as additional information relative to closing date fair values become available, and
the measurement period ends in the first quarter of 2024 for Brady Ware. The measurement period for recording adjustments to
the fair value of assets and liabilities ends in the second quarter of 2024 for Brady Ware Corporate Finance.
First Financial Bancorp 2023 Annual Report 7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
$
$
$
$
$
$
$
2023
903,004
6,356
909,360
275,234
634,126
903,004
275,234
627,770
43,107
212,422
478,489
318,596
62,733
255,863
2.72
2.69
0.92
93,939
95,096
December 31,
2022
$
$
$
$
$
$
$
585,006
6,357
591,363
65,863
525,500
585,006
65,863
519,143
11,713
189,641
455,349
241,722
24,110
217,612
2.33
2.30
0.92
93,529
94,587
$
$
$
$
$
$
$
2021
483,217
6,091
489,308
31,099
458,209
483,217
31,099
452,118
(18,121)
171,506
400,812
240,933
35,773
205,160
2.16
2.14
0.92
95,035
95,897
$ 17,532,900
14,966,741
3,231,392
10,933,176
2,993,219
4,331,228
2,718,390
3,317,960
13,360,797
937,814
344,115
2,267,974
$ 17,003,316
14,331,900
3,636,829
10,298,971
3,037,153
3,828,139
1,700,705
4,135,180
12,701,177
1,287,156
346,672
2,041,373
$ 16,329,141
13,941,829
4,409,237
9,288,299
3,198,745
4,157,374
1,330,263
4,185,572
12,871,954
296,203
409,832
2,258,942
82.04 %
0.33 %
12.53 %
6.51 %
1.51 %
12.01 %
24.72 %
4.36 %
4.40 %
33.82 %
12.38
$
76.11 %
0.06 %
12.85 %
6.59 %
1.33 %
10.34 %
21.62 %
3.73 %
3.77 %
39.48 %
9.97
$
76.15 %
0.26 %
14.06 %
8.29 %
1.28 %
9.08 %
16.43 %
3.27 %
3.31 %
42.59 %
12.26
$
Table 1 • Financial Summary
(Dollars in thousands, except per share data)
Summary of operations
Interest income
Tax equivalent adjustment (1)
Interest income tax – equivalent (1)
Interest expense
Net interest income tax – equivalent (1)
Interest income
Interest expense
Net interest income
Provision for credit losses
Noninterest income
Noninterest expenses
Income before income taxes
Income tax expense
Net income
Per share data
Earnings per common share
Basic
Diluted
Cash dividends declared per common share
Average common shares outstanding–basic (in thousands)
Average common shares outstanding–diluted (in thousands)
Selected year-end balances
Total assets
Earning assets
Investment securities
Total loans and leases
Interest-bearing demand deposits
Savings deposits
Time deposits
Noninterest-bearing demand deposits
Total deposits
Short-term borrowings
Long-term debt
Shareholders’ equity
Select Financial Ratios
Average loans to average deposits (2)
Net charge-offs to average loans and leases
Average shareholders’ equity to average total assets
Average tangible shareholders’ equity to average tangible assets
Return on average assets
Return on average equity
Return on average tangible shareholders' equity
Net interest margin
Net interest margin (tax equivalent basis) (1)
Dividend payout
Tangible book value per share
(1) Tax equivalent basis calculated using a 21% tax rate
(2) Includes loans held for sale
8 First Financial Bancorp 2023 Annual Report
OVERVIEW OF OPERATIONS
Net income for the year ended December 31, 2023 was $255.9 million, resulting in earnings per diluted common share of
$2.69. This compares to net income of $217.6 million and earnings per diluted common share of $2.30 in 2022. Return on
average assets was was 1.51% and 1.33% for 2023 and 2022, respectively. First Financial’s return on average tangible
shareholders’ equity for 2023 was 24.72%, compared to 21.62% for 2022.
Net interest income in 2023 increased $108.6 million, or 20.9%, from 2022, to $627.8 million, primarily driven by higher yields
earned on the loan and investment portfolios resulting as a result of higher interest rates offsetting higher funding costs. The net
interest margin on a fully tax equivalent basis was 4.40% for 2023 compared to 3.77% in 2022.
Noninterest income increased $22.8 million, or 12.0%, to $212.4 million during 2023 from $189.6 million in 2022. The
increase in 2023 was primarily driven by increases in leasing business income, other noninterest income and wealth
management fees, which were partially offset by lower mortgage banking income.
Noninterest expense increased $23.1 million, or 5.1%, from $455.3 million in 2022 to $478.5 million in 2023. This increase
was largely driven by higher salaries and incentives, data processing expenses, FDIC assessments and leasing business
expenses. These increases were partially offset by a decline in other noninterest expenses.
Income tax expense increased $38.6 million, or 160.2%, to $62.7 million in 2023 from $24.1 million in 2022, with the effective
tax rate increasing to 19.7% in 2023 from 10.0% in 2022. The increase in the effective tax rate in 2023 was primarily related to
the recognition of fewer tax credit investments in 2023 compared to 2022.
Total loans increased $634.2 million, or 6.2%, to $10.9 billion at December 31, 2023 from $10.3 billion at December 31, 2022,
primarily driven by growth in residential real estate loans, lease financing and C&I loans. Total deposits increased $659.6
million, or 5.2%, to $13.4 billion as of December 31, 2023 from $12.7 billion at December 31, 2022 due to increases in time
and savings deposits, which offset declines in noninterest bearing deposits.
The ACL on loans and leases was $141.4 million, or 1.29% of total loans at December 31, 2023, compared to $133.0 million,
and 1.29% of total loans at December 31, 2022. First Financial recorded $43.1 million in provision expense during 2023,
compared to $6.7 million in provision expense during 2022.
First Financial’s operational results may be influenced by certain economic factors and conditions, such as market interest rates,
industry competition, household and business spending levels, consumer confidence and the regulatory environment. For a
more detailed discussion of the Company's operations, please refer to the sections that follow.
NON-GAAP FINANCIAL MEASURES
The Company utilizes certain non-GAAP financial measures, which it believes provide useful insight to the reader of the
Consolidated Financial Statements. These non-GAAP measures should be supplemental to primary GAAP measures and
should not be read in isolation or relied upon as a substitute for the primary GAAP measures.
For analytical purposes, net interest income is presented in the following table adjusted to a tax equivalent basis assuming a
21% marginal tax rate. Net interest income is disclosed on a tax equivalent basis to consistently reflect income from tax-
exempt assets, such as municipal loans and investments, in order to facilitate a comparison between taxable and tax-exempt
amounts. Management believes it is a standard practice in the banking industry to present net interest margin and net interest
income on a fully tax equivalent basis as these measures provide useful information to make peer comparisons.
First Financial Bancorp 2023 Annual Report 9
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Table 2 • Non-GAAP - Net Interest Income
(Dollars in thousands)
Net interest income
Tax equivalent adjustment
Net interest income - tax equivalent
Average earning assets
2023
Year ended December 31,
2022
627,770
$
6,356
634,126
$
519,143
6,357
525,500
14,404,909
$
13,921,563
$
$
$
$
$
$
2021
452,118
6,091
458,209
13,826,645
Net interest margin (1)
Net interest margin (FTE) (1)
(1) Calculated using net interest income divided by average earning assets
4.36 %
4.40 %
3.73 %
3.77 %
3.27 %
3.31 %
In addition to capital ratios defined by the U.S. banking agencies, First Financial considers various other measures when
evaluating capital utilization and adequacy, including the return on average tangible shareholders' equity and the tangible
shareholders' equity ratio. These calculations are intended to complement the capital ratios defined by the U.S. banking
agencies for both absolute and comparative purposes. As GAAP does not include capital ratio measures, the Company believes
there are no comparable GAAP financial measures to these ratios. These ratios are not formally defined by GAAP or codified
in the federal banking regulations and, therefore, are considered to be non-GAAP financial measures.
First Financial believes return on average tangible shareholders' equity is an important measure for comparative purposes with
other financial institutions, but it is not defined under GAAP, and therefore is considered a non-GAAP financial measure. This
measure is useful for evaluating the performance of a business as it calculates the return available to common shareholders
without the impact of intangible assets and their related amortization.
First Financial encourages readers to consider its Consolidated Financial Statements in their entirety and not to rely on any
single financial measure.
The following table reconciles non-GAAP capital ratios to GAAP:
Table 3 • Non-GAAP - Capital Ratios
(Dollars in thousands)
Net income (a)
2023
Year ended December 31,
2022
2021
$
255,863
$
217,612
$
205,160
Average total shareholders' equity
2,129,751
2,105,339
2,259,807
Less:
Average goodwill
Average other intangibles
Average tangible equity (b)
(1,005,805)
(88,724)
1,035,222
(999,611)
(99,081)
1,006,647
(937,943)
(73,496)
1,248,368
Total shareholders' equity
2,267,974
2,041,373
2,258,942
Less:
Goodwill
Other intangibles
Ending tangible equity (c)
(1,005,868)
(83,949)
1,178,157
(1,001,507)
(93,919)
945,947
(1,000,749)
(104,367)
1,153,826
Total assets
17,532,900
17,003,316
16,329,141
10 First Financial Bancorp 2023 Annual Report
Table 3 • Non-GAAP - Capital Ratios
Less:
Goodwill
Other intangibles
Ending tangible assets (d)
Year ended December 31,
2023
2022
2021
(1,005,868)
(1,001,507)
(83,949)
(93,919)
16,443,083
15,907,890
(1,000,749)
(104,367)
15,224,025
Risk-weighted assets (e)
13,374,177
12,923,233
11,642,201
Total average assets
Less:
Average goodwill
Average other intangibles
Average tangible assets (f)
16,997,223
16,382,730
16,072,360
(1,005,805)
(88,724)
15,902,694
(999,611)
(99,081)
(937,943)
(73,496)
15,284,038
15,060,921
Ending common shares outstanding (g)
95,141,244
94,891,099
94,149,240
Ratios
Return on average tangible shareholders' equity (a)/(b)
Ending tangible shareholders' equity as a percent of:
Ending tangible assets (c)/(d)
Risk-weighted assets (c)/(e)
Average tangible shareholders' equity to average tangible
assets (b)/(f)
Tangible book value per share (c)/(g)
$
12.38
$
NET INCOME
24.72 %
21.62 %
16.43 %
7.17 %
8.81 %
6.51 %
5.95 %
7.32 %
6.59 %
9.97
$
7.58 %
9.91 %
8.29 %
12.26
2023 vs. 2022. First Financial’s net income increased $38.3 million, or 17.6%, to $255.9 million in 2023, compared to net
income of $217.6 million in 2022. The increase in 2023 was primarily related to a $108.6 million, or 20.9%, increase in net
interest income and a $22.8 million, or 12.0%, increase in noninterest income, partially offset by a $23.1 million, or 5.1%,
increase in noninterest expenses, a $36.3 million, or 539.9%, increase in provision expense and a $38.6 million, or 160.2%,
increase in income tax expense.
2022 vs. 2021. First Financial’s net income increased $12.5 million, or 6.1%, to $217.6 million in 2022, compared to net
income of $205.2 million in 2021. The increase in 2022 was primarily related to a $67.0 million, or 14.8%, increase in net
interest income, a $18.1 million, or 10.6%, increase in noninterest income and a $11.7 million, or 32.6%, decrease in income
tax expense, partially offset by a $54.5 million, or 13.6%, increase in noninterest expenses and a $25.8 million, or 135.4%,
increase in provision expense.
For more detail, refer to the Net interest income, Noninterest income, Noninterest expenses, Income taxes, and Asset quality
and allowance for credit losses sections that follow.
NET INTEREST INCOME
First Financial’s net interest income for the years 2021 through 2023 is shown in Table 1 – Financial Summary.
First Financial’s principal source of income is net interest income, which is the excess of interest received from earning assets,
including loan-related fees and purchase accounting accretion, less interest paid on interest-bearing liabilities. The amount of
net interest income is determined by the volume and mix of earning assets, the rates earned on such assets and the volume, mix
First Financial Bancorp 2023 Annual Report 11
Management’s Discussion and Analysis of Financial Condition and Results of Operations
and rates paid for the deposits and borrowed money that support the earning assets. Earning assets consist of interest-bearing
loans to customers as well as marketable investment securities. First Financial's tax equivalent net interest margin was 4.40%,
3.77% and 3.31% for 2023, 2022 and 2021, respectively.
Table 5 – Volume/Rate Analysis - Tax Equivalent Basis describes the extent to which changes in interest rates as well as
changes in the volume of earning assets and interest-bearing liabilities have affected First Financial’s net interest income on a
tax equivalent basis during the years presented. Nonaccrual loans and loans held for sale were included in the average loan
balances used to determine the yields in Table 5 – Volume/Rate Analysis - Tax Equivalent Basis, which should be read in
conjunction with Table 4 – Statistical Information.
Loan fees included in the interest income computation for 2023, 2022 and 2021 were $19.0 million, $19.2 million and $46.8
million, respectively, with the 2021 fees being heavily influenced by PPP activity. Interest income also included purchase
accounting accretion of $4.2 million, $8.8 million and $12.3 million for 2023, 2022 and 2021, respectively.
2023 vs. 2022. Net interest income increased $108.6 million, or 20.9%, to $627.8 million in 2023 from $519.1 million in 2022,
as interest rates rose during 2023. This increase was due to higher asset yields and higher earning asset balances more than
offsetting an increase in interest bearing liabilities and rates paid on those liabilities during the period.
Net interest margin on a fully tax equivalent basis increased 63 bps to 4.40% for 2023 compared to 3.77% in 2022 as the
Company's asset sensitive balance sheet responded to further Fed rate hikes. This resulted in a 206 bp increase in asset yields,
which more than offset an increase in interest-bearing liabilities and a 190 bp increase in funding costs during the period.
Interest income grew $318.0 million, or 54.4%, in 2023 when compared to the prior year as the yield on earning assets rose to
6.31% from 4.25%. Additionally, average earning assets increased to $14.4 billion as of December 31, 2023 from $13.9 billion
in 2022, primarily due to a $1.0 billion increase in average loan balances.
Total interest expense increased due to a 184 bp increase in the cost of interest-bearing deposits coupled with a $878.3 million
increase in those deposit balances, a 218 bp increase in the cost of average borrowings and a $183.4 million increase in those
borrowings. The increasing rate environment resulted in a shift in deposit mix as customers migrated from noninterest bearing
accounts to higher cost deposit products. Additionally, higher interest rates drove the increase in the cost of interest-bearing
deposits, which was 2.18% in 2023 compared to 34 bps for the same period in the prior year. Average borrowed funds
increased $183.4 million in 2023, while the cost of these borrowed funds increased to 5.38% in 2023 from 3.20% during 2022.
2022 vs. 2021. Net interest income increased $67.0 million, or 14.8%, from $452.1 million in 2021 to $519.1 million in 2022,
as interest rates rose during 2022. This increase was due to higher asset yields and higher earning asset balances more than
offsetting an increase in interest-bearing liabilities and rates paid on those liabilities during the period.
Net interest margin on a fully tax equivalent basis increased 46 bps to 3.77% for 2022 compared to 3.31% in 2021 as the
Company's asset sensitive balance sheet responded to multiple Fed rate hikes. This resulted in a 71 bp increase in asset yields,
which more than offset an increase in interest-bearing liabilities and a 36 bp increase in funding costs during the period.
Interest income grew $101.8 million, or 21.1%, in 2022 when compared to the prior year as the yield on earning assets rose to
4.25% from 3.54%. Additionally, average earning assets increased to $13.9 billion as of December 31, 2022 from $13.8 billion
in 2021.
Total interest expense increased due to a 17 bp increase in the cost of interest-bearing deposits, an increase in average
borrowings and a 63 bp increase in the average rate on those borrowings. The increasing rate environment drove the rise in the
cost of interest-bearing deposits, which was 34 bps in 2022 compared to 17 bps for the same period in the prior year. Average
borrowed funds increased $529.8 million in 2022, while the cost of these borrowed funds increased to 3.20% in 2022 from
2.57% during 2021.
12 First Financial Bancorp 2023 Annual Report
Table 4 • Statistical Information
Average
Balance
2023
Interest
Average
Yield
Average
Balance
2022
Interest
Average
Yield
Average
Balance
2021
Interest
Average
Yield
(Dollars in thousands)
Earning assets
Loans and leases (1), (4)
Commercial and industrial (2)
Lease financing (2)
Construction-real estate
Commercial-real estate (2)
Residential-real estate
$ 3,447,984 $ 263,632
7.65 % $ 2,979,273 $ 154,152
5.17 % $ 2,790,733 $ 137,841
342,243
25,063
7.32 %
153,380
11,785
7.68 %
67,822
2,739
535,715
41,302
7.71 %
476,597
23,036
4.83 %
575,883
18,743
4,038,457
293,353
7.26 % 4,040,365
185,017
4.58 % 4,379,325
152,251
1,231,507
54,065
4.39 %
989,743
40,083
4.05 %
971,692
40,275
Installment and other consumer
970,681
69,016
7.11 %
935,607
46,118
4.93 %
854,780
34,906
Total loans and leases
Investment securities (3)
Taxable
Tax-exempt (2)
Total investment securities (3)
Interest-bearing deposits with other
banks
Total earning assets
Nonearning assets
Allowance for credit losses
Cash and due from banks
Accrued interest and other assets
Total assets
Interest-bearing liabilities
Deposits
10,566,587
746,431
7.06 % 9,574,965
460,191
4.81 % 9,640,235
386,755
2,952,767
125,520
4.25 % 3,293,010
102,314
3.11 % 3,271,601
79,213
489,466
17,596
3.59 %
739,036
23,374
3.16 %
841,639
23,193
3,442,233
143,116
4.16 % 4,032,046
125,688
3.12 % 4,113,240
102,406
396,089
14,404,909
19,813
909,360
5.00 %
314,552
6.31 % 13,921,563
5,484
591,363
1.74 %
73,170
4.25 % 13,826,645
147
489,308
(145,472)
216,625
2,521,161
$ 16,997,223
(125,001)
233,925
2,352,243
$ 16,382,730
(162,477)
242,201
2,165,991
$ 16,072,360
Interest-bearing demand
$ 2,932,477 $ 42,388
1.45 % $ 3,158,560 $ 8,933
0.28 % $ 2,988,359 $ 1,930
Savings
Time
3,932,100
68,168
1.73 % 4,049,883
8,871
0.22 % 4,065,654
2,397,289
91,454
3.81 % 1,175,086
10,336
0.88 % 1,601,295
4,122
8,383
Total interest-bearing deposits
9,261,866
202,010
2.18 % 8,383,529
28,140
0.34 % 8,655,308
14,435
Borrowed funds
Short-term borrowings
1,019,470
53,378
5.24 %
817,495
19,132
2.34 %
204,503
198
Long-term debt
340,950
19,846
5.82 %
359,518
18,591
5.17 %
442,720
16,466
Total borrowed funds
1,360,420
73,224
5.38 % 1,177,013
37,723
3.20 %
647,223
16,664
Total interest-bearing liabilities
10,622,286
275,234
2.59 % 9,560,542
65,863
0.69 % 9,302,531
31,099
4.94 %
4.04 %
3.25 %
3.48 %
4.14 %
4.08 %
4.01 %
2.42 %
2.76 %
2.49 %
0.20 %
3.54 %
0.06 %
0.10 %
0.52 %
0.17 %
0.10 %
3.72 %
2.57 %
0.33 %
Noninterest-bearing liabilities
Noninterest-bearing demand
deposits
Other liabilities
Shareholders' equity
Total liabilities and shareholders'
equity
Net interest income and interest
rate spread (fully tax equivalent)
Net interest margin (fully tax
equivalent)
Interest income and yield
Interest expense and rate
Net interest income and spread
Net interest margin
3,617,961
627,225
2,129,751
$ 16,997,223
4,196,735
520,114
2,105,339
$ 16,382,730
4,005,034
504,988
2,259,807
$ 16,072,360
$ 634,126
3.72 %
$ 525,500
3.56 %
$ 458,209
3.21 %
$ 903,004
275,234
$ 627,770
4.40 %
6.27 %
2.59 %
3.68 %
4.36 %
$ 585,006
65,863
$ 519,143
3.77 %
4.20 %
0.69 %
3.51 %
3.73 %
$ 483,217
31,099
$ 452,118
3.31 %
3.49 %
0.33 %
3.16 %
3.27 %
(1) Nonaccrual loans are included in average loan balance and loan fees are included in interest income.
(2) Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate.
(3) Includes HTM securities, AFS securities and other investments
(4) Includes loans held-for-sale
First Financial Bancorp 2023 Annual Report 13
Table 5 • Volume/Rate Analysis - Tax Equivalent Basis (1)
(Dollars in thousands)
Interest income
Loans (2)
Investment securities (3)
Taxable
Tax-exempt
Total investment securities interest (3)
Interest-bearing deposits with other banks
Total
Interest expense
Interest-bearing demand deposits
Savings deposits
Time deposits
Short-term borrowings
Long-term debt
Total
Net interest income
2023 change from 2022 due to
2022 change from 2021 due to
Volume
Rate
Total
Volume
Rate
Total
$ 70,049
$ 216,191
$ 286,240
$
(3,137) $ 76,573
$ 73,436
(14,463)
37,669
(8,972)
(23,435)
4,079
3,194
40,863
10,250
23,206
(5,778)
17,428
14,329
665
(3,245)
(2,580)
4,208
22,436
3,426
25,862
1,129
23,101
181
23,282
5,337
50,693
267,304
317,997
(1,509)
103,564
102,055
(3,268)
(2,042)
46,626
10,575
(1,081)
36,723
61,339
34,492
23,671
2,336
33,455
59,297
81,118
34,246
1,255
481
(35)
(3,749)
14,346
(4,302)
6,522
4,784
5,702
4,588
6,427
50,810
158,561
209,371
6,741
28,023
7,003
4,749
1,953
18,934
2,125
34,764
$
(117) $ 108,743
$ 108,626
$
(8,250) $ 75,541
$ 67,291
(1) Tax equivalent basis calculated using a 21% tax rate
(2) Includes nonaccrual loans and loans held-for-sale
(3) Includes HTM securities, AFS securities and other investments
NONINTEREST INCOME AND NONINTEREST EXPENSES
Noninterest income and noninterest expenses for 2023, 2022 and 2021 are shown in Table 6 – Noninterest Income and
Noninterest Expenses.
NONINTEREST INCOME
2023 vs. 2022. Noninterest income increased $22.8 million, or 12.0%, to $212.4 million in 2023 from $189.6 million in 2022.
The increase was primarily attributed to a $19.7 million, or 62.5%, increase in leasing business income, a $4.4 million, or
24.9%, increase in other noninterest income and a $2.6 million, or 11.0% increase in wealth management fees. These increases
were partially offset by an $1.8 million, or 12.2%, decrease in gain on sale of loans, a $0.9 million, or 1.7%, decrease in foreign
exchange income, and a $0.8 million, or 2.8%, decrease in service charges on deposit accounts.
The growth in leasing business income in 2023, reflected continued growth from Summit Funding Group during the year. The
increase in other noninterest income was driven by BOLI gains as well as higher loan syndication fees, while wealth
management fees were boosted by an increase in managed assets.
Partially offsetting these increases, gains on sales of retail mortgage loans declined in 2023 as loan demand slowed due to a
significant increase in interest rates. Foreign exchange income declined slightly following record high levels in 2022, and
service charge income declined due to a full-year impact of the Company's changes to its service charge and overdraft programs
in 2022.
2022 vs. 2021. Noninterest income increased $18.1 million, or 10.6%, to $189.6 million in 2022 from $171.5 million in 2021.
The increase was attributed to $31.6 million of leasing business income, a $10.2 million, or 22.7%, increase in foreign
exchange income and a $2.0 million, or 12.6%, increase in other noninterest income. These increases were partially offset by
an $18.0 million, or 54.4%, decrease in gain on sale of loans, a $3.8 million, or 12.0%, decrease in service charges on deposit
accounts, a $2.5 million, or 31.4%, decrease in client derivative fees and a $1.3 million, or 191.0%, decrease in unrealized gain
(loss) on equity securities.
Noninterest income in 2022 was bolstered by leasing business income, which reflected new activity acquired as part of the
14 First Financial Bancorp 2023 Annual Report
Summit Funding Group acquisition at the end of 2021. In addition, foreign exchange income increased during the year due to
record demand for currency transactions in 2022. The increase in other noninterest income was driven by higher income earned
on limited partnership investments during the year.
Partially offsetting those increases, gains on sales of retail mortgage loans declined from the prior year as loan demand slowed
due to a significant increase in interest rates. Service charge income declined during the year as a result of the Company's
changes to its service charge and overdraft programs, and client derivative fees declined as a result of lower product demand.
The unrealized loss on equity securities in 2022 was related to a decline in the value of the Company's Class B Visa shares.
Table 6 • Noninterest Income and Noninterest Expenses
(Dollars in thousands)
Noninterest income
2023
2022
2021
Total
% Change
Total
% Change
Total
% Change
Service charges on deposit accounts
$
27,289
(2.8) % $
28,062
(12.0) % $
31,876
Wealth management fees
Bankcard income
Client derivative fees
Foreign exchange income
Leasing business income
Net gains from sales of loans
26,081
14,039
5,155
54,051
51,322
13,217
11.0 %
(2.4) %
(5.3) %
(1.7) %
62.5 %
(12.2) %
23,506
14,380
5,441
54,965
31,574
15,048
(1.2) %
0.6 %
(31.4) %
23,780
14,300
7,927
22.7 %
44,793
N/M
0
(54.4) %
33,021
Net gain (loss) on equity securities
206
(132.2) %
(639)
(191.0) %
702
Other
Subtotal
22,320
213,680
24.9 %
17,873
12.6 %
15,866
12.3 %
190,210
10.4 %
172,265
8.3 %
11.7 %
22.0 %
(23.1) %
13.8 %
N/M
(35.5) %
(92.2) %
30.1 %
(6.7) %
Net gain (loss) on sales/transfers of investment
securities
(1,258)
121.1 %
(569)
(25.0) %
(759)
(116.6) %
Total
$ 212,422
12.0 % $ 189,641
10.6 % $ 171,506
(9.3) %
Noninterest expenses
Salaries and employee benefits
$ 292,731
8.7 % $ 269,368
9.5 % $ 245,924
Net occupancy
Furniture and equipment
Data processing
Marketing
Communication
Professional services
State intangible tax
FDIC assessments
Intangible assets amortization
Leasing business expense
Other
Total
22,990
13,543
35,852
9,647
2,729
9,926
3,914
11,948
10,402
32,500
32,307
3.5 %
2.4 %
6.5 %
10.3 %
1.7 %
2.0 %
(8.7) %
66.1 %
(7.0) %
59.6 %
(38.7) %
22,208
13,224
33,662
8,744
2,683
9,734
4,285
7,194
11,185
20,363
52,699
0.3 %
(4.3) %
7.3 %
9.5 %
(8.4) %
22,142
13,819
31,363
7,983
2,930
(16.6) %
11,676
0.7 %
27.8 %
13.7 %
N/M
4,256
5,630
9,839
0
16.5 %
45,250
$ 478,489
5.1 % $ 455,349
13.6 % $ 400,812
3.9 %
(4.8) %
(7.7) %
14.0 %
24.5 %
(16.1) %
17.2 %
(29.7) %
10.2 %
(11.6) %
N/M
16.9 %
2.6 %
First Financial Bancorp 2023 Annual Report 15
NONINTEREST EXPENSES
2023 vs. 2022. Noninterest expenses increased $23.1 million, or 5.1%, to $478.5 million in 2023 compared to $455.3 million in
2022, primarily due to a $23.4 million, or 8.7%, increase in salaries and employee benefits, a $12.1 million, or 59.6% increase
in leasing business expenses, a $4.8 million, or 66.1%, increase in FDIC assessments, and a $2.2 million, or 6.5%, increase in
data processing expenses. Partially offsetting these increases was a $20.4 million, or 38.7%, decrease in other noninterest
expenses.
Salaries and employee benefits in 2023 were driven higher by annual compensation adjustments, incentive compensation tied to
fee income, and performance related incentives tied to the Company's financial results. Leasing business expense reflected
continued growth from Summit Funding Group during the year. FDIC assessment expense increased during 2023 due to higher
assessment rates coupled with a one-time special assessment of $0.9 million, while data processing expenses increased as the
Company continued to make strategic investments in technology, including its online banking platform. Partially offsetting
these increases, other noninterest expense declined in 2023 due to elevated tax credit investment write-downs in 2022 that did
not recur in the current year.
2022 vs. 2021. Noninterest expenses increased $54.5 million, or 13.6%, in 2022 compared to 2021, primarily due to
a $23.4 million, or 9.5%, increase in salaries and employee benefits, $20.4 million of leasing business expense, a $7.4 million,
or 16.5%, increase in other noninterest expenses, a $2.3 million, or 7.3%, increase in data processing expenses, a $1.6 million,
or 27.8%, increase in FDIC assessments and a $1.3 million, or 13.7%, increase in intangible asset amortization expense. These
increases were partially offset by a $1.9 million, or 16.6%, decrease in professional services.
Salaries and employee benefits in 2022 were driven higher by annual compensation adjustments, incentive compensation tied to
fee income, and performance related incentives tied to the Company's financial results. Leasing business expense
reflected new activity acquired as part of the Summit Funding Group transaction. The increase in other noninterest expense
was largely attributed to higher write-downs of tax credit investments in 2022, while data processing expenses increased as the
Company continued to make strategic investments in technology. FDIC assessment expense increased during the year due to
higher assessment rates while intangible amortization expenses increased following the acquisition of Summit. Professional
services declined in 2022 due to acquisition and loan sale related expenses in 2021 that did not recur in 2022.
INCOME TAXES
2023 vs. 2022. First Financial’s income tax expense in 2023 totaled $62.7 million compared to $24.1 million in 2022, resulting
in effective tax rates of 19.7% and 10.0% for 2023 and 2022, respectively. The higher effective tax rate in 2023 was primarily
related to higher pre-tax income during the year as well as tax credit activity during 2022 that did not recur in 2023.
2022 vs. 2021. First Financial’s income tax expense in 2022 totaled $24.1 million compared to $35.8 million in 2021, resulting
in effective tax rates of 10.0% and 14.8% for 2022 and 2021, respectively. The lower effective tax rate in 2022 was primarily
related to an increase in tax credit activity during the year, partially offset by higher pre-tax income.
For further information on income taxes, see Note 16 – Income Taxes in the Notes to Consolidated Financial Statements.
INVESTMENTS
First Financial utilizes its investment portfolio as a source of liquidity and interest income, as well as a tool for managing the
Company's interest rate risk profile. As such, the Company's primary investment strategy is to invest in debt securities with low
credit risk, such as treasury and agency-backed residential MBS. The investment portfolio is also managed with consideration
to prepayment, extension and maturity risk. First Financial invests primarily in MBS issued by U.S. government agencies and
corporations, such as GNMA, FHLMC and FNMA, as these securities are considered to have a low credit risk and high
liquidity profile due to government agency guarantees. Government and agency backed securities comprised 51.0% and 47.4%
of First Financial's investment securities portfolio as of December 31, 2023 and 2022, respectively.
The Company also invests in certain securities that are not supported by government or agency guarantees and whose
realization is dependent on future principal and interest repayments. Prior to purchase, First Financial performs a detailed
collateral and structural analysis on these securities and strategically invests in asset classes in which First Financial has
expertise and experience, as well as a senior position in the capital structure. First Financial continuously monitors credit risk
and geographic concentration risk in its evaluation of market opportunities that would enhance the overall performance of the
16 First Financial Bancorp 2023 Annual Report
portfolio. Securities not supported by government or agency guarantees represented 49.0% and 52.6% of First Financial's
investment securities portfolio as of December 31, 2023 and 2022, respectively.
The other investments category in the Consolidated Balance Sheets consists primarily of First Financial’s investments in FRB
stock, FHLB stock and class B Visa shares.
2023 vs. 2022. First Financial’s investment portfolio at December 31, 2023 totaled $3.1 billion, compared to $3.5 billion at
December 31, 2022, and represented 17.7% of total assets at December 31, 2023. The $392.2 million, or 11.2%, decline in the
investment portfolio during 2023 was primarily related to the Company's strategic redeployment of balance sheet liquidity to
fund loan growth during the year.
First Financial classified $3.0 billion, or 97.4%, and $3.4 billion, or 97.6%, of investment securities as AFS at December 31,
2023 and 2022, respectively. First Financial classified $80.3 million, or 2.6%, and $84.0 million, or 2.4%, of investment
securities as HTM at December 31, 2023 and 2022, respectively.
First Financial recorded a $282.0 million unrealized after-tax loss on the investment portfolio as a component of equity in
AOCI resulting from changes in the fair value of AFS securities at December 31, 2023 due to rising interest rates. This
unrealized loss position improved $44.0 million in 2023 from a $325.9 million unrealized after-tax loss at December 31, 2022.
The overall duration of the investment portfolio was 4.6 years as of both December 31, 2023 and December 31, 2022. First
Financial has avoided adding to its portfolio any particular securities that would materially increase credit risk or geographic
concentration risk and the Company continuously monitors and considers these risks in its evaluation of current market
opportunities that would enhance the overall performance of the portfolio.
Debt securities issued by the U.S. government and U.S. government agencies and corporations, including the FHLB, FHLMC,
FNMA and the U.S. Export/Import Bank, were not meaningful as a percentage of the portfolio at either December 31, 2023 or
December 31, 2022.
Investments in MBS securities, which include CMOs, represented 52.5% and 51.6% of First Financial's total investment
portfolio at December 31, 2023 and 2022, respectively. MBS are participations in pools of loans secured by mortgages under
which payments of principal and interest are passed through to the security holders. These securities are subject to prepayment
risk, particularly during periods of falling interest rates, and extension risk during periods of rising interest rates. Prepayments
of the underlying residential real estate loans may shorten the lives of the securities, thereby affecting yields to maturity and
market values.
Tax-exempt securities of states, municipalities and other political subdivisions totaled $660.7 million as of December 31, 2023
and $716.6 million as of December 31, 2022, comprising 21.3% and 20.5% of the investment portfolio at December 31, 2023
and 2022, respectively. The securities are diversified to include states as well as issuing authorities within states, thereby
decreasing geographic portfolio risk. First Financial continuously monitors the risk associated with this investment type and
reviews underlying ratings for possible downgrades. First Financial does not own any state or other political subdivision
securities that are currently impaired.
Asset-backed securities were $560.2 million, or 18.1% of the investment portfolio at December 31, 2023 and $711.3 million, or
20.4% of the investment portfolio at December 31, 2022. First Financial considers these investment securities to have lower
credit risk and a high liquidity profile as a result of explicit guarantees on the collateral.
Other securities, consisting primarily of taxable securities of states, municipalities and other political subdivisions, in addition
to debt securities issued by corporations, were $151.7 million, or 4.9% of the investment portfolio, at December 31, 2023 and
$164.6 million, or 4.7% of the investment portfolio, at December 31, 2022.
First Financial Bancorp 2023 Annual Report 17
Table 7 • Investment Securities as of December 31
(Dollars in thousands)
U.S. Treasuries
Securities of U.S. government agencies and corporations
Mortgage-backed securities-residential
Mortgage-backed securities-commercial
Collateralized mortgage obligations
Obligations of state and other political subdivisions
Asset-backed securities
Other securities
Total
2023
2022
Amount
Percent of
Portfolio
Amount
Percent of
Portfolio
$
31,243
1.0 % $
32,696
69,780
661,048
540,156
426,618
660,692
560,248
151,662
$ 3,101,447
2.2 %
21.3 %
66,468
650,063
17.4 %
664,925
13.8 %
486,992
21.3 %
18.1 %
4.9 %
716,591
711,325
164,609
100.0 % $ 3,493,669
0.9 %
1.9 %
18.6 %
19.0 %
14.0 %
20.5 %
20.4 %
4.7 %
100.0 %
The estimated maturities and weighted-average yields of HTM and AFS investment securities as of December 31, 2023 are
shown in Table 8 – Investment Securities. Tax-equivalent adjustments using a rate of 21% were included in calculating yields
on tax-exempt obligations of state and other political subdivisions.
First Financial held $793.0 million and $388.2 million of cash on deposit with the Federal Reserve at December 31, 2023 and
2022, respectively. First Financial continually monitors its liquidity position as part of its ERM framework, specifically
through its asset/liability management process.
The Company had a $0.2 million unrealized gain on equity securities recorded in noninterest income for the twelve months
ended December 31, 2023 compared to a $0.6 million unrealized loss for the same period of 2022.
First Financial will continue to monitor loan and deposit demand, balance sheet composition, capital sensitivity and the interest
rate environment as it manages investment strategies in future periods. See Note 4 – Investment Securities in the Notes to
Consolidated Financial Statements for additional information on the Company's investment portfolio and Note 23 – Fair Value
Disclosures for additional information on how First Financial determines the fair value of investment securities.
18 First Financial Bancorp 2023 Annual Report
Table 8 • Investment Securities as of December 31, 2023
(Dollars in thousands)
Held-to-Maturity
Securities of other U.S. government
agencies and corporations
$
Mortgage-backed securities-
residential
Mortgage-backed securities-
commercial
Collateralized mortgage obligations
Obligations of state and other
political subdivisions
Other securities
Total
Available-for-Sale
U.S. treasuries
Securities of other U.S. government
agencies and corporations
Mortgage-backed securities-
residential
Mortgage-backed securities-
commercial
Collateralized mortgage obligations
Obligations of state and other
political subdivisions
$
$
Within one year
After one but within
five years
After five but within
ten years
After ten years
Amount
Yield(1)
Amount
Yield(1)
Amount
Yield(1)
Amount
Yield(1)
Maturity (2)
0
0
0
0
0
0
0
0
0
0.00 % $
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
0
0
0.00 % $
0.00 %
0
0
0.00 % $
0.00 %
485
3.00 %
32,441
2.35 %
3,917
2.45 %
4,053
1.64 %
0
0
0
0
0.00 %
0.00 %
0.00 %
0.00 %
4,595
3.46 %
1,880
3.67 %
1,700
2.25 %
0
0.00 %
31,250
5.13 %
0
0.00 %
0.00 % $
8,997
3.00 % $
69,624
3.60 % $
1,700
2.25 %
0.00 % $
31,243
1.32 % $
0
0.00 % $
0.00 %
0
0.00 %
69,780
1.74 %
0
0
0.00 %
0.00 %
83
3.50 %
69,690
3.30 %
250,719
2.31 %
340,556
2.35 %
222,460
7.72 %
214,156
4.63 %
61,378
1.87 %
9,236
2.90 %
11,228
6.07 %
165,141
2.78 %
136,299
2.29 %
105,980
2.25 %
33,156
3.46 %
131,334
2.97 %
274,178
2.49 %
213,849
2.39 %
Asset-backed securities
283,977
6.26 %
209,987
3.17 %
55,169
2.68 %
11,115
3.40 %
Other securities
Total
0
0.00 %
72,720
7.23 %
44,778
4.75 %
2,914
4.08 %
$ 550,904
6.66 % $ 894,271
3.69 % $ 892,301
2.43 % $ 683,650
2.39 %
(1) Tax equivalent basis was calculated using a 21% tax rate and yields were based on amortized cost.
(2) Maturity represents estimated life of investment securities
LENDING PRACTICES
First Financial remains dedicated to meeting the financial needs of individuals and businesses through its client-focused
business model. The loan portfolio is comprised of a broad range of borrowers primarily located in the Ohio, Indiana and
Kentucky markets; however, the commercial finance and leasing lines of business serve a national client base.
First Financial’s loan portfolio consists of commercial loan types, including C&I, lease financing (equipment leasing),
construction real estate and commercial real estate, as well as consumer loan types, such as residential real estate, home equity,
installment and credit card loans. First Financial's lending portfolios are managed to avoid the creation of inappropriate
industry, geographic, franchise concept or borrower concentration risk.
Credit Management. Subject to First Financial’s credit policy and guidelines, credit underwriting and approval occur within
the market and/or the centralized line of business originating the loan. First Financial has delegated a lending limit sufficient to
address the majority of client requests in a timely manner to each market president and line of business manager. Loan requests
for amounts greater than those limits require the approval of a designated credit officer or senior credit committee and may
require additional approvals from the chief credit officer, the chief executive officer and the board of directors. This allows
First Financial to manage the initial credit risk exposure through a standardized, strategic and disciplined approval process, but
with an increasingly higher level of authority. Plans to purchase or sell a participation in a loan, or a group of loans, requires
the approval of certain senior lending and administrative officers, and in some cases could include the board of directors.
Credit management practices are dependent on the type and nature of the loan. First Financial monitors all significant
First Financial Bancorp 2023 Annual Report 19
exposures on an ongoing basis. Commercial loans are assigned internal risk ratings reflecting the risk of loss inherent in the
loan. These internal risk ratings are assigned upon initial approval of credit and are updated periodically thereafter. First
Financial reviews and adjusts its risk ratings based on actual experience, which is the basis for determining an appropriate ACL.
First Financial's commercial risk ratings of pass, special mention, substandard and doubtful are derived from standard
regulatory rating definitions and facilitate the monitoring of credit quality across the commercial loan portfolio. For further
information regarding these risk ratings, see Note 5 – Loans and Leases in the Notes to the Consolidated Financial Statements.
Commercial loans rated as special mention, substandard or doubtful are considered criticized, while loans rated as substandard
or doubtful are considered classified. Commercial loans may be designated as criticized and/or classified based on individual
borrower performance or industry and environmental factors. Criticized and classified loans are subject to more frequent
internal reviews to assess the borrower’s credit status and develop appropriate action plans.
Management considers classified loans to be the leading indicator of credit losses, and these loans are typically managed by the
Special Assets Department. Special Assets is a commercial credit group whose primary focus is to handle the day-to-day
management of commercial workouts, recoveries and problem loan resolutions. Special Assets ensures that First Financial has
appropriate oversight, improved communication and timely resolution of issues throughout the loan portfolio. Additionally, the
Credit Risk Management group within First Financial's Risk Management function provides independent, objective oversight
and assessment of commercial credit quality and processes.
Consumer lending credit approvals are based on, among other factors, the financial strength and payment history of the
borrower, type of exposure and the transaction structure. Consumer loans are generally smaller dollar amounts than other types
of lending and are made to a large number of customers, providing diversification within the portfolio. Credit risk in the
consumer loan portfolio is managed by loan type, and consumer loan asset quality indicators, including delinquency, are
continuously monitored. The Credit Risk Management group performs product-level performance reviews and assesses credit
quality and compliance with underwriting and loan administration guidelines across the consumer loan portfolio.
LOANS AND LEASES
2023 vs. 2022. Loans, excluding loans held for sale, totaled $10.9 billion at December 31, 2023, increasing $634.2 million, or
6.2%, compared to December 31, 2022.
Residential real estate loans increased $241.4 million, or 22.1%, as rising interest rates led to more adjustable rate and
nonconforming jumbo mortgage originations, which the Company retains on its balance sheet. Finance lease balances
increased $238.7 million, or 101.1%, due to new production from Summit Funding Group. C&I loans increased $90.9 million,
or 2.7%, largely due to the Company's strong origination efforts over the course of 2023. Additionally, construction real estate
loans increased $52.8 million, or 10.3%; commercial real estate loans increased $28.2 million, or 0.7%; home equity loans
increased $24.9 million, or 3.4%; and credit card balances increased $8.1 million, or 15.7%. Partially offsetting these increases
was a decline in installment loans, which decreased $50.8 million, or 24.2%, during 2023.
Average loan balances, including loans held for sale, were $10.6 billion for 2023, an increase of $1.0 billion, or 10.4%,
compared to 2022.
Table 9 – Loan Maturity/Rate Sensitivity indicates the contractual maturity of all loans outstanding at December 31, 2023 as
well as their sensitivity to changes in interest rates.
For discussion of risks associated with the loan portfolio and First Financial's ACL, see the Asset Quality and Allowance for
Credit Losses section included in Management’s Discussion and Analysis.
20 First Financial Bancorp 2023 Annual Report
Table 9 • Loan Maturity/Rate Sensitivity
(Dollars in thousands)
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate
Residential real estate
Home equity
Installment
Credit card
Total
(Dollars in thousands)
Fixed rate
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate
Residential real estate
Home equity
Installment
Credit card
Total
Variable rate
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate
Residential real estate
Home equity
Installment
Credit card
Total
Within
one year
After one
but within
five years
December 31, 2023
Maturity
After five
but within
fifteen years
$
698,171 $
104,116
133,294
782,812
38,361
22,183
37,289
0
2,224,560 $
339,677
281,196
2,110,544
146,207
95,139
93,600
0
575,751 $
31,024
39,807
1,141,385
425,495
132,907
26,700
0
$
1,816,226 $
5,290,923 $
2,373,069 $
After
fifteen years
Total
3,501,221
474,817
564,832
4,080,939
1,333,674
758,676
159,078
59,939
1,452,958 $ 10,933,176
2,739 $
0
110,535
46,198
723,611
508,447
1,489
59,939
Within
one year
After one
but within
five years
After five
but within
fifteen years
After
fifteen years
$
151,861 $
91,277
742
77,087
30,209
13,056
33,352
0
419,545 $
292,047
725
283,952
109,009
42,081
87,017
0
$
397,584 $
1,234,376 $
$
546,310 $
12,839
132,552
705,725
8,152
9,127
3,937
0
1,805,015 $
47,630
280,471
1,826,592
37,198
53,058
6,583
0
150,981 $
22,545
1,516
175,099
317,841
69,868
23,751
0
761,601 $
424,770 $
8,479
38,291
966,286
107,654
63,039
2,949
0
$
1,418,642 $
4,056,547 $
1,611,468 $
1,186 $
0
64,111
4,025
540,091
34,816
1,438
490
646,157 $
1,553 $
0
46,424
42,173
183,520
473,631
51
59,449
806,801 $
Total
723,573
405,869
67,094
540,163
997,150
159,821
145,558
490
3,039,718
2,777,648
68,948
497,738
3,540,776
336,524
598,855
13,520
59,449
7,893,458
First Financial Bancorp 2023 Annual Report 21
In an effort to mitigate credit risk, First Financial routinely reviews its loan portfolio for various concentrations. These reviews
consider the Bank's collateral position as well as exposure to a given industry sector. First Financial believes that the loan
portfolio is sufficiently diversified to provide protection from deterioration in any particular industry or devaluation of a
specific collateral type. Table 10 - C&I and Owner Occupied Loans by Sector and Table 11 - Investor CRE Loans by Property
Type provide additional detail behind the Company's C&I and CRE loan portfolios as of December 31, 2023.
Table 10 • C&I and Owner Occupied CRE Loans by Sector (1)
(Dollars in thousands)
NAICS Sector
Finance and Insurance
Real Estate and Rental and Leasing
Manufacturing
Accommodation and Food Services
Health Care and Social Assistance
Construction
Professional, Scientific, and Technical Services
Retail Trade
Transportation and Warehousing
Other Services (except Public Administration)
Agriculture, Forestry, Fishing and Hunting
Wholesale Trade
Administrative and Support and Waste Management
Arts, Entertainment, and Recreation
Public Administration
Other
Total
(1) Excludes loan marks and loans in process
Table 11 • Investor CRE Loans by Property Type (1)
(Dollars in thousands)
Property Type
Residential Multi Family 5+
Retail Property
Office
Industrial
Hospital/Nursing Home
Hotel
Land
Residential 1-4 Family
Industrial
Other
Total
(1) Excludes loan marks and loans in process
22 First Financial Bancorp 2023 Annual Report
December 31, 2023 % of Total Loans
$
834,614
774,814
557,859
308,219
260,386
254,909
221,985
187,222
168,515
167,080
157,287
149,576
96,949
83,413
57,569
170,791
18.8 %
7.1 %
5.1 %
2.8 %
2.4 %
2.3 %
2.0 %
1.7 %
1.5 %
1.5 %
1.4 %
1.4 %
0.9 %
0.8 %
0.5 %
1.6 %
$
4,451,188
40.7 %
December 31, 2023 % of Total Loans
$
891,488
742,293
441,339
327,939
253,434
204,104
92,037
77,975
57,777
57,696
8.2 %
6.8 %
4.0 %
3.0 %
2.3 %
1.9 %
0.8 %
0.7 %
0.5 %
0.5 %
$
3,146,082
28.8 %
Additionally, given the potential for stress related to commercial office space, First Financial performed a targeted review of its
exposure to this sector during 2023. As of December 31, 2023, First Financial had $462.4 million of loans collateralized by
non-owner occupied office space, which represents 4.2% of the total loan portfolio. The overall LTV of the portfolio at
origination is strong, and 67.9% of the portfolio is located in suburban locations. Additionally, the majority of the portfolio is
secured by Class A and Class B assets with recourse to the sponsor. As of December 31, 2023, 91.0% of the office portfolio
was pass rated, and there were two relationships totaling $22.6 million on nonaccrual status.
COMMITMENTS AND CONTINGENCIES
Off-balance sheet arrangements include commitments to extend credit and financial guarantees. Loan commitments are
agreements to extend credit to a client absent any violation of any condition established in the commitment agreement.
Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
First Financial had commitments outstanding to extend credit totaling $4.5 billion and $4.4 billion at December 31, 2023 and
2022, respectively. This increase in commitments was driven by the Company's strong origination efforts during the year.
As of December 31, 2023, loan commitments with variable interest rates totaled $4.4 billion, while commitments with a fixed
interest rate totaled $108.2 million. At December 31, 2022, commitments with variable interest rates totaled $4.2 billion, while
loan commitments with a fixed interest rate totaled $126.3 million. The fixed rate loan commitments have interest rates ranging
from 0% to 21% for both December 31, 2023 and 2022 and have maturities ranging from less than 1 year to 31.6 years at both
December 31, 2023 and December 31, 2022.
Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third
party. First Financial’s portfolio of letters of credit consists primarily of performance assurances made on behalf of clients who
have a contractual commitment to produce or deliver goods or services. First Financial issued letters of credit aggregating
$34.9 million and $31.5 million at December 31, 2023, and 2022, respectively. Management conducts regular reviews of these
instruments on an individual client basis.
First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amounts of $341.7
million and $379.3 million at December 31, 2023, and 2022, respectively.
First Financial is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved
qualified affordable housing, renewable energy, or other renovation or community revitalization projects. These investments
are included in Accrued interest and other assets in the Consolidated Balance Sheets, with any unfunded commitments included
in Accrued interest and other liabilities in the Consolidated Balance Sheets. As of December 31, 2023, First Financial expects
to recover its remaining investments through the use of the tax credits that are generated by the investments. First Financial had
unfunded commitments related to tax credit investments of $96.4 million and $84.3 million at December 31, 2023 and 2022,
respectively.
In the ordinary course of business, First Financial and its subsidiaries are parties to litigation, including claims to the ownership
of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral, foreclosure
interests that are incidental to our regular business activities and other matters. While the ultimate liability with respect to these
litigation matters and claims cannot be determined at this time, First Financial believes that damages, if any, and other amounts
relating to pending matters are not probable or cannot be reasonably estimated as of December 31, 2023. Reserves are
established for these various matters of litigation, when appropriate, under FASB ASC Topic 450, Contingencies, based in part
upon the advice of legal counsel. First Financial had no reserves related to litigation matters as of December 31, 2023 or
December 31, 2022.
ASSET QUALITY AND ALLOWANCE FOR CREDIT LOSSES
Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful or when
principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to a borrower's
continued failure to adhere to contractual payment terms, coupled with other pertinent factors. When a loan is classified as
nonaccrual, the accrual of interest income is discontinued and previously accrued but unpaid interest is reversed.
As detailed in Note 2, the Company prospectively adopted ASU 2022-02 effective as of January 1, 2023. The new rule
eliminated the accounting for TDRs while establishing a new standard for the treatment of modifications made to borrowers
experiencing financial difficulties, defined by First Financial as FDMs. Effective with the adoption of the standard, the
First Financial Bancorp 2023 Annual Report 23
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Company prospectively will not include FDMs in the calculation of nonperforming loans, nonperforming assets or classified
assets. Prior period data, which included TDRs, has not been adjusted.
See Table 12 – Summary of the ACL and Selected Statistics for a summary of First Financial’s nonaccrual loans and OREO,
which collectively comprise nonperforming assets.
2023 vs. 2022. Nonaccrual loans as of December 31, 2023 were $65.8 million, or 60 bps of total loans. This represents a $37.1
million, or 129.7%, increase from $28.6 million as of December 31, 2022. The increase in nonaccrual loans was primarily
attributed to two large CRE credits that were downgraded during 2023. Total nonperforming assets increased $26.1 million, or
65.6%, to $65.9 million at December 31, 2023 from $39.8 million at December 31, 2022. The increase in nonperforming assets
was driven by the increase in nonaccrual loans, partially offset by the impact from adopting ASU 2022-02, which eliminated
consideration of $11.0 million of accruing TDRs from nonperfoming assets.
Classified asset balances increased $12.9 million, or 10.0%, to $141.0 million at December 31, 2023 from $128.1 million at
December 31, 2022. The increase was largely attributed to two CRE loans downgraded to nonaccrual, partially offset by the
payoff of one large healthcare credit.
Allowance for credit losses. The ACL is a reserve accumulated on the Consolidated Balance Sheets through the recognition of
the provision for loan and lease losses. First Financial records provision expense in the Consolidated Statements of Income to
maintain the ACL at a level considered sufficient to absorb expected credit losses for financial assets in the portfolio over their
expected remaining lives with consideration given to current and forward-looking information.
The recorded values of the loans and leases actually removed from the Consolidated Balance Sheets due to credit deterioration
are referred to as charge-offs. First Financial's policy is to charge-off all or a portion of a loan when, in management's opinion,
it is unlikely to collect the principal amount owed in full either through payments from the borrower or from the liquidation of
collateral. All loans charged-off are subject to continuous review and concerted efforts are made to maximize any recovery. In
most cases, the borrower’s debt obligation is not canceled even though the balance may have been charged-off. Actual losses
on loans and leases are charged against the ACL. Any subsequent recovery of a previously charged-off loan is credited back to
the ACL.
Management estimates the allowance using relevant available information from both internal and external sources, relating to
past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic
forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its
quantitative model, as necessary, to reflect conditions not already considered therein. These adjustments are commonly known
as the Qualitative Framework. The evaluation of these factors is the responsibility of the ACL Committee, which is comprised
of senior officers from the risk management, credit administration, finance and lending areas.
See Table 12 – Summary of the ACL and Selected Statistics for a summary of activity impacting the ACL and Table 13 –
Allocation of the ACL for detail on its composition.
2023 vs. 2022. The total ACL, which includes both funded and unfunded reserves, was $159.9 million at December 31, 2023,
which combined with 33 bps of net charge-offs to result in $43.1 million in total provision expense for the year. This compared
to a total allowance of $151.4 million as of December 31, 2022 and $11.7 million of provision expense in 2022.
The Company utilized the Moody's December baseline forecast as its R&S forecast in the quantitative model at December 31,
2023. For reasonableness, the Company also considered the impact to the model from alternative, more adverse economic
forecasts and slower prepayment speeds. These alternative analyses were utilized to inform the Company's qualitative
adjustments. Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future
credit stress, such as franchise, hotel and investor commercial real estate lending, when making qualitative adjustments to the
ACL model.
ACL - Loans and Leases. The ACL on loans and leases at December 31, 2023 was $141.4 million, which was an $8.5
million, or 6.4%, increase from $133.0 million at December 31, 2022. The ACL was 1.29% as a percentage of total loans as of
both December 31, 2023 and December 31, 2022. Provision expense increased $36.3 million, or 539.9%, to $43.1 million in
2023 from $6.7 million of provision expense in 2022. Modest ACL growth in 2023 was driven by loan growth and slower
prepayments speeds during the period.
24 First Financial Bancorp 2023 Annual Report
Net charge-offs increased $28.9 million, or 502.5%, to $34.6 million for 2023 compared to $5.7 million for 2022, while the
ratio of net charge-offs as a percentage of average loans outstanding increased to 33 bps in 2023 from 6 bps in 2022. The
increase in 2023 was largely attributed to two large relationships, which totaled $16.1 million. Additionally, $6.1 million of
losses were incurred on loan sales during 2023 intended to minimize concentration risks.
The ACL as a percentage of nonaccrual loans was 215.1% at December 31, 2023 and 464.6% at December 31, 2022. The
decrease in this ratio was attributed to the increase in nonaccrual loans during the period outpacing the increase in the ACL.
Provision expense is a product of the Company's ACL model combined with net charge-off activity during the period.
Provision expense increased $36.3 million during 2023 as the Company recorded $43.1 million of provision expense during the
period compared to $6.7 million in 2022. The increase in provision expense was driven by loan growth and the increase in net
charge-offs during the period.
ACL - Unfunded Commitments. The ACL on unfunded commitments was $18.4 million as of both December 31, 2023 and
December 31, 2022. First Financial recorded insignificant provision expense on unfunded commitments for the year ended
December 31, 2023 compared to $5.0 million for the same period of 2022.
For further discussion of First Financial's ACL, see Note 6 – Allowance for Credit Losses in the Notes to Consolidated
Financial Statements.
First Financial Bancorp 2023 Annual Report 25
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Table 12 • Summary of the ACL and Selected Statistics
(Dollars in thousands)
Transactions in the allowance for credit losses:
Balance at January 1
Day one adoption impact of ASC 326
Purchase accounting ACL for PCD
Provision for credit losses
Loans charged-off:
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate
Real estate-residential
Home equity
Installment
Credit card
Total loans charged-off
Recoveries of loans previously charged-off:
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate
Real estate-residential
Home equity
Installment
Credit card
Total recoveries
Net charge-offs
2023
2022
2021
2020
2019
$
132,977
$
131,992
$
175,679
$
0
0
0
0
0
17
43,074
6,731
(19,024)
57,650
61,505
0
70,796
5,345
852
0
12,100
488
1,541
148
885
$
56,542
0
0
30,598
26,676
162
0
3,689
677
2,591
223
1,547
15,620
0
1,498
13,471
127
1,073
334
780
32,903
21,359
35,565
1,612
0
3
4,785
228
1,223
151
221
8,223
24,680
2,907
0
17
2,262
381
1,132
158
230
7,087
14,272
19,175
4,423
0
8,723
39
340
6,442
1,173
40,315
1,534
55
0
2,523
247
615
441
282
5,697
34,618
5,899
152
0
3,667
224
160
1,549
907
12,558
939
49
0
4,304
174
898
165
283
6,812
5,746
Balance at December 31
$
141,433
$
132,977
$
131,992
$
175,679
$
2,883
0
68
1,113
273
1,335
251
152
6,075
29,490
57,650
0.95 %
0.17 %
(0.01) %
0.07 %
0.04 %
0.16 %
(0.03) %
2.81 %
0.33 %
48,165
11,435
59,600
2,033
61,633
201
61,834
89,250
0.51 %
1.28 %
0.00 %
0.15 %
(0.02) %
(0.04) %
3.42 %
1.49 %
0.33 %
$
65,753
$
N/A
65,753
106
65,859
2,028
67,887
140,995
$
$
0.17 %
0.07 %
0.00 %
(0.02) %
0.01 %
(0.10) %
0.87 %
1.14 %
0.06 %
$
28,623
10,960
39,583
191
39,774
857
0.50 %
0.00 %
0.26 %
0.20 %
(0.01) %
(0.02) %
0.20 %
1.13 %
0.26 %
48,392
11,616
60,008
98
60,106
137
60,243
104,815
0.08 %
1.07 %
0.00 %
0.23 %
0.01 %
0.05 %
(0.01) %
1.39 %
0.14 %
$
80,752
$
7,099
87,851
1,287
89,138
169
$
$
89,307
142,021
$
$
$
$
40,631
128,137
$
$
1.29 %
0.60 %
0.60 %
215.10 %
215.10 %
1.29 %
0.28 %
0.38 %
464.58 %
335.94 %
1.42 %
0.52 %
0.65 %
272.76 %
219.96 %
1.77 %
0.82 %
0.89 %
217.55 %
199.97 %
0.63 %
0.52 %
0.65 %
119.69 %
96.73 %
Net charge-offs to average loans and leases
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate
Real estate-residential
Home equity
Installment
Credit card
Total net charge-offs
Nonperforming assets
Nonaccrual loans (1)
Accruing troubled debt restructurings (2)
Total nonperforming loans (2)
Other real estate owned (OREO)
Total nonperforming assets (2)
Accruing loans past due 90 days or more
Total underperforming assets (2)
Total classified assets (2)
Credit quality ratios:
As a percent of year-end loans, net of unearned income:
Allowance for credit losses
Nonaccrual loans
Nonperforming loans (2)
Allowance for credit losses to nonaccrual loans
Allowance for credit losses to nonperforming loans
(1) Nonaccrual loans include nonaccrual TDRs of $10.0 million, $16.0 million, $14.7 million, and $18.5 million, as of December 31, 2022, 2021, 2020, and 2019, respectively.
(2) Upon adoption of ASU 2022-02 as of January 1, 2023, the TDR model was eliminated. Prospectively, disclosures will include modifications of loans to borrower experiencing
financial difficulty (FDM). FDMs are excluded from nonperforming, underperforming and classified assets.
26 First Financial Bancorp 2023 Annual Report
Table 13 • Allocation of the ACL
2023
2022
December 31,
2021
2020
2019
(Dollars in thousands)
Allowance
Balance at End of Period Applicable to:
Percent
of Loans
to Total
Loans
Allowance
Percent
of Loans
to Total
Loans
Allowance
Percent
of Loans
to Total
Loans
Allowance
Percent
of Loans
to Total
Loans
Allowance
Percent
of Loans
to Total
Loans
Commercial and industrial
$ 44,319
32.0 % $ 42,313
33.1 % $ 44,052
29.3 % $ 51,454
30.4 % $ 18,584
32.6 %
Lease financing
Real estate – construction
Real estate – commercial
Real estate – residential
Installment, home equity & credit card
12,365
11,003
34,903
18,088
20,755
4.4 %
3,571
2.3 %
1,633
1.2 %
995
0.8 %
971
5.2 %
13,527
5.0 %
11,874
4.9 %
21,736
6.4 %
2,381
37.3 %
41,106
39.3 %
53,420
45.5 %
76,795
43.5 %
23,579
12.2 %
12,684
10.6 %
6,225
9.6 %
8,560
10.1 %
8.9 %
19,776
9.7 %
14,788
9.5 %
16,139
8.8 %
5,299
6,836
0.8 %
5.0 %
42.6 %
10.3 %
8.7 %
Total
$ 141,433
100.0 % $ 132,977
100.0 % $ 131,992
100.0 % $ 175,679
100.0 % $ 57,650
100.0 %
DERIVATIVES
First Financial is authorized to use certain derivative instruments including interest rate caps, floors, swaps and foreign
exchange contracts to meet the needs of its clients while managing interest rate risk associated with certain transactions. The
Company does not use derivatives for speculative purposes.
First Financial primarily utilizes interest rate swaps, which generally involve the receipt by First Financial of floating rate
amounts from swap counterparties in exchange for payments to these counterparties by First Financial of fixed rate amounts
received from borrowers. This results in the Company's loan customers receiving fixed rate funding while providing First
Financial with a floating rate asset.
In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation
agreements with counterparties whereby First Financial assumes a portion of the credit exposure associated with an interest rate
swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make payments to the
counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with the
counterparty.
First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans to third party investors,
which are considered derivatives. When borrowers secure an IRLC with First Financial and the loan is intended to be sold,
First Financial will enter into forward commitments for the future delivery of the loans to third party investors in order to hedge
against the effect of changes in interest rates impacting IRLCs and loans held for sale.
First Financial may enter into foreign exchange derivative contracts for the benefit of commercial customers to hedge their
exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from interest rate derivative contracts,
First Financial also enters into foreign exchange contracts with major financial institutions to economically hedge the exposure
from client driven foreign exchange activity. The Company has risk limits and internal controls in place to help ensure
excessive risk is not being taken in providing this service to customers.
First Financial may enter into interest rate collars and floors, which are designated as cash flow hedges. These cash flow
hedges are utilized to mitigate interest rate risk on variable-rate commercial loan pools. Changes in the fair value of cash flow
hedges included in the assessment of hedge effectiveness are recorded in AOCI and reclassified from AOCI to current period
earnings when the hedged item affects earnings.
The structure of the interest rate collars is such that First Financial pays the counterparty an incremental amount if the collar
index exceeds the cap rate. Conversely, First Financial receives an incremental amount if the index is below the floor rate. No
payments are required if the collar index is between the cap and floor rates.
The structure of First Financial's interest rate floors is such that First Financial receives an incremental amount if the index falls
below the floor strike rate. No payments are required if the index remains above the floor strike rate.
As of December 31, 2023, the notional value of the Company's cash flow hedges was $1.0 billion, with the $3.8 million change
in the fair value recorded in AOCI in the Consolidated Balance Sheet. There were no cash flow hedges outstanding at
December 31, 2022. As of December 31, 2023, the maximum length of time over which the Company is hedging its exposure
First Financial Bancorp 2023 Annual Report 27
Management’s Discussion and Analysis of Financial Condition and Results of Operations
to the variability in future cash flows is 60 months. It is estimated that $0.7 million will be reclassified from OCI to interest
income during the next 12 months.
See Note 13 – Derivatives in the Notes to Consolidated Financial Statements for additional information regarding First
Financial's use of derivative instruments.
DEPOSITS
First Financial solicits deposits by offering commercial and consumer clients a wide variety of transaction and savings
accounts, including checking, savings, money-market and time deposits of various maturities and rates.
2023 vs. 2022. First Financial's total deposits increased $659.6 million, or 5.2%, to $13.4 billion as of December 31, 2023 from
$12.7 billion at December 31, 2022. This change was driven by a $1.0 billion, or 59.8%, increase in time deposits and a $503.1
million, or 13.1%, increase in savings deposits. These changes were partially offset by an $817.2 million, or 19.8%, decrease in
noninterest bearing deposits and a $43.9 million, or 1.4%, decrease in interest-bearing checking deposits. Total non-time
deposit balances were $10.6 billion as of December 31, 2023 and $11.0 billion as of December 31, 2022. The increase in total
deposits was largely driven by the Company's utilization of brokered deposits as a source of funding. While core deposit
balances were relatively flat year over year, the mix continued to shift to higher cost products such as retail CDs and money
market savings as a result of higher interest rates.
Total average deposits for 2023 increased $299.6 million, or 2.4%, from 2022, primarily due to a $1.2 billion, or 104.0%,
increase in average time deposits as the Company increased its reliance upon brokered deposits as a source of funding and
customers migrated to higher yielding deposit products. These increases were partially offset by a $578.8 million, or 13.8%,
decrease in average noninterest bearing deposits, a $226.1 million, or 7.2%, decrease in average interest-bearing demand
deposits and a $117.8 million, or 2.9%, decrease in average savings deposits.
Uninsured deposit balances were $5.6 billion, or 42.1% of total deposits, as of December 31, 2023. The Company reviews
uninsured deposits for concentration risk, and typically evaluates this risk by excluding public funds and intercompany deposits
to arrive at an adjusted uninsured deposit amount. As such, excluding public funds and intercompany accounts, adjusted
uninsured deposits were $3.2 billion, or 23.8% of total deposits, at December 31, 2023.
Table 14 – Uninsured Deposits-Maturities of Time Deposits Greater Than or Equal to $250,000 details the contractual maturity
of certain deposits that are not FDIC insured. Time Deposits Greater Than or Equal to $250,000 represented 2.2% of total
deposits outstanding at December 31, 2023 and 1.3% at December 31, 2022.
Table 14 • Uninsured Deposits-Maturities of Time Deposits Greater than or Equal to $250,000
(Dollars in thousands)
December 31, 2023
Maturing in
3 months or less
3 months to 6 months
6 months to 12 months
over 12 months
Total
December 31, 2022
Maturing in
3 months or less
3 months to 6 months
6 months to 12 months
over 12 months
Total
BORROWINGS
28 First Financial Bancorp 2023 Annual Report
CDs
IRAs
Total
$
$
53,542 $
85,206
94,412
55,965
289,125 $
969 $
2,971
4,071
2,924
10,935 $
54,511
88,177
98,483
58,889
300,060
38,264
21,380
46,710
49,806
1,382 $
610
2,385
4,602
39,646
21,990
49,095
54,408
$
156,160 $
8,979 $
165,139
First Financial's short-term borrowings are utilized to manage the Company's normal liquidity needs. These borrowings include
repurchase agreements utilized for corporate sweep accounts with cash management account agreements in place, as well as
overnight advances from the FHLB. The Company's long-term borrowings consist of subordinated debt, FRB borrowings,
FHLB long-term advances, repurchase agreements utilizing investment securities pledged as collateral and a capital loan from a
municipality.
2023 vs. 2022. First Financial utilizes both short-term borrowings and long-term advances from the FHLB as wholesale
funding sources. Borrowed funds were $1.3 billion as of December 31, 2023 compared to $1.6 billion as of
December 31, 2022. Borrowings decreased during the period largely as a result of the Company utilizing brokered CDs in lieu
of borrowings to satisfy its funding needs.
Short-term borrowings decreased $349.3 million, or 27.1%, to $937.8 million at December 31, 2023, from $1.3 billion at
December 31, 2022. First Financial had $800.0 million of short-term borrowings from the FHLB at December 31, 2023
compared to $1.1 billion at December 31, 2022. Short-term borrowings included no repurchase agreements as of December 31,
2023 or 2022. Additionally, Company had no federal funds purchased as of December 31, 2023 or 2022.
Total long-term debt was $344.1 million and $346.7 million at December 31, 2023 and 2022, respectively. Outstanding
subordinated debt totaled $314.2 million and $313.7 million as of December 31, 2023 and 2022, respectively. The
subordinated debt is treated as Tier 2 capital for regulatory capital purposes and also included unamortized valuation and debt
issuance costs of $6.9 million and $7.8 million as of December 31, 2023 and 2022, respectively.
The Company had no FHLB long-term advances as of December 31, 2023 or 2022. First Financial's total remaining borrowing
capacity from the FHLB was $611.3 million at December 31, 2023. For ease of borrowing execution, First Financial utilizes a
blanket collateral agreement with the FHLB. First Financial pledged $6.2 billion of certain eligible residential, commercial and
agricultural real estate loans, home equity lines of credit and certain agency CMOs, municipals and CMBS securities as
collateral for borrowings from the FHLB as of December 31, 2023.
See Note 12 – Borrowings in the Notes to Consolidated Financial Statements for additional information on First Financial's
borrowings.
LIQUIDITY
Liquidity management is the process by which First Financial manages the continuing flow of funds necessary to meet its
financial commitments on a timely basis and at a reasonable cost. These funding commitments include withdrawals by
depositors, credit commitments to borrowers, shareholder dividends, share repurchases, operating expenses and capital
expenditures. Liquidity is derived primarily from deposit growth, principal and interest payments on loans and investment
securities, maturing loans and investment securities and access to wholesale funding sources.
First Financial’s most stable source of liability-funded liquidity for both long and short-term needs is deposit growth and
retention of the core deposit base. In addition to core deposit funding, First Financial also utilizes a variety of other short and
long-term funding sources, which include subordinated notes, longer-term advances from the FRB and FHLB and its short-term
line of credit. For further information regarding the company's liability-funded liquidity, see Note 11 - Deposits and Note 12 -
Borrowings.
Both First Financial and the Bank received investment grade credit ratings from Kroll Bond Rating Agency, Inc., an
independent rating agency. These credit ratings impact the cost and availability of financing to First Financial, and a
downgrade to these credit ratings could affect First Financial's or the Bank’s abilities to access the credit markets and
potentially increase borrowing costs, negatively impacting financial condition and liquidity. Key factors in maintaining high
credit ratings include consistent and diverse earnings, strong credit quality and capital ratios, diverse funding sources and
disciplined liquidity monitoring procedures. The ratings of First Financial and the Bank at December 31, 2023 were as follows:
First Financial Bancorp 2023 Annual Report 29
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Table 15 • Credit Ratings
Senior Unsecured Debt
Subordinated Debt
Short-Term Debt
Deposit
Short-Term Deposit
First Financial Bancorp
First Financial Bank
BBB+
BBB
K2
N/A
N/A
A-
BBB+
K2
A-
K2
First Financial's principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter
maturities. AFS securities were 97.4% and 97.6% of the total investment portfolio as of December 31, 2023 and 2022,
respectively. The market value of investment securities classified as AFS totaled $3.0 billion and $3.4 billion at December 31,
2023 and 2022, respectively. As of December 31, 2023, $1.4 billion of AFS securities were unpledged and there were $358.0
million of securities available to be sold at breakeven. Additionally, $533.3 million of AFS securities have floating rates and
could be sold with minimal losses at December 31, 2023.
HTM securities that are maturing within a short period of time can be an additional source of liquidity. As of December 31,
2023 and 2022, the Company had no HTM securities maturing within one year.
In total, First Financial expects $622.9 million of cash flows from its investment portfolio in the next 12 months.
Other sources of liquidity include cash and due from banks and interest-bearing deposits with other banks. At December 31,
2023, these balances totaled $1.0 billion, and First Financial had unused and available overnight wholesale funding sources of
$5.1 billion, or 29.0% of total assets, to fund loan and deposit activities in addition to general corporate requirements.
First Financial has a $40.0 million short-term credit facility with an unaffiliated bank that matures in December 2024. This
facility has a variable interest rate and provides First Financial additional liquidity, if needed, for various corporate activities
including the repurchase of First Financial common stock and the payment of dividends to shareholders. As of both
December 31, 2023 and 2022, First Financial had no outstanding balance. The credit agreement requires First Financial to
comply with certain covenants including those related to asset quality and capital levels, and First Financial was in compliance
with all covenants associated with this facility as of December 31, 2023 and 2022. This credit facility also required First
Financial to pledge as collateral the Bank's common stock where the lender is granted a security interest in this collateral.
Certain restrictions exist regarding the Bank's ability to transfer funds to First Financial in the form of cash dividends, loans,
other assets or advances and the approval of the Bank's primary federal regulator is required to pay dividends in excess of
regulatory limitations. Dividends paid to First Financial from the Bank totaled $160.0 million, $170.0 million and $200.0
million for 2023, 2022 and 2021, respectively. As of December 31, 2023, the Bank had retained earnings of $918.9 million, of
which $248.7 million was available for distribution to First Financial without prior regulatory approval. As an additional
source of liquidity, First Financial had $134.7 million in cash at the parent company as of December 31, 2023.
Share repurchases may also impact First Financial's liquidity. For further information regarding share repurchases, see the
Capital section that follows.
Capital expenditures were $24.1 million for 2023, $13.8 million for 2022 and $15.3 million for 2021. Material commitments
for capital expenditures as of December 31, 2023, were $40.4 million. Management believes that sufficient liquidity exists to
fund its future capital expenditure commitments.
Management is not aware of any other trends, events or regulatory requirements that, if implemented, are likely to have a
material effect on First Financial’s liquidity. For a discussion of liquidity risk management, please see the Market Risk section
that follows.
30 First Financial Bancorp 2023 Annual Report
CAPITAL
Risk-Based Capital. First Financial and its subsidiary, First Financial Bank, are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action
regulations involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory
guidelines. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet
minimum capital requirements can initiate regulatory action.
The Board of Governors of the Federal Reserve System approved Basel III in order to strengthen the regulatory capital
framework for all banking organizations, subject to a phase-in period for certain provisions. Basel III established and defined
quantitative measures to ensure capital adequacy. These measures require First Financial to maintain minimum amounts and
ratios of Common equity Tier 1 capital, Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets
(Leverage ratio).
Basel III includes a minimum ratio of Common equity Tier 1 capital to risk-weighted assets of 7.0% and includes a fully
phased-in capital conservation buffer of 2.5% of risk-weighted assets. Further, the minimum ratio of Tier 1 capital to risk-
weighted assets is 8.5% and all banks are subject to a 4.0% minimum leverage ratio, while the minimum required Total risk-
based capital ratio is 10.5%. Failure to maintain the required Common equity Tier 1 capital will result in potential restrictions
on a bank’s ability to pay dividends, repurchase stock and pay discretionary compensation to its employees. The capital
requirements also provide strict eligibility criteria for regulatory capital instruments and change the method for calculating risk-
weighted assets in an effort to better identify riskier assets, such as highly volatile commercial real estate and nonaccrual loans.
First Financial's Tier 1 capital increased to 12.06% at December 31, 2023 compared to 11.17% at December 31, 2022, while the
total capital ratio increased to 13.61% from 13.09% during the same period. The leverage ratio increased to 9.70% at
December 31, 2023, compared to 8.89% at December 31, 2022. Likewise, the Company’s tangible common equity ratio
increased to 7.17% at December 31, 2023 from 5.95% at December 31, 2022. The increase in the tangible common equity ratio
was primarily driven by the Company's strong earnings as well as the increase in accumulated other comprehensive income
during the period, which was primarily due to improvement in the investment portfolio during the year.
As of December 31, 2023, First Financial met all capital adequacy requirements to which it was subject. At December 31, 2023
and 2022, regulatory notifications categorized First Financial Bank as well-capitalized under the regulatory framework for
prompt corrective action. There have been no conditions or events that management believes has changed the Company’s
capital categorization.
For further detail on First Financial's capital ratios at December 31, 2023, see Note 20 – Capital in the Notes to Consolidated
Financial Statements.
First Financial Bancorp 2023 Annual Report 31
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Table 16 • Capital Adequacy
(Dollars in thousands)
Consolidated capital calculations
Common stock
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost
Total shareholders' equity
Common equity tier 1 capital adjustments
Goodwill and other intangibles
Total tangible equity
Total assets
Goodwill and other intangibles
Total tangible assets
Common tier 1 capital
Tier 1 capital
Total capital
Total risk-weighted assets
Average assets (1)
Regulatory capital
Common tier 1 ratio
Tier 1 ratio
Total capital ratio
Leverage ratio
Other capital ratios
Total shareholders' equity to ending assets
Total tangible shareholders' equity to ending tangible assets
Total tangible shareholders' equity to risk-weighted assets
(1) For purposes of calculating the Leverage ratio, certain intangible assets are excluded from average assets.
December 31,
2023
2022
$ 1,638,972
$ 1,634,605
1,136,718
(309,819)
(197,897)
968,237
(358,663)
(202,806)
2,267,974
2,041,373
(1,089,817)
(1,095,426)
$ 1,178,157
$ 945,947
$ 17,532,900
$ 17,003,316
(1,089,817)
(1,095,426)
$ 16,443,083
$ 15,907,890
$ 1,568,815
$ 1,399,420
1,613,480
1,443,698
1,820,285
1,691,255
13,374,177
12,923,233
16,628,122
16,240,905
11.73 %
12.06 %
13.61 %
9.70 %
12.94 %
7.17 %
8.81 %
10.83 %
11.17 %
13.09 %
8.89 %
12.01 %
5.95 %
7.32 %
First Financial generally seeks to balance the return of earnings to shareholders through shareholder dividends and share
repurchases with capital retention in order to maintain adequate levels of capital and support the Company's growth plans.
Shareholder Dividends. First Financial’s dividend payout ratio, or total dividends paid divided by net income available to
common shareholders, was 33.8%, 39.5% and 42.6% for the years 2023, 2022 and 2021, respectively. The dividend payout
ratio is continually reviewed by management and the board of directors for consistency with First Financial’s overall capital
planning activities and compliance with applicable regulatory limitations. In January 2024, the board of directors authorized a
dividend of $0.23 per common share, payable on March 15, 2024 to all shareholders of record as of March 1, 2024.
Share Repurchases. First Financial did not purchase any shares under the 2022 Repurchase Plan during 2023 or 2022.
Effective January 2024, First Financial's board of directors approved a new stock repurchase plan (the 2024 Repurchase Plan),
replacing the 2022 Repurchase Plan which expired in December of 2023. The 2024 Repurchase Plan continues for two years
and authorizes the purchase of up to 5,000,000 shares of the Company's common stock and will expire in December 2025.
32 First Financial Bancorp 2023 Annual Report
Shareholders' Equity. Total shareholders’ equity at December 31, 2023 and December 31, 2022 was $2.3 billion and $2.0
billion, respectively. The increase in total equity compared to the prior year was primarily due to an increase in retained
earnings during the year, which was the result of the Company's strong earnings.
For further detail, see the Consolidated Statements of Changes in Shareholders’ Equity.
PENSION PLAN
First Financial sponsors a non-contributory defined-benefit pension plan covering substantially all employees. The significant
assumptions used in the valuation and accounting for the pension plan include the discount rate, expected return on plan assets
and the rate of employee compensation increase. The discount rate assumption was determined based on highly rated corporate
bonds, weighted to adjust for their relative size, projected plan cash flows using the annuity substitution method as well as
comparisons to external industry surveys. The expected return on plan assets was 7.25% for both 2023 and 2022, and was
based on the composition of plan assets, actual returns, economic forecasts and economic trends. The assumed rate of
compensation increase was 3.50% and was compared to historical increases for plan participants for reasonableness.
Presented below is the estimated impact on First Financial’s projected benefit obligation and pension expense as of
December 31, 2023, assuming shifts in the significant assumptions:
Table 17 • Rate Change Impact on Pension Parameters
(Dollars in thousands)
-100 BP
+100 BP
-100 BP
+100 BP
-100 BP
+100 BP
Change in Projected Benefit Obligation
Change in Pension Expense
$
3,351 $
(366)
(2,580)
N/A
N/A $
471 $
1,490 $
(1,490)
(291) $
(23)
635
125
Discount rate
Expected return on
plan assets
Rate of compensation
increase
Based upon the plan’s current funding status and updated actuarial projections for 2023, First Financial recorded expense
related to its pension plan of $3.5 million for 2023, $2.0 million for 2022 and $3.4 million for 2021. First Financial will make
contributions to the plan if plan assets do not meet or exceed ERISA’s minimum funding standards. Given the plan's over-
funded status, First Financial made no cash contributions to fund the pension plan in 2023, 2022 or 2021 nor does it expect to
make a cash contribution in 2024.
See Note 17 – Employee Benefit Plans in the Notes to Consolidated Financial Statements for additional information on First
Financial's pension plan.
ENTERPRISE RISK MANAGEMENT
First Financial considers risk to be any issue that could have an adverse impact on the Company's capital or earnings, or
negatively impact the Company's ability to meet its objectives. First Financial manages risks through a structured ERM
approach that routinely assesses the overall level of risk, identifies specific risks and evaluates the steps being taken to mitigate
those risks. First Financial continues to enhance its risk management capabilities and has, over time, embedded risk awareness
into the Company's culture. ERM allows First Financial to align a variety of risk management activities within the Company
into a cohesive, enterprise-wide approach and focus on process-level risk management activities and strategic objectives within
the risk management culture. Additionally, ERM allows the Company to deliberately develop risk responses and evaluate the
effectiveness of mitigation compared to established thresholds for risk appetite and tolerance, in addition to facilitating the
consideration of significant organizational changes and consolidation of information through a common process for
management and the board of directors.
First Financial has identified nine types of risk that it monitors in its ERM framework. These risks include credit, market
(composed of interest rate, liquidity, capital, foreign exchange and financial risk), operational, compliance, strategic, reputation,
information technology, cybersecurity and legal.
First Financial uses a robust regulatory risk framework as one of the foundational components of its ERM framework. This
allows for a common categorization across the Company and provides a consistent and complete risk framework that can be
summarized and assessed enterprise-wide. Additionally, the risk framework utilized is consistent with that used by the
Company’s regulators, which results in additional feedback on First Financial’s ability to assess and measure risk across the
organization as well as the ability for management and the board of directors to identify and understand differences in assessed
risk profiles.
First Financial Bancorp 2023 Annual Report 33
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ERM helps ensure that First Financial continues to identify and adequately address risks that emerge from a combination of
new customers, products and associates, changing markets, new lines of business and processes and new or evolving systems.
The goals of First Financial’s ERM framework are to:
•
•
•
•
•
•
•
•
focus on the Company at both the enterprise and line of business levels;
align the Company's risk appetite with its strategic, operational, compliance and reporting objectives;
enhance risk response decisions;
reduce operational deficiencies and possible losses;
identify and manage interrelated risks;
provide integrated responses to multiple risks;
improve the deployment and allocation of capital; and
improve overall business performance.
Specific enterprise-level objectives include:
•
•
•
•
•
•
•
creating a holistic view of risk in which risk is comprehensively considered, consistently communicated and
documented in decision making;
centralizing the oversight of risk management activities;
defining the risks that will be addressed by the enterprise and each functional area or business unit to create an
awareness of risks affecting the Company;
establishing and maintaining systems and mechanisms to identify, assess, monitor and measure risks that may impact
First Financial’s ability to achieve its business objectives;
creating a process which ensures that, for all new lines of business and new product decisions, management evaluates
the expertise needed and assesses the risks involved;
establishing and maintaining systems and mechanisms to monitor risk responses;
developing risk occurrence information systems to provide early warning of events or situations that create risk for the
Company;
• maintaining a compliance culture and framework that ensures adherence to laws, rules and regulations, fair treatment
•
•
and privacy of customers and prevention of money laundering and terrorist financing;
implementing and reviewing risk measurement techniques that management may use to establish the Company’s risk
tolerance, assess risk likelihood and impact, main effective controls and analyze risk and control monitoring
processes; and
establishing appropriate management reporting systems regarding the enterprise-wide risk exposures and allocation of
capital.
Line of business-level objectives focus on why and where the particular business or business unit risk exists; how the business
unit’s management of its risks affects the Company’s strategy, earnings, reputation and other key success factors; whether the
line of business objectives are aligned with enterprise objectives; how effective internal procedures are integral to successful
business operations; and whether internal controls and their maintenance are reliable.
Board of Directors and Board Risk & Compliance Committees. First Financial’s board of directors is responsible for
understanding the Company’s compliance and risk management objectives and risk tolerance, and as such, board oversight of
the Company’s compliance and risk management activities is a key component to an effective risk management process. The
Board's oversight responsibilities include:
•
establishing and guiding the Company’s strategic direction and tolerance for risk, including the determination of the
aggregate risk appetite and identifying the senior managers who have the responsibility for managing risk;
• monitoring the Company’s performance and overall risk profile, ensuring that the level of risk is maintained at prudent
levels and is supported by adequate capital;
ensuring that the Company implements sound fundamental principles that facilitate the identification, measurement,
monitoring and control of risk;
ensuring that adequate resources are dedicated to compliance and risk management; and
confirming that awareness of risk management activities is evident throughout the organization.
•
•
•
The board of directors has defined broad risk tolerance levels, or limits, to guide management in the decision-making process,
and is responsible for establishing information and communication requirements to ensure that risk management activities
remain within these tolerance limits. The Risk and Compliance Committee, a standing committee of the board of directors, is
34 First Financial Bancorp 2023 Annual Report
responsible for carrying out the board’s responsibilities in this regard. Other standing committees of the board (Audit,
Compensation, Corporate Governance and Nominating, and Capital Markets) oversee particular areas of risk governance
assigned specifically to them.
Risk Committees. The ERM program utilizes multiple cross-functional management committees as its primary assessment
and communication mechanism for identified risks. These committees include:
•
•
•
•
•
•
•
•
•
•
•
•
•
Board Enterprise Risk & Compliance
Enterprise Risk Management
Credit
Compliance
CRA & Fair Banking
Human Resources
Vendor Management
Operational Risk
Cybersecurity
Information Technology
Balance Sheet Strategy / ALCO
Allowance for Credit Loss
Sarbanes Oxley
Committee chairs play key roles in the execution of risk management activities throughout the enterprise and are responsible for
continuous updates and communication among committee members in conjunction with the risk management department
regarding changes to risk profiles, changes to risk assessments and the emergence of new risks that could impact the Company.
Executive and Senior Management. Members of executive and senior management are responsible for managing risk
activities and delegating risk authority and tolerance to the responsible risk owners.
Management is responsible for identifying which processes and activities are critical to achieving the Company’s business
objectives within tolerance levels. Management then delegates responsibility, authority and accountability to the appropriate
risk owners who are responsible for ensuring that the respective processes and activities are designed and implemented to
manage the related risks within those delegated tolerance levels. Management analyzes and monitors risk management
performance with key risk indicator and key performance indicator dashboards.
Chief Administrative Officer. The Chief Administrative Officer (CAO) provides executive leadership to various critical
administrative functions. The CAO's responsibilities include oversight of the Risk Management, Compliance, Legal, Human
Resources, Information Security, and Community Development departments. The CAO is responsible for ensuring regulatory
compliance, implementing robust internal controls, and fostering a culture of adherence to policies and procedures.
Additionally, the CAO works with senior executives to develop strategic initiatives aimed at enhancing risk mitigation
strategies, helping our communities thrive, corporate responsibility and promoting the bank's overall stability and growth.
Chief Risk Officer. The chief risk officer is responsible for the oversight of the Company’s ERM processes. The chief risk
officer may appoint other officers or establish other management committees as required for effective risk management and
governance, including risk identification, risk measurement, risk monitoring, risk control or mitigation and risk reporting and
assurance. The chief risk officer is also responsible for the maintenance of procedures, methodologies and guidelines
considered necessary to administer the ERM program.
Chief Compliance Officer. The chief compliance officer is responsible for the oversight of the Company’s compliance
management function, which includes Bank Secrecy Act/Anti-Money Laundering and all other regulatory compliance. The
chief compliance officer is authorized to implement all necessary actions to ensure achievement of the objectives of an effective
compliance program and may appoint other officers or establish other management committees as required for effective
compliance management. The chief compliance officer reviews and evaluates compliance issues and concerns and is
responsible for monitoring and reporting results of the compliance efforts in addition to providing guidance to the board of
directors and senior management team on matters relating to compliance.
Internal Audit. Internal audit is responsible for planning audit activities to periodically reassess the design and operation of
key risk management processes and to make periodic evaluations of the ongoing accuracy and effectiveness of the
communications from risk owners to senior management and from senior management to the board of directors.
First Financial Bancorp 2023 Annual Report 35
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Risk Assessment Process. The periodic assessment of risks is a key component of a sound ERM program. Managers,
business line leaders and executives are responsible for developing the risk and control assessment for their individual
departments, business lines and subsidiaries. The chief risk officer, management and the board risk and compliance committee
are responsible for ensuring that risk is viewed and analyzed from an enterprise-level global perspective. Furthermore,
interrelated risks are considered, assessing how a single risk or event may create multiple risks.
Risk management programs, in each functional component and in aggregate, are designed to accomplish the following:
•
•
•
•
•
•
•
•
•
•
identify risks and their respective owners;
link identified risks and their mitigation to the Company's strategic objectives;
utilize risk and control assessments that evaluate both inherent risks and their associated likelihood of occurrence and
consequences, as well as the associated controls employed and their effectiveness in reducing risk; the risks and their
associated likelihood of occurrence and consequences;
encourage employees in all units to develop a working understanding of upstream and downstream activities;
develop strategies to manage risk, such as avoiding the risk; reducing the negative effect of the risk; transferring the
risk to another party; and/or accepting some or all of the consequences of a particular risk;
prioritize the risk issues with regard to the current residual risk status and trend;
provide reports to management and risk owners that will assist them in implementing appropriate risk management
processes;
assist management in assessing the alternatives for managing risks;
assist management in the development of risk management plans; and
track risk management/mitigation efforts.
Monitoring and Reporting. The board of directors oversees risk reporting and monitoring through the board risk and
compliance committee, which meets at least quarterly.
Management continually reviews any risk identified as key, as well as the appropriateness of established tolerance limits and
the actions considered as necessary to mitigate key risks. As circumstances warrant, management provides recommendations to
the board risk and compliance committee related to changes or adjustments to key risks or tolerance limits.
First Financial believes that communication is fundamental to successful risk management and productive reporting and
communication between the risk management department, management and the board of directors is required for collaborative
and effective risk management.
CREDIT RISK
Credit risk represents the risk of loss due to failure of a customer or counterparty to meet its financial obligations in accordance
with contractual terms. First Financial manages credit risk through its underwriting and ongoing administration practices,
periodically reviewing and approving its credit exposures using credit policies and guidelines approved by the board of
directors.
MARKET RISK
Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest
rates, foreign exchange rates and equity prices. The primary sources of market risk for First Financial are interest rate risk and
liquidity risk.
Interest rate risk. Interest rate risk is the risk to earnings and the value of the Company's equity arising from changes in
market interest rates. Interest rate risk arises in the normal course of business to the extent that there is a divergence between
the amount of interest-earning assets and the amount of interest-bearing liabilities that are prepaid, withdrawn, re-priced or
mature in specified periods. First Financial seeks to achieve consistent growth in net interest income and equity while
managing volatility from shifts in market interest rates, while operating within acceptable limits established for interest rate risk
and maintaining adequate levels of funding and liquidity.
Potential cash flows, sales, or replacement value of many of our assets and liabilities, especially those that earn or pay interest,
are sensitive to changes in the general level of interest rates. This interest rate risk arises primarily from our normal business
activities of gathering deposits and extending loans. Many factors affect our exposure to changes in interest rates, such as
general economic and financial conditions, client preferences, historical pricing relationships, and re-pricing characteristics of
36 First Financial Bancorp 2023 Annual Report
financial instruments. Our earnings can also be affected by the monetary and fiscal policies of the U.S. Government and its
agencies, particularly the Federal Reserve.
In managing interest rate risk, the Company establishes guidelines and strategies for asset and liability management, including
measurement of short and long-term sensitivities to changes in interest rates, through our internal Balance Sheet Strategies and
Asset Liability Committee, which is comprised of senior officers from the treasury, risk management, credit administration,
finance and lending areas. These guidelines and strategies are also reviewed with the Capital Markets Committee of our Board
of Directors.
First Financial monitors its interest rate risk position using income simulation models and EVE sensitivity analyses that capture
both short-term and long-term interest rate risk exposure. Income simulation involves forecasting NII under a variety of
interest rate scenarios. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest
rate scenarios. First Financial uses EVE sensitivity analysis to understand the impact of changes in interest rates on long-term
cash flows, income and capital. For both NII and EVE modeling, First Financial leverages instantaneous parallel shocks to
evaluate interest rate risk exposure across rising and falling rate scenarios. Additional scenarios evaluated include various non-
parallel yield curve twists.
First Financial’s interest rate risk models are based on the contractual and assumed cash flows and repricing characteristics for
the Company’s assets, liabilities and off-balance sheet exposure. A number of assumptions are also incorporated into the
interest rate risk models, including prepayment behaviors and repricing spreads for assets in addition to attrition and repricing
rates for liabilities. Assumptions are primarily derived from behavior studies of the Company’s historical client base and are
continually refined. Modeling the sensitivity of NII and EVE to changes in market interest rates is highly dependent on the
assumptions incorporated into the modeling process.
Non-maturity deposit modeling is particularly dependent on the assumption for repricing sensitivity known as a beta. Beta is
the amount by which First Financial’s interest bearing non-maturity deposit rates will increase when short-term interest rates
rise. The Company utilized a weighted average deposit beta of 42% in its interest rate risk modeling as of December 31, 2023.
First Financial also includes an assumption for the migration of non-maturity deposit balances into CDs for all upward rate
scenarios beginning with the +100 BP scenario, thereby increasing deposit costs and reducing asset sensitivity.
Presented below is the estimated impact on First Financial’s NII and EVE as of December 31, 2023, assuming immediate,
parallel shifts in interest rates:
Table 18 • Rate Change Impact on NII and EVE
NII - Year 1
NII - Year 2
EVE
% Change from base case for
immediate parallel changes in rates
-100 BP
(6.45)%
(6.10)%
(2.09)%
+100 BP
3.12%
2.49%
1.20%
+200 BP
4.78%
3.39%
2.39%
“Risk-neutral” refers to the absence of a strong bias toward either asset or liability sensitivity. “Asset sensitivity” is when a
company's interest-earning assets reprice more quickly or in greater quantities than interest-bearing liabilities. Conversely,
“liability sensitivity” is when a company's interest-bearing liabilities reprice more quickly or in greater quantities than interest-
earning assets. In a rising interest rate environment, asset sensitivity results in higher net interest income while liability
sensitivity results in lower net interest income. In a declining interest rate environment, asset sensitivity results in lower net
interest income while liability sensitivity results in higher net interest income.
The projected results for NII and EVE reflect an asset sensitive position, due to a strong funding mix of low cost transactional
deposits supporting loans priced primarily off the short end of the rate curve. The difference in sensitivity between the down
and up rate scenarios is driven by an assumed compositional shift in funding makeup. First Financial continues to manage its
balance sheet with a bias toward asset sensitivity while simultaneously balancing the potential earnings impact of this strategy.
First Financial continually evaluates the sensitivity of its interest rate risk position to modeling assumptions. The following
table reflects First Financial’s estimated NII sensitivity profile as of December 31, 2023 assuming both a 25% increase and
decrease to the beta assumption on managed rate deposit products:
First Financial Bancorp 2023 Annual Report 37
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Table 19 • Estimated Interest Sensitivity on NII
NII-Year 1
NII-Year 2
Beta sensitivity (% change from base)
+100 BP
+200 BP
Beta 25% lower
Beta 25% higher
Beta 25% lower
Beta 25% higher
4.19 %
3.58 %
2.05 %
1.40 %
5.81 %
4.44 %
3.75 %
2.34 %
See the Net Interest Income section of Management’s Discussion and Analysis for further discussion.
Table 20 – Market Risk Disclosure projects the principal maturities and yields of First Financial’s interest-bearing financial
instruments at December 31, 2023 for the next five years and thereafter, as well as the fair value of the instruments. For loans,
securities and liabilities with contractual maturities, the table presents principal cash flows and related weighted-average
interest rates by contractual maturities. For investment securities, including MBS and CMO, principal cash flows are based on
estimated average lives. For loan instruments without contractual maturities, such as credit card loans, principal payments are
allocated based on historical payment activity trends. Maturities for interest-bearing liability accounts with no contractual
maturity dates are estimated according to historical experience of cash flows and current expectations of client behaviors when
calculating fair value, but are included in the maturing in one year or less category as they can be withdrawn on demand.
Table 20 • Market Risk Disclosure
(Dollars in thousands)
Rate sensitive assets
Fixed interest rate loans (1)
Principal Amount Maturing In
Fair Value
December 31,
2024
2025
2026
2027
2028
Thereafter
Total
2023
$ 399,097
$ 370,474
$ 333,634
$ 301,693
$ 228,346
$ 1,372,007
$ 3,005,251
$ 2,802,503
Average interest rate
5.54 %
5.64 %
5.65 %
5.58 %
5.73 %
4.39 %
5.05 %
Variable interest rate loans (1)
1,418,191
1,182,445
1,148,670
904,150
880,726
2,261,523
7,795,705
7,674,854
Average interest rate
8.02 %
7.86 %
7.79 %
7.72 %
8.47 %
7.36 %
7.78 %
Fixed interest rate securities
144,200
132,320
141,926
226,054
282,932
1,566,562
2,493,994
2,488,741
Average interest rate
3.99 %
3.30 %
3.31 %
3.17 %
2.52 %
2.28 %
2.59 %
Variable interest rate securities
406,703
74,737
23,950
17,350
4,000
80,713
607,453
604,073
Average interest rate
7.67 %
8.41 %
7.90 %
8.54 %
9.43 %
4.88 %
7.41 %
Other earning assets
792,960
0
0
0
0
0
792,960
792,960
Average interest rate
5.40 %
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
5.40 %
Rate sensitive liabilities
Noninterest-bearing checking (2)
Savings and interest-bearing
checking (2)
$ 3,317,960
$
7,324,447
$
0
0
$
0
0
$
0
0
$
0
0
0
0
$ 3,317,960
$ 3,317,960
7,324,447
7,324,447
Average interest rate
2.36 %
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
2.36 %
Time deposits
2,441,829
225,140
33,439
12,370
5,612
0
2,718,390
2,704,912
Average interest rate
4.46 %
4.15 %
0.69 %
0.59 %
0.85 %
0.00 %
4.37 %
Fixed interest rate borrowings
942,591
121,996
5,679
6,365
7,130
150,168
1,233,929
1,240,372
Average interest rate
5.51 %
5.52 %
11.50 %
11.43 %
11.37 %
5.36 %
5.58 %
Variable interest rate borrowings
0
0
0
0
0
48,000
48,000
47,868
Average interest rate
0.00 %
0.00 %
0.00 %
0.00 %
0.00 %
8.14 %
8.14 %
(1) Includes loans held for sale
(2) Deposits without a stated maturity are represented as maturing within one year due to the ability of the client to withdraw deposited amounts on demand.
Liquidity risk. Liquidity risk is the potential that an entity will be unable to meet its obligations as they come due because of
an inability to liquidate assets, or obtain funding or that it cannot easily unwind or offset exposures without significantly
lowering market prices because of inadequate market depth or market disruptions. Management focuses on maintaining and
38 First Financial Bancorp 2023 Annual Report
enhancing liquidity by maximizing collateral-based liquidity availability. First Financial manages liquidity in relation to the
trend and stability of deposits; degree and reliance on short-term, volatile sources of funds, including any undue reliance on
borrowings or brokered deposits to fund longer-term assets. Management identifies, measures, monitors and manages liquidity
while seeking to maintain diversification of funding sources, both on- and off-balance-sheet.
Management, including the Balance Sheet Strategies and Asset Liability Committee, monitors liquidity through a regular
review of asset and liability maturities, funding sources, and loan and deposit forecasts. The Company continually refines and
updates its liquidity risk management processes, such as refining the contingency funding plan, meeting frequently, and
securing additional contingent borrowing capacity. We maintain strategic and contingency liquidity plans to ensure sufficient
available funding to satisfy requirements for balance sheet growth, properly manage capital market funding sources and to
address unexpected liquidity requirements.
Management closely monitors the usage of excess business deposits, the balance of personal deposits and the broader
macroeconomic environment. This monitoring includes consideration of various metrics and establishment of internal
thresholds related to balance sheet composition, borrowing composition, and liquidity composition. Balance sheet composition
metrics reviewed include the loan to deposit, loans to total assets and core deposits to total assets ratios among others.
Borrowing composition monitoring includes, but is not limited to, consideration of borrowing capacity as a percentage of total
assets, brokered CDs as a percentage of total assets and Fed funds lines to total assets. Liquidity composition ratios include
remaining liquidity to total assets, and tier 1 liquidity sources as a percentage of both 30 and 90 day maturing liabilities, among
others. As of December 31, 2023, all metrics reviewed were within the Company's policy limits.
The Company utilizes its contingency funding plan to assess the ability of the Company to successfully navigate significant
liquidity events. The contingency funding plan considers various sources of liquidity, including loan and deposit growth rates,
decreasing access to secured and unsecured wholesale funding sources and declining financial performance, to determine First
Financial’s ability to meet liquidity requirements over certain time horizons and in certain stress scenarios. The contingency
funding plan also includes the process for creating a Contingency Funding Task Force (CFTF). During a liquidity crisis, the
CFTF, via the Balance Sheet Strategies and Asset Liability Committee, would assess and identify key mitigation strategies
needed for addressing a liquidity crisis. These mitigation strategies would be assigned to appropriate personnel for
implementation with established targets and reporting requirements. Typical mitigation strategies would include, but not be
limited to, curtailing loan originations, pricing options for stabilizing/growing deposits, options for expanding wholesale
funding sources, and asset liquidation options.
For further discussion of the Company's liquidity, please see the Liquidity section within Management's Discussion and
Analysis.
OPERATIONAL RISK
Operational risk is the risk of loss due to human behavior, inadequate or failed internal systems and controls and external
influences such as market conditions, fraudulent activities, natural disasters and security risks. First Financial continuously
strives to strengthen the Company’s system of internal controls and operating processes as well as associates' ability to assess
the impact on earnings and capital from operational risk.
COMPLIANCE RISK
Compliance risk represents the risk of regulatory sanctions, reputational impact or financial loss resulting from the Company’s
failure to comply with rules and regulations issued by the various banking agencies and standards of good banking practice.
Activities which may expose First Financial to compliance risk include, but are not limited to, those dealing with the prevention
of money laundering, privacy and data protection, community reinvestment initiatives, fair lending challenges resulting from
the Company’s ongoing management of its banking center network and employment and tax matters.
STRATEGIC AND REPUTATION RISK
Strategic risk represents the risk of loss due to failure to fully develop and execute business plans, failure to assess current and
new business opportunities, markets and products, inability to effectively manage human capital risk factors such as
satisfaction, engagement, attrition, retention, and diversity, equity and, inclusion (DEI) and any other event not identified in the
defined risk types previously mentioned. Strategic risk focuses on analyzing factors that affect the direction of the institution or
improper implementation of decisions
Reputation risk represents the risk of loss or impairment of earnings and capital from negative publicity. This affects the ability
of First Financial to establish new relationships or services or to continue servicing existing relationships. Reputation risk is
First Financial Bancorp 2023 Annual Report 39
Management’s Discussion and Analysis of Financial Condition and Results of Operations
recognized by the effect that public opinion could have on First Financial's franchise value and has evolved in recent years with
the growth in social media. First Financial also seeks to build social responsibility into its brand and has formed a corporate
responsibility working group to develop an initial corporate social responsibility (CSR) report, which will highlight First
Financial’s efforts, goals, and plans to help the environment and our communities.
Mitigation of strategic and reputation risk elements is achieved through initiatives that help First Financial better understand
and report on the various risks it faces each day, including those related to the development of new products and business
initiatives and client feedback response and mitigation routines that analyze and share feedback data with business lines for
client experience and process improvements.
INFORMATION TECHNOLOGY RISK
Information technology risk is the risk that the information technologies utilized by FFB are not efficiently and effectively
supporting the current and future needs of the business, operating as intended or compromise the availability, integrity and
reliability of data and information. This risk also considers whether or not the Company’s information technology exposes the
Company's assets to potential loss or misuse, or threatens the Company’s ability to sustain the operation of critical business
processes.
CYBERSECURITY RISK
Cybersecurity (cyber) risk is differentiated from information technology risk by threat interactions that yield high impact
consequences and ever-increasing probability. First Financial continues to be the target of various evolving and adaptive cyber
attacks, including malware, phishing and distributed denial-of-service, in order to disrupt the operations of financial institutions,
potentially test their cybersecurity capabilities, commit fraud, or obtain confidential, proprietary or other information. While
standard security operations address most day-to-day incidents, cyber risk includes threats and attacks that often use advanced
tools, techniques and processes to evade detection or inflict maximum damage to an organization's information assets. Cyber
threats and attacks adapt and evolve rapidly, so First Financial works to continuously enhance controls and processes to protect
its networks and applications from attack, damage or unauthorized access. Critical components to the Company’s cyber risk
control structure include corporate governance, threat intelligence, security awareness training and patch management
programs. Cyber risk mitigation includes effectively identifying, protecting against, detecting, responding to and recovering
from cyber threats.
LEGAL RISK
Legal risk encompasses the impact of unenforceable contracts, lawsuits or adverse judgments, which can disrupt or otherwise
negatively affect the Company’s operations or condition. Legal risk also includes the exposure from litigation, fiduciary
relationships and contractual obligations from both traditional and nontraditional financial institution activities. Legal risk is
present in all areas of the Company and its activities.
FOURTH QUARTER REVIEW
For the three months ended December 31, 2023, the Company reported net income of $56.7 million, or $0.60 per diluted
common share. These results compare to net income of $63.1 million, or $0.66 per diluted common share, for the third quarter
of 2023. Return on average assets for the fourth quarter of 2023 was 1.31% compared to a return on assets of 1.48% in the third
quarter of 2023.
Loan balances increased $286.4 million from the third quarter of 2023, an increase of 10.7% on an annualized basis. The
increase was attributed to strong origination volumes across much of the portfolio and included a $109.8 million increase in
finance leases from Summit Funding Group. Average deposit balances increased $415.7 million compared to the linked
quarter, primarily due to a $284.4 million increase in money market accounts, a $123.1 million increase in public funds, and a
$157.6 million increase in combined retail and brokered CD's. These increases offset a decline in noninterest bearing deposits
and savings accounts. This mix shift reflects the higher interest rates increasing customer demand for higher cost deposit
products.
Net interest margin for the fourth quarter of 2023 was 4.21%, or 4.26% on a fully tax-equivalent basis. This was a 7 bp decline
from the third quarter of 2023. This decrease was driven by higher funding costs, which included a 31 bp increase in the cost of
deposits, outpacing increases in asset yields. Higher deposit costs were partially offset by a favorable shift in funding mix and a
14 bp increase in asset yields resulting from higher rates and a more profitable mix of earning asset balances during the period.
40 First Financial Bancorp 2023 Annual Report
Noninterest income for the fourth quarter of 2023 was $47.0 million, a decrease of $9.6 million, or 17.0%, from the prior
quarter. Foreign exchange income declined $4.7 million, or 34.8%, from the third quarter to $8.7 million, due to a $4.6 million
loss on a trade. Additionally, leasing business income declined $1.7 million during the quarter; however, this was primarily a
function of product mix as Summit originated a larger volume of finance leases during the period. Mortgage banking income
declined $1.1 million, or 27.6%, during the quarter as demand softened due to higher interest rates.
Noninterest expense for the fourth quarter of 2023 was $119.1 million, a decrease of $2.9 million, or 2.4%, from the linked
quarter. This decline from the linked quarter was due to lower employee costs and marketing expenses. These declines were
partially offset by a $0.9 million FDIC special assessment expense incurred during the period.
The ACL, including both funded and unfunded reserves, was $159.9 million at December 31, 2023, and the Company recorded
$10.2 million in total provision expense during the fourth quarter. The provision expense was driven by loan growth and net
charge-offs during the period. The Company recorded 46 bps of net chargeoffs annualized as a percentage of loan balances
during the quarter, which was a 15 bp decline from 61 bps in the third quarter. Total classified asset balances were relatively
flat at the end of the fourth quarter when compared to the third quarter.
CRITICAL ACCOUNTING ESTIMATES
First Financial’s Consolidated Financial Statements are prepared based on the application of accounting policies, the most
significant of which are described in Note 1 – Summary of Significant Accounting Policies in the Notes to Consolidated
Financial Statements. These policies require the reliance on estimates and assumptions which are inherently subjective and
may be susceptible to significant change. Changes in underlying factors, assumptions or estimates could have a material impact
on First Financial’s future financial condition and results of operations. In management’s opinion, some of these estimates and
assumptions have a more significant impact than others on First Financial’s financial reporting.
For First Financial, these estimates and assumptions include accounting for the ACL - loans and leases, goodwill, pension and
income taxes. The estimates and assumptions made are based upon historical experience, future forecasts, or other factors that
management believes to be reasonable under the circumstances. Because of the nature of the judgment and assumptions, actual
results could differ from estimates, which could have a material effect on our financial condition and results of operations.
Allowance for credit losses - loans and leases
• Overview. The allowance for credit losses on loans and leases represents management’s estimate of all expected
credit losses over the expected contractual life of the Company's loan and lease portfolio. Determining the
appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are
inherently uncertain. Subsequent evaluations of the then-existing loan and lease portfolio, in light of the factors then
prevailing, may result in significant changes in the allowance for credit losses in those future periods.
The allowance for credit losses on loans and leases, as reported in our Consolidated Balance Sheets, is adjusted by
provision expense, which is recognized in earnings, and reduced by the charge-off of loan amounts, net of recoveries.
•
Judgments and Uncertainties. Management estimates the allowance using relevant available information from both
internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts.
Historical credit loss experience paired with economic forecasts provide the basis for the quantitatively modeled
estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions
not already considered therein. These adjustments are commonly known as the Qualitative Framework.
First Financial quantitatively models expected credit loss using PD, LGD and EAD over the R&S forecast period,
reversion and post-reversion periods.
Utilizing third-party software, First Financial forecasts PD by using a parameterized transition matrix approach.
Average transition matrices are calculated over the TTC period, which was defined as the period from December 2007
to December 2022. TTC transition matrices are adjusted under forward-looking macroeconomic expectations to obtain
R&S forecasts.
First Financial is not required to develop forecasts over the full contractual term of the financial asset or group of
financial assets. Rather, for periods beyond which the entity is able to make or obtain R&S forecasts of expected
credit losses, the Company reverts in a straight line manner over a one year period to an average TTC loss level that is
First Financial Bancorp 2023 Annual Report 41
Management’s Discussion and Analysis of Financial Condition and Results of Operations
reflective of the prepayment adjusted contractual term of the financial asset or group of financial assets. First
Financial elected a two year R&S period which is forecasted using econometric data sourced from Moody's, an
industry-leading independent third party.
FFB utilizes a non-parametric loss curve approach embedded within a third-party software for estimating LGD. The
PD multiplied by LGD produces an expected loss rate that, when calculating the ACL, is applied to contractual loan
cash flows, adjusted for expected future rates of principal prepayments.
The Company adjusts its quantitative model for certain qualitative factors to reflect the extent to which management
expects current conditions and R&S forecasts to differ from the conditions that existed for the period over which
historical information was evaluated. The Qualitative Framework reflects changes related to relevant data, such as
changes in asset quality trends, portfolio growth and composition, national and local economic factors, credit policy
and administration and other factors not considered in the base quantitative model.
• Effect if Actual Results Differ From Assumptions. The allowance represents management’s best estimate, but
significant downturns in circumstances relating to loan quality and economic conditions could result in a requirement
for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow a
reduction in the required allowance. In either instance, unanticipated changes could have a significant impact on
results of operations.
One of the most significant judgments used in determining the allowance for credit losses is the macroeconomic
forecast provided by a third party. The economic indices sourced from the macroeconomic forecast and used in
projecting loss rates include the forecasted manufacturing overtime, business bankruptcies, rental vacancy rates,
housing price indices, national unemployment rate, changes in commercial real estate prices, changes in home values,
S&P 500 performance, housing sales, among other variable. Each reporting period, several macroeconomic forecast
scenarios are considered by management. Management selects the macroeconomic forecast that is most reflective of
expectations at that point in time. Changes in the macroeconomic forecast, could significantly impact the calculated
estimated credit losses.
Another variable utilized in the calculation of the allowance to which the calculation may be sensitive is the
prepayment rate. The model incorporates a prepayment rate calculated using a trailing twelve month average by
portfolio. Changes in prepayment speeds that vary from though the cycle actual prepayment activity may have a
significant impact on the expected duration of the various loan portfolios, and could result in inaccurate estimate of
default.
The provision for credit loss recorded through earnings is the amount necessary to maintain the allowance for credit
losses at the amount of expected credit losses. The amount of expense and the corresponding level of allowance for
credit losses on loans are based on our evaluation of the collectability of the loan portfolio based on historical loss
experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors.
Goodwill
• Overview. Assets and liabilities acquired in a business combination are recorded at their estimated fair values as of
the acquisition date. The excess cost of the acquisition over the fair value of net assets acquired is recorded as
goodwill. The Company’s goodwill is accounted for in a single reporting unit representing the consolidated entity.
The Company is required to evaluate goodwill for impairment on an annual basis or whenever events or changes in
circumstances indicate that the carrying value may not be recoverable.
In testing goodwill for impairment, U.S. GAAP permits First Financial to first assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In this
qualitative assessment, First Financial evaluates events and circumstances which may include, but are not limited to,
the general economic environment, banking industry and market conditions, the Company's overall financial
performance, the performance of the Company's common stock, the key financial performance metrics of the
Bancorp’s reporting units and events affecting the reporting unit to determine if it is not more likely than not that the
fair value of a reporting unit is less than its carrying amount. If the quantitative impairment test is required or the
decision to bypass the qualitative assessment is elected, First Financial performs the goodwill impairment test by
comparing the fair value of a reporting unit with its carrying amount, including goodwill.
First Financial performs its annual impairment test effective October 1, absent events or changes in circumstances that
indicate the carrying value of goodwill may not be recoverable. These annual tests indicated that the Company's
goodwill was not impaired as of October 1, 2023 and 2022.
42 First Financial Bancorp 2023 Annual Report
•
Judgments and Uncertainties. The determination of fair values is based on valuations using management’s
assumptions of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors. In
addition, we engage third party specialists to assist in the development of fair values. Preliminary estimates of fair
values may be adjusted for up to one year subsequent to the merger or acquisition date if new information is obtained
about facts and circumstances that existed as of the merger or acquisition date that, if known, would have affected the
measurement of the amounts recognized as of that date. Adjustments recorded during this period are recognized in the
current reporting period. Management uses various valuation methodologies to estimate the fair value of these assets
and liabilities, and often involves a significant degree of judgment, particularly when liquid markets do not exist for
the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets, and
certain other assets and liabilities.
• Effect if Actual Results Differ From Assumptions. Changes in these factors, as well as downturns in economic or
business conditions, could have a significant adverse impact on the carrying value of assets, including goodwill and
liabilities, which could result in impairment losses affecting our financial statements as a whole and our banking
subsidiary in which the goodwill resides.
Pension
• Overview. First Financial sponsors a non-contributory defined-benefit pension plan covering substantially all
employees. Accounting for the pension plan involves material estimates regarding future plan obligations and
investment returns on plan assets.
•
Judgments and Uncertainties. The determination of the plan obligation is based on valuations using management’s
assumptions of discount rates, mortality rates, interest crediting rates, expected return on plan assets, rate of
compensation increases and lump sum payment expectations. First Financial engages a third party actuary to calculate
the balance sheet position of the plan, cash flow, plan asset information, amortization amounts and participant
information. First Financial determines the discount rate assumption using published corporate bond indices and the
projected cash flows of the pension plan. First Financial also utilizes external surveys for industry comparisons to
assess the discount rate for reasonableness. The expected long-term return on plan assets is determined based on the
composition of plan assets, actual returns and economic forecasts, while the rate of compensation increase is compared
to historical increases for plan participants. Changes in these assumptions can have a material impact on the amount of
First Financial’s future pension obligations, on the funded status of the plan and on the Company's operating results.
• Effect if Actual Results Differ From Assumptions. Although management believes that the judgments and
estimates used are reasonable, actual results could differ. Actual future pension costs/credits and funding levels will
depend on future investment performance, changes in discount rates, market conditions, funding levels relative to the
projected benefit obligation and accumulated benefit obligation and various other factors related to the populations
participating in the pension plans. Please see the Pension Plan section of this MD&A for the estimated impact on
pension expense and projected benefit obligations assuming shifts in certain plan assumptions.
Income taxes
• Overview. The Company is subject to the income tax laws of the U.S., its states, and the municipalities in which we
operate. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant
government taxing authorities. We review income tax expense and the carrying value of deferred tax assets quarterly;
and as new information becomes available, the balances are adjusted as appropriate. FASB ASC 740-10 (FIN 48)
prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or
expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. See
Note 16 Income Taxes to the consolidated financial statements for a further description of our provision and related
income tax assets and liabilities.
•
Judgments and Uncertainties. In establishing a provision for income tax expense, the Company must make
judgments and interpretations about the application of these inherently complex tax laws. It must also make estimates
about when in the future certain items will affect taxable income in the various tax jurisdictions. Disputes over
interpretations of the tax laws may be subject to review/adjudication by the court systems of the various tax
jurisdictions or may be settled with the taxing authority upon examination or audit.
• Effect if Actual Results Differ From Assumptions. Although management believes that the judgments and
estimates used are reasonable, actual results could differ and we may be exposed to losses or gains that could be
material. To the extent we prevail in matters for which reserves have been established or are required to pay amounts
First Financial Bancorp 2023 Annual Report 43
Management’s Discussion and Analysis of Financial Condition and Results of Operations
in excess of our reserves, our effective income tax rate in a given financial statement period could be materially
affected. An unfavorable tax settlement would result in an increase in our effective income tax rate in the period of
resolution. A favorable tax settlement would result in a reduction in our effective income tax rate in the period of
resolution.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee and
the Audit Committee has reviewed our disclosure relating to it in this “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as ‘‘believes,’’ ‘‘anticipates,’’
“likely,” “expected,” “estimated,” ‘‘intends’’ and other similar expressions are intended to identify forward-looking statements
but are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not
limited to, statements we make about (i) our future operating or financial performance, including revenues, income or loss and
earnings or loss per share, (ii) future common stock dividends, (iii) our capital structure, including future capital levels, (iv) our
plans, objectives and strategies, and (v) the assumptions that underlie our forward-looking statements.
As with any forecast or projection, forward-looking statements are subject to inherent uncertainties, risks and changes in
circumstances that may cause actual results to differ materially from those set forth in the forward-looking statements.
Forward-looking statements are not historical facts but instead express only management’s beliefs regarding future results or
events, many of which, by their nature, are inherently uncertain and outside of management’s control. It is possible that actual
results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-
looking statements. Important factors that could cause actual results to differ materially from those in our forward-looking
statements include the following, without limitation:
•
•
•
economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company’s
business;
future credit quality and performance, including our expectations regarding future loan losses and our allowance for
credit losses
the effect of and changes in policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform
and Consumer Protection Act and other legislation and regulation relating to the banking industry;
• Management’s ability to effectively execute its business plans;
• mergers and acquisitions, including costs or difficulties related to the integration of acquired companies;
•
•
•
•
•
•
•
the possibility that any of the anticipated benefits of the Company’s acquisitions will not be realized or will not be
realized within the expected time period;
the effect of changes in accounting policies and practices;
changes in consumer spending, borrowing and saving and changes in unemployment;
changes in customers’ performance and creditworthiness;
the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;
current and future economic and market conditions, including the effects of changes in housing prices, fluctuations in
unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global
economic growth;
the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which
causes the Coronavirus disease 2019 (“COVID-19”), global pandemic, and the impact on the performance of our loan
and lease portfolio, the market value of our investment securities, the availability of sources of funding and the
demand for our products;
44 First Financial Bancorp 2023 Annual Report
•
•
•
•
•
•
•
our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital
standards) and our ability to generate capital internally or raise capital on favorable terms;
financial services reform and other current, pending or future legislation or regulation that could have a negative effect
on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank
products and services;
the effect of the current interest rate environment or changes in interest rates or in the level or composition of our
assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing
rights and mortgage loans held for sale;
the effect of a fall in stock market prices on our brokerage, asset and wealth management businesses;
a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or
other service providers, including as a result of cyber attacks;
the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;
and
our ability to develop and execute effective business plans and strategies.
These and other risk factors are more fully described in First Financial's Annual Report on Form 10-K for the year ended
December 31, 2023 under the section entitled “Item 1A. Risk Factors” and from time to time, in other filings with the SEC.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this
report. Actual results may differ materially from those expressed in or implied by any forward-looking statements. Except to
the extent required by applicable law or regulation, First Financial undertakes no obligation to revise or update publicly any
forward-looking statements for any reason.
First Financial Bancorp 2023 Annual Report 45
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Report on Internal Control over Financial Reporting
First Financial’s management is responsible for establishing and maintaining adequate internal control over financial reporting.
First Financial’s internal control over financial reporting is a process designed under the supervision of First Financial’s chief
executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Any
system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be
circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes
in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will
provide only reasonable assurance with respect to financial statement preparation. As of December 31, 2023, First Financial’s
management, including the chief executive officer and the chief financial officer, evaluated the effectiveness of First Financial’s
internal controls over financial reporting, using as its framework for that evaluation the Internal Control – Integrated
Framework published by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2013
framework). Based on the evaluation, we believe that, as of December 31, 2023, our internal control over financial reporting is
effective based on those criteria.
Crowe LLP, the independent registered public accounting firm that audited the consolidated financial statements included in
this Form 10-K, has issued an attestation report on First Financial’s internal control over financial reporting as of December 31,
2023. The report, which expresses an unqualified opinion on First Financial’s internal control over financial reporting as of
December 31, 2023, is included in the information that follows under the heading “Report of Independent Registered Public
Accounting Firm."
/s/ Archie M. Brown
President and Chief Executive Officer
February 22, 2024
/s/ James M. Anderson
Executive Vice President, Chief Financial
Officer and Chief Operating Officer
February 22, 2024
46 First Financial Bancorp 2023 Annual Report
Crowe LLP
Independent Member Crowe Global
Report of Independent Registered Public Accounting Firm
Shareholders and the Board of Directors of First Financial Bancorp
Cincinnati, Ohio
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of First Financial Bancorp (the "Company") as of
December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in
shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related
notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework: (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States
of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework: (2013) issued by
COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
First Financial Bancorp 2023 Annual Report 47
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Allowance for Credit Losses for Loans Qualitative Factors - Refer to Notes 1and 6 to the financial statements
The allowance for credit losses (the “ACL”) is an accounting estimate of expected credit losses over the estimated life of
financial assets carried at amortized cost and off-balance-sheet credit exposures in accordance with ASC 326. The standard
requires a financial asset (or a group of financial assets), including the Company's loan portfolio, measured at amortized cost,
to be presented at the net amount expected to be collected. Estimates of expected credit losses for loans are based on historical
experience, current conditions and reasonable and supportable forecasts over the estimated life of the loans. In order to
estimate the expected credit losses, the Company utilizes a loss estimation model.
Management quantitatively models expected credit loss using Probability of Default (“PD”), Loss Given Default (“LGD”),
and Exposure at Default (“EAD”) over the Reasonable and Supportable (“R&S”) forecast, reversion and post-reversion
periods. Utilizing third-party software, the Company forecasts PD by using transition matrices to evaluate when events are
more or less likely to occur based on previous events. The transition matrices are adjusted under forward-looking
macroeconomic expectations to obtain R&S forecasts. Management utilizes third-party software for estimating LGD. The PD
multiplied by LGD produces an expected loss rate that, when calculating the ACL, is applied to contractual loan cash flows,
adjusted for expected future rates of principal prepayments. The Company adjusts its quantitative model for certain qualitative
factors to reflect the extent to which management expects current conditions and R&S forecasts to differ from the conditions
that existed for the period over which historical information was evaluated. The qualitative framework reflects changes related
to relevant data, such as changes in asset quality trends, portfolio growth and composition, national and local economic
factors, credit policy and administration and other factors not considered in the base model. The ACL is measured on a
collective (pool) basis when similar risk characteristics exist. The ACL is influenced by loan volumes, risk rating migration,
delinquency status and other conditions influencing loss expectations, such as reasonable and supportable forecasts of
economic conditions.
The Allowance for Credit Losses for Loans was identified by us as a critical audit matter because of the extent of auditor
judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by
management. The principal considerations resulting in our determination included the following:
•
•
Significant auditor judgment and effort were used in evaluating the qualitative factors used in the calculation.
Significant audit effort related to the completeness and accuracy of the high volume of data used in the model
computation.
The primary procedures performed to address the critical audit matter included:
48 First Financial Bancorp 2023 Annual Report
•
•
•
Testing the effectiveness of management’s internal controls over the preparation and evaluation of the ACL
calculation, significant model assumptions, development and reasonableness of qualitative factors, completeness and
accuracy of data used in the calculation, systems used in the development of the estimate, and the appropriateness of
the overall calculation as well as control over the independent model validation.
Substantively testing management’s process for developing qualitative factors and assessing relevance and reliability
of data used to develop factors, including evaluating management’s judgments and assumptions for reasonableness.
Substantively testing the mathematical accuracy of the EAD model including the completeness and accuracy of loan
data used in the model to estimate ACL.
Crowe LLP
We have served as the Company's auditor since 2015, which is the year the engagement letter was signed for the audit of the
2016 financial statements.
Louisville, Kentucky
February 22, 2024
First Financial Bancorp 2023 Annual Report 49
Consolidated Balance Sheets
(Dollars in thousands)
Assets
Cash and due from banks
Interest-bearing deposits with other banks
Investment securities available-for-sale, at fair value (amortized cost $3,382,604 at December 31, 2023 and
$3,827,418 at December 31, 2022)
Investment securities held-to-maturity (fair value $71,688 at December 31, 2023 and $76,485 at December 31,
2022)
Other investments, at fair value
Loans held for sale, at fair value
Loans and leases
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate
Residential real estate
Home equity
Installment
Credit card
Total loans and leases
Less: Allowance for credit losses
Net loans and leases
Premises and equipment
Operating leases
Goodwill
Other intangibles
Accrued interest and other assets
Total assets
Liabilities
Deposits
Interest-bearing demand
Savings
Time
Total interest-bearing deposits
Noninterest-bearing
Total deposits
FHLB short-term borrowings
Other short-term borrowings
Total short-term borrowings
Long-term debt
Total borrowed funds
Accrued interest and other liabilities
Total liabilities
Shareholders' equity
Common stock - no par value
Authorized - 160,000,000 shares; Issued - 104,281,794 shares in 2023 and in 2022
Retained earnings
Accumulated other comprehensive income (loss)
Treasury stock, at cost, 9,140,550 shares in 2023 and 9,390,695 shares in 2022
Total shareholders' equity
Total liabilities and shareholders' equity
See Notes to Consolidated Financial Statements
50 First Financial Bancorp 2023 Annual Report
December 31,
2023
2022
$
213,059 $
792,960
207,501
388,182
3,021,126
3,409,648
80,321
129,945
9,213
3,501,221
474,817
564,832
4,080,939
1,333,674
758,676
159,078
59,939
10,933,176
(141,433)
10,791,743
194,740
153,214
1,005,868
83,949
1,056,762
17,532,900 $
2,993,219 $
4,331,228
2,718,390
10,042,837
3,317,960
13,360,797
800,000
137,814
937,814
344,115
1,281,929
622,200
15,264,926
84,021
143,160
7,918
3,410,272
236,124
512,050
4,052,759
1,092,265
733,791
209,895
51,815
10,298,971
(132,977)
10,165,994
189,080
91,738
1,001,507
93,919
1,220,648
17,003,316
3,037,153
3,828,139
1,700,705
8,565,997
4,135,180
12,701,177
1,130,000
157,156
1,287,156
346,672
1,633,828
626,938
14,961,943
1,638,972
1,136,718
(309,819)
(197,897)
2,267,974
17,532,900 $
1,634,605
968,237
(358,663)
(202,806)
2,041,373
17,003,316
$
$
$
Consolidated Statements of Income
(Dollars in thousands except per share data)
Interest income
Loans and leases, including fees
Investment securities
Taxable
Tax-exempt
Total interest on investment securities
Other earning assets
Total interest income
Interest expense
Deposits
Short-term borrowings
Long-term borrowings
Total interest expense
Net interest income
Provision for credit losses - loan and lease losses
Provision for credit losses - unfunded commitments
Net interest income after provision for credit losses
Noninterest income
Service charges on deposit accounts
Wealth management fees
Bankcard income
Client derivative fees
Foreign exchange income
Leasing business income
Net gain from sales of loans
Net gain (loss) on sales/transfers of investment securities
Net gain (loss) on equity securities
Other
Total noninterest income
Noninterest expenses
Salaries and employee benefits
Net occupancy
Furniture and equipment
Data processing
Marketing
Communication
Professional services
State intangible tax
FDIC assessments
Intangible assets amortization
Leasing business expense
Other
Total noninterest expenses
Income before income taxes
Income tax expense
Net income
Earnings per common share
Basic
Diluted
Average common shares outstanding - basic
Average common shares outstanding - diluted
See Notes to Consolidated Financial Statements
Years ended December 31,
2022
2023
2021
$
743,770 $
458,742 $
385,535
125,520
13,901
139,421
19,813
903,004
202,010
53,378
19,846
275,234
627,770
43,074
33
584,663
27,289
26,081
14,039
5,155
54,051
51,322
13,217
(1,258)
206
22,320
212,422
292,731
22,990
13,543
35,852
9,647
2,729
9,926
3,914
11,948
10,402
32,500
32,307
478,489
318,596
62,733
255,863 $
102,314
18,466
120,780
5,484
585,006
28,140
19,132
18,591
65,863
519,143
6,731
4,982
507,430
28,062
23,506
14,380
5,441
54,965
31,574
15,048
(569)
(639)
17,873
189,641
269,368
22,208
13,224
33,662
8,744
2,683
9,734
4,285
7,194
11,185
20,363
52,699
455,349
241,722
24,110
217,612 $
79,212
18,323
97,535
147
483,217
14,435
198
16,466
31,099
452,118
(19,024)
903
470,239
31,876
23,780
14,300
7,927
44,793
0
33,021
(759)
702
15,866
171,506
245,924
22,142
13,819
31,363
7,983
2,930
11,676
4,256
5,630
9,839
0
45,250
400,812
240,933
35,773
205,160
2.72 $
2.69 $
2.33 $
2.30 $
2.16
2.14
93,938,772
95,096,067
93,528,712
94,586,851
95,034,690
95,897,385
$
$
$
First Financial Bancorp 2023 Annual Report 51
Consolidated Statements of Comprehensive Income (Loss)
(Dollars in thousands)
Net income
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on debt securities arising during the period
Change in retirement obligation
Unrealized gain (loss) on derivatives
Unrealized gain (loss) on foreign currency exchange
Other comprehensive income (loss)
Comprehensive income (loss)
See Notes to Consolidated Financial Statements
Years ended December 31,
2023
2022
2021
$
255,863 $
217,612 $
205,160
43,967
906
3,755
216
48,844
(346,963)
(11,177)
0
(90)
(52,538)
4,066
0
(625)
(358,230)
(49,097)
$
304,707 $
(140,618) $
156,063
First Financial Bancorp 2023 Annual Report 52
Consolidated Statements of Changes in Shareholders' Equity
(Dollars in thousands, except share amounts)
Common
Common
stock
shares
stock
amount
Accumulated
other
Retained
comprehensive
Treasury stock
earnings
income (loss)
Shares
Amount
Total
Balance at January 1, 2021
104,281,794 $ 1,638,947 $
720,429 $
48,664
(6,259,865) $
(125,970) $ 2,282,070
Net income
Other comprehensive income (loss)
Cash dividends declared:
Common stock at $0.92 per share
Purchase of common stock
Common stock issued in connection with
business combinations
Exercise of stock options, net of shares
purchased
Restricted stock awards, net of forfeitures
Share-based compensation expense
Balance at December 31, 2021
Net income
Other comprehensive income (loss)
Cash dividends declared:
Common stock at $0.92 per share
Exercise of stock options, net of shares
purchased
Restricted stock awards, net of forfeitures
Share-based compensation expense
104,281,794
205,160
(88,116)
(49,097)
205,160
(49,097)
(88,116)
(4,633,355)
(108,077)
(108,077)
405,805
8,749
10,000
6,936
347,925
145
6,697
837,473
(433)
(10,132,554)
(218,456)
217,612
(86,848)
(358,230)
15,660
726,199
337
15,313
64
(2,697)
9,635
2,258,942
217,612
(358,230)
(86,848)
177
(3,659)
13,379
1,251
(81)
(9,394)
9,635
1,640,358
(160)
(18,972)
13,379
Balance at December 31, 2022
104,281,794
1,634,605
968,237
(358,663)
(9,390,695)
(202,806)
2,041,373
Net income
Other comprehensive income (loss)
Cash dividends declared:
Common stock at $0.92 per share
Exercise of stock options, net of shares
purchased
Restricted stock awards, net of forfeitures
Share-based compensation expense
255,863
(87,382)
48,844
(57)
(10,474)
14,898
4,855
245,290
105
4,804
255,863
48,844
(87,382)
48
(5,670)
14,898
Balance at December 31, 2023
104,281,794 $ 1,638,972 $ 1,136,718 $
(309,819)
(9,140,550) $
(197,897) $ 2,267,974
See Notes to Consolidated Financial Statements
First Financial Bancorp 2023 Annual Report 53
Consolidated Statements of Cash Flows
(Dollars in thousands)
Operating activities
Year ended December 31,
2022
2021
2023
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
$
255,863 $
217,612 $
205,160
Provision for credit losses
Depreciation and amortization
Stock-based compensation expense
Pension expense (income)
Net amortization (accretion) on investment securities
Net (gain) loss on sales/transfers of investments securities
Net (gain) loss on equity securities
Originations of loans held for sale
Net (gains) losses on sales of loans held for sale
Proceeds from sales of loans held for sale
Deferred income taxes
Amortization of operating leases
Payment of operating lease liability
Bank owned life insurance income
Decrease (increase) in interest receivable
(Decrease) increase in interest payable
Decrease (increase) in other assets
(Decrease) increase in other liabilities
Net cash provided by (used in) operating activities
Investing activities
Proceeds from sales of investment securities available-for-sale
Proceeds from calls, paydowns and maturities of securities available-for-sale
Purchases of securities available-for-sale
Proceeds from calls, paydowns and maturities of securities held-to-maturity
Purchases of securities held-to-maturity
Proceeds from calls, paydowns and maturities of other securities
Purchases of other investment securities
Net decrease (increase) in interest-bearing deposits with other banks
Proceeds from sales of loans and leases held for investment
Net decrease (increase) in loans and leases
Proceeds from disposal of other real estate owned
Purchases of premises and equipment
Net change in operating leases
Life insurance death benefits
Net cash acquired (paid) from business combinations
Net cash provided by (used in) investing activities
Financing activities
Net (decrease) increase in total deposits
Net (decrease) increase in short-term borrowings
Payments on long-term borrowings
Cash dividends paid on common stock
Purchases of common stock
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities
Cash and due from banks
Net (decrease) increase in Cash and due from banks
Cash and due from banks at beginning of year
Cash and due from banks at end of year
54 First Financial Bancorp 2023 Annual Report
43,107
30,026
14,898
3,515
7,190
1,258
(206)
(294,037)
(13,217)
302,609
13,365
7,773
(7,819)
(5,033)
(9,567)
40,305
159,446
(62,507)
486,969
92,187
440,815
(96,745)
3,902
0
29,713
(16,292)
(404,778)
0
(665,861)
288
(24,135)
(61,476)
4,652
(3,535)
(701,265)
659,620
(349,342)
(3,313)
(87,159)
0
48
219,854
11,713
31,181
13,379
2,002
12,819
569
639
(368,574)
(15,048)
375,122
(3,505)
7,626
(7,824)
(2,287)
(19,134)
6,652
(226,398)
164,302
200,846
277,082
704,304
(641,643)
14,640
0
8
(40,836)
(173,371)
0
(987,088)
192
(13,778)
(29,475)
6,860
0
(883,105)
(170,777)
990,953
(64,018)
(86,606)
0
177
669,729
(18,121)
32,136
9,635
3,365
28,987
759
(702)
(794,524)
(33,021)
825,102
12,087
7,425
(6,860)
(1,833)
6,463
(1,889)
138,225
(24,237)
388,157
375,276
1,139,498
(2,418,290)
34,563
(1,000)
42,403
(11,474)
(194,506)
141,072
503,203
1,278
(15,333)
0
2,305
(109,024)
(510,029)
639,951
129,609
(463,382)
(87,316)
(108,077)
64
110,849
5,558
207,501
213,059 $
$
(11,023)
(12,530)
231,054
220,031
207,501 $
220,031
(continued on next page)
(Dollars in thousands)
Supplemental disclosures
Interest paid
Income taxes paid
Acquisition of other real estate owned through foreclosure
Issuance of restricted stock awards
Common stock issued in acquisitions
Supplemental schedule for investing activities
Business combinations
Assets acquired, net of purchase consideration
Liabilities assumed
Goodwill
See Notes to Consolidated Financial Statements.
Year ended December 31,
2022
2021
2023
234,929 $
10,076 $
387 $
12,503 $
0 $
59,512 $
5,696 $
327 $
22,280 $
0 $
32,841
17,689
98
12,231
10,000
(3,420) $
941
4,361 $
64 $
822
758 $
62,916
125,894
62,978
$
$
$
$
$
$
$
First Financial Bancorp 2023 Annual Report 55
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of presentation. The Consolidated Financial Statements of First Financial Bancorp., a financial holding company,
principally serving Ohio, Indiana, Kentucky and Illinois, include the accounts and operations of First Financial and its wholly
owned subsidiary, First Financial Bank. All significant intercompany transactions and accounts have been eliminated in
consolidation. Certain reclassifications of prior years' amounts have been made to conform to current year presentation. Such
reclassifications had no effect on net earnings.
Use of estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates,
assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes.
Actual realized amounts could differ materially from those estimates.
Cash and due from banks. Cash and due from banks consist of currency, coin and cash items due from banks. Cash items
due from banks include noninterest-bearing balances that are on deposit at other depository institutions.
Investment securities. First Financial classifies debt securities into three categories: HTM, trading and AFS. Management
classifies investment securities into the appropriate category at the time of purchase and re-evaluates that classification as
deemed appropriate.
Investment securities are classified as HTM when First Financial has the positive intent and ability to hold the securities to
maturity. HTM securities are recorded at amortized cost.
Investment securities classified as trading are held principally for resale in the near-term and are recorded at fair value. Fair
value is determined using quoted market prices. Gains or losses on trading securities, both realized and unrealized, are reported
in noninterest income.
Investment securities not classified as either HTM or trading are classified as AFS. AFS securities are recorded at fair value,
with the unrealized gains and losses, net of tax, reported as a separate component of accumulated other comprehensive income
(loss) in shareholders' equity.
The amortized cost of investment securities classified as either HTM or AFS on purchased callable debt securities is adjusted
for amortization of premiums to the earliest call date if the call feature meets certain criteria. Otherwise, premiums are
amortized to maturity similar to discounts on callable debt securities, or in the case of mortgage-backed securities, over the
estimated life of the security. Such amortization and accretion are considered an adjustment to the yield on the security and
included in interest income from investments. Interest and dividends are also included in interest income from investment
securities in the Consolidated Statements of Income. Realized gains and losses are based on the amortized cost of the security
sold using the specific identification method.
Other investments. Other investments include holdings in FRB and FHLB stock, which are both carried at cost as well as
equity securities, including class B Visa shares which do not have a readily determinable fair value and are therefore monitored
for impairment. Changes in the fair value of equity securities with readily determinable fair values are recorded in Net gain
(loss) on equity securities in the Consolidated Statements of Income.
Loans held for sale. Loans held for sale consist of residential real estate loans newly originated for the purpose of sale to third
parties, and in certain circumstances, loans previously originated that have been specifically identified by management for sale
based on predetermined criteria. Loans held for sale are carried at fair value. Any subsequent change in the carrying value of
transferred loans, not to exceed original cost, is recorded in the Consolidated Statements of Income. First Financial sells loans
with servicing retained or released depending on pricing and market conditions.
Loans and leases. Loans and leases for which First Financial has the intent and ability to hold for the foreseeable future, or
until maturity or payoff, are classified in the Consolidated Balance Sheets as loans and leases. Loans and leases are carried at
the principal amount outstanding, net of unamortized deferred loan origination fees and costs, and net of unearned income.
Loan origination and commitment fees received, as well as certain direct loan origination costs paid, are deferred, and the net
amount is amortized as an adjustment to the related loan's yield.
56 First Financial Bancorp 2023 Annual Report
Interest income on loans and leases is recorded on an accrual basis. When a loan is classified as nonaccrual, the accrual of
interest income is discontinued and previously accrued, but unpaid interest is reversed. Any payments received while a loan is
classified as nonaccrual are applied as a reduction to the carrying value of the loan. A loan may return to accrual status if
collection of future principal and interest payments is no longer doubtful.
Allowance for credit losses - held-to-maturity securities. Management measures expected credit losses on held-to-maturity
debt securities on a collective basis by security type. The estimate of expected credit losses considers historical credit loss
information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-
maturity portfolio into the following major security types: Mortgage-backed, CMOs, Obligations of state and other political
subdivisions and Other.
Nearly all of the HTM securities held by the Company are issued by U.S. government entities and agencies. These securities
are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long
history of no credit losses. The remainder of the Company's HTM securities are non-agency collateralized mortgage
obligations and obligations of state and other political subdivisions which currently carry ratings no lower than A+. Accrued
interest receivable on held-to maturity debt securities, which totaled $0.4 million as of both December 31, 2023 and 2022, is
excluded by policy election from the estimate of credit losses.
Allowance for credit losses - available-for-sale securities. For AFS debt securities in an unrealized loss position, the
Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before
recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s
amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the
aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.
In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the
rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this
assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are
compared to the amortized cost basis of the security.
If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an
allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any
impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income (loss).
Changes in the allowance for credit losses are recorded as provision for credit loss expense. Losses are charged against the
allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria
regarding intent or requirement to sell is met. Accrued interest receivable on AFS debt securities, which totaled $15.3 million
and $15.9 million as of December 31, 2023 and 2022, respectively, is excluded from the estimate of credit losses.
Allowance for credit losses - loans and leases. The allowance for credit losses is a valuation account that is deducted from the
loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management's determination of the
adequacy of the ACL is based on an assessment of the expected credit losses on loan and leases over their expected life. The
ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off.
Loans are charged off when management believes that the collection of the principal amount owed in full, either through
payments from the borrower or a guarantor or from the liquidation of collateral is unlikely. Expected recoveries do not exceed
the aggregate of amounts previously charged-off and expected to be charged-off. Any interest that is accrued but not collected
is reversed against interest income when a loan is placed on nonaccrual status, which typically occurs prior to charging off all,
or a portion, of a loan. The Company made the policy election to exclude accrued interest receivable on loans and leases from
the estimate of credit losses.
Management estimates the allowance using relevant available information from both internal and external sources, relating to
past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic
forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its
quantitative model, as necessary, to reflect conditions not already considered therein. These adjustments are commonly known
as the Qualitative Framework.
First Financial quantitatively models expected credit loss using PD, LGD and EAD over the R&S forecast period, reversion and
post-reversion periods.
Utilizing third-party software, First Financial forecasts PD by using a parameterized transition matrix approach. Average
transition matrices are calculated over the TTC period, which was defined as the period from December 2007 to December
2022. TTC transition matrices are adjusted under forward-looking macroeconomic expectations to obtain R&S forecasts.
First Financial Bancorp 2023 Annual Report 57
Notes to Consolidated Financial Statements
First Financial is not required to develop forecasts over the full contractual term of the financial asset or group of financial
assets. Rather, for periods beyond which the entity is able to make or obtain R&S forecasts of expected credit losses, the
Company reverts in a straight line manner over a one year period to an average TTC loss level that is reflective of the
prepayment adjusted contractual term of the financial asset or group of financial assets. First Financial elected a two year R&S
period which is forecasted using econometric data sourced from Moody's, an industry-leading independent third party.
FFB utilizes a non-parametric loss curve approach embedded within a third-party software for estimating LGD. The PD
multiplied by LGD produces an expected loss rate that, when calculating the ACL, is applied to contractual loan cash flows,
adjusted for expected future rates of principal prepayments.
The Company adjusts its quantitative model for certain qualitative factors to reflect the extent to which management expects
current conditions and R&S forecasts to differ from the conditions that existed for the period over which historical information
was evaluated. The Qualitative Framework reflects changes related to relevant data, such as changes in asset quality trends,
portfolio growth and composition, national and local economic factors, credit policy and administration and other factors not
considered in the base quantitative model.
Loans that do not share risk characteristics are evaluated on an individual basis. First Financial will typically evaluate on an
individual basis any nonaccrual loans greater than $250,000. When management determines that foreclosure is probable or
when repayment is expected to be provided substantially through the operation or sale of underlying collateral, expected credit
losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs, as applicable. For loans
evaluated on an individual basis that are not determined to be collateral dependent, a discounted cash flow analysis is performed
to determine expected credit losses.
Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when
appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following
applies: management has a reasonable expectation at the reporting date that a restructuring will be executed with an individual
borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not
unconditionally cancellable by the Company.
Credit card receivables do not have stated maturities. In determining the estimated life of a credit card receivable, management
first estimates the future cash flows expected to be received and then applies those expected future cash flows to the credit card
balance.
Significant downturns in circumstances relating to loan quality and economic conditions could result in a requirement for
additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow a reduction in the
required allowance. In either instance, unanticipated changes could have a significant impact on results of operations.
Allowance for credit losses - unfunded commitments. First Financial estimates expected credit losses over the contractual
period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is
unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and
an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the
Company's ACL methodology for loans and leases. Adjustments to the reserve for unfunded commitments are recorded in
Provision for credit losses - unfunded commitments in the Consolidated Statements of Income. The reserve for unfunded
commitments is included in Accrued interest and other liabilities on the Consolidated Balance Sheets.
Legal Contingencies. First Financial and its subsidiaries may be parties to numerous claims and lawsuits as well as threatened
or potential actions or claims concerning matters arising from the conduct of its business activities. The outcome of claims or
litigation, and the timing of ultimate resolution are inherently difficult to predict and significant judgment may be required in
the determination of both the probability of loss and whether the amount of the loss is reasonably estimable. First Financial's
estimates are subjective and are based on the status of legal and regulatory proceedings, the merit of the Company’s defenses
and consultation with internal and external legal counsel. An accrual for a potential litigation loss is established when
information related to the loss contingency indicates both that a loss is probable and that the amount of loss can be reasonably
estimated. This accrual, when required, is included in other liabilities in the Consolidated Balance Sheets and is adjusted from
time to time as appropriate to reflect changes in circumstances. Legal expenses are recorded in Professional services expense in
the Consolidated Statements of Income.
Premises and equipment. Premises and equipment are stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization are principally computed on the straight-line method over the estimated useful lives of the assets.
Useful lives generally range from 10 to 40 years for building and building improvements; 3 to 10 years for furniture, fixtures
58 First Financial Bancorp 2023 Annual Report
and equipment; and 3 to 5 years for software, hardware and data handling equipment. Land improvements are depreciated over
20 years and leasehold improvements are depreciated over the lesser of the term of the respective lease or the useful life of the
asset. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Maintenance and repairs are expensed as incurred.
Operating Leases. First Financial provides financing for various types of equipment through a variety of leasing
arrangements. Operating leases are carried at the aggregate of lease payments plus estimated residual value of the leased
equipment, less unearned income. The Company recognizes income over the term of the lease using the constant effective yield
method. Lease residual values are reviewed for impairment at least annually. Depreciation expense related to operating lease
equipment is recorded in Leasing business expense on the Consolidated Statements of Income.
Bank-owned life insurance. First Financial purchases and is the owner and beneficiary of life insurance policies on the lives
of certain employees. The Bank invests in these policies to provide an efficient form of funding for long-term retirement and
other employee benefits costs. The policies are included within Accrued interest and other assets in the Consolidated Balance
Sheets at each policy’s respective cash surrender value. Changes in the cash surrender value of these policies are recorded in
Other noninterest income in the Consolidated Statements of Income.
Goodwill. When accounting for business combinations, the net assets of entities acquired by First Financial are recorded at
their estimated fair value at the date of acquisition. The excess cost of the acquisition over the fair value of net assets acquired
is recorded as goodwill. Goodwill and other intangible assets deemed to have indefinite lives are not amortized, but are subject
to annual impairment tests. The Company is required to evaluate goodwill for impairment on an annual basis or whenever
events or changes in circumstances indicate that the carrying value may not be recoverable. First Financial performs its annual
impairment test effective October 1, absent events or changes in circumstances that indicate the carrying value of goodwill may
not be recoverable.
The Company’s goodwill is accounted for in a single reporting unit representing the consolidated entity. In testing goodwill for
impairment, U.S. GAAP permits First Financial to first assess qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying amount. In this qualitative assessment, First Financial evaluates
events and circumstances which may include, but are not limited to, the general economic environment, banking industry and
market conditions, the Company's overall financial performance, the performance of the Company's common stock, the key
financial performance metrics of the Bancorp’s reporting units and events affecting the reporting unit to determine if it is not
more likely than not that the fair value of a reporting unit is less than its carrying amount. If the quantitative impairment test is
required or the decision to bypass the qualitative assessment is elected, the Bancorp performs the goodwill impairment test by
comparing the fair value of a reporting unit with its carrying amount, including goodwill.
When required, management's quantitative impairment analysis includes both an income and a market approach. The income
approach utilizes a discounted cash flow model and the market approach utilizes a market multiple methodology and as well as
a comparable transaction methodology. These valuation methodologies utilize key assumptions that include forecasts of
revenues and expenses derived from internal management projections, changes in working capital estimates, company specific
discount rate derived from a rate build up approach, externally sourced bank peer group market multiples and externally
sourced bank peer group change in control premium, all of which are highly subjective and require significant judgment.
Changes in these key assumptions, as well as downturns in economic or business conditions, could materially affect our
estimate of the reporting unit fair value and could affect our conclusion regarding the existence of potential impairment. In
2023, management evaluated goodwill for impairment using a qualitative analysis.
Other intangible assets. Other intangible assets consist primarily of core deposit intangibles, customer list, MSR and other
miscellaneous intangibles.
CDI represent the estimated value of acquired customer deposit relationships. CDI are recorded at fair value at the date of
acquisition and are based on a discounted cash flow methodology that gives appropriate consideration to expected customer
attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits.
Core deposit intangibles are amortized on an accelerated basis over their estimated useful lives.
First Financial recorded a customer list intangible asset in conjunction with the Bannockburn and Summit mergers to account
for the obligation or advantage on the part of either the Company or the customer to continue pre-existing relationships
subsequent to the mergers. Customer list intangible assets are amortized on a straight-line basis over their estimated useful
lives.
First Financial Bancorp 2023 Annual Report 59
Notes to Consolidated Financial Statements
Mortgage servicing rights are servicing fees First Financial receives from selling fixed and adjustable-rate residential mortgage
loans where it obtains servicing responsibilities. In those sales, the First Financial obtained servicing responsibilities and
provided certain standard representations and warranties; however, the investors have no recourse to the Company’s other
assets for failure of debtors to pay when due. First Financial receives servicing fees based on a percentage of the outstanding
balance.
Mortgage servicing rights are measured at fair value with changes in fair value reported in Other noninterest income in the
Consolidated Statements of Income.
The fair value of the mortgage servicing rights is estimated by calculating the present value of estimated future net servicing
cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and
other economic factors, which are determined based on current market conditions. The expected and actual rates of mortgage
loan prepayments are the most significant factors driving the value of mortgage servicing rights. Increases in mortgage loan
prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. In determining
the market value of the mortgage servicing rights, mortgage interest rates, which are used to determine prepayment rates and
discount rates, are held constant over the estimated life of the portfolio. Mortgage servicing rights are reported in other assets
and are amortized against noninterest income offsetting the actual servicing income of the underlying mortgage loans.
Mortgage servicing rights are regularly evaluated for impairment based on the estimated fair value of those rights. The
mortgage servicing rights are stratified by certain risk characteristics, primarily loan term and note rate. If impairment exists, a
valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair
value.
Other miscellaneous intangible assets also include purchase commissions, non-compete agreements and trade name intangibles.
Other real estate owned. OREO consists of properties acquired by the Company primarily through the loan foreclosure or
repossession process, or other resolution activity that results in partial or total satisfaction of problem loans. OREO properties
are recorded at fair value, less estimated disposal costs (net realizable value) establishing a new cost basis. Physical possession
of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion
of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu
of foreclosure or through a similar legal agreement. Losses arising at the time of acquisition of such properties are charged
against the ACL. Management performs periodic valuations to assess the adequacy of recorded OREO balances and
subsequent changes in the carrying value of OREO properties are recorded in the Consolidated Statements of Income.
Improvements to OREO properties may be capitalized if the improvements contribute to the overall value of the property, but
may not be capitalized in excess of the net realizable value of the property. When management disposes of an OREO property,
any gains or losses realized at the time of disposal are reflected in the Consolidated Statements of Income.
Affordable housing projects. First Financial has investments in certain qualified affordable housing projects. These projects
are indirect federal subsidies that provide tax incentives to encourage investment in the development, acquisition and
rehabilitation of affordable rental housing, and allow investors to claim tax credits and other tax benefits (such as deductions
from taxable income for operating losses) on their federal income tax returns. The principal risk associated with qualified
affordable housing investments is the potential for noncompliance with the tax code requirements, such as failure to rent
properties to qualified tenants, resulting in unavailability or recapture of the tax credits and other tax benefits. Investments in
affordable housing projects are included in Accrued interest and other assets in the Consolidated Balance Sheets while any
unfunded commitment is recorded with Accrued interest and other liabilities. These investments are accounted for under the
proportional amortization method. Under the proportional amortization method, the initial cost of the investment is amortized
in proportion to the tax credits and other benefits received and recognized as a component of Income tax expense in the
Consolidated Statements of Income.
Investments in historic tax credits. First Financial has noncontrolling financial investments in private investment funds and
partnerships that finance the rehabilitation and re-use of historic buildings. These unconsolidated investments may generate a
return through the realization of federal and state income tax credits, as well as other tax benefits, such as tax deductions from
net operating losses of the investments over a period of time. Investments in historic tax credits are accounted for under the
equity method of accounting and the Company’s recorded investment in these entities is carried in Accrued interest and other
assets on the Consolidated Balance Sheets with any unfunded commitment recorded in Accrued interest and other liabilities.
Impairment of these investments is recorded in Other noninterest expense, while the tax credits and other net tax benefits
received are recognized as a component of income tax expense in the Consolidated Statements of Income.
60 First Financial Bancorp 2023 Annual Report
Investments in renewable energy credits. First Financial has investments in renewable energy projects where it has
noncontrolling interest which is not consolidated. This investment may generate a return through the realization of federal and
state income tax credits, as well as other tax benefits, such as tax deductions from net operating losses of the investments over a
period of time. Investments in renewable energy tax credits are accounted for under the equity method of accounting and are
included in Accrued interest and other assets on the Consolidated Balance Sheets with any unfunded commitment recorded in
Accrued interest and other liabilities. Impairment of these investments is recorded in Other noninterest expense, while the tax
credits and other net tax benefits received are recognized as a component of income tax expense in the Consolidated Statements
of Income.
Deposits - Deposits generally include the unpaid balance of cash or its equivalent received or held by the Bank for its
commercial and consumer customers. Deposits include both interest-bearing and noninterest-bearing balances. Interest
expense incurred on interest-bearing deposits is recognized in accordance with applicable guidance in U.S. GAAP for these
liabilities and is included in Interest expense in the Consolidated Statements of Income.
Income taxes. First Financial and its subsidiaries file a consolidated federal income tax return. Each subsidiary provides for
income taxes on a separate return basis, and remits to First Financial amounts determined to be currently payable.
First Financial evaluates and assesses the relative risks and appropriate tax treatment of transactions after considering statutes,
regulations, judicial precedent and other information, and maintains tax accruals consistent with its evaluation of these relative
risks. Changes to the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the
status of examinations being conducted by taxing authorities and changes to statutory, judicial and regulatory guidance that
impact the relative risks of tax positions. These changes, when they occur, can affect deferred taxes and accrued taxes as well
as the current period’s income tax expense and can be material to the Company's operating results.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the enactment date. Interest and penalties on income tax
assessments or income tax refunds are recorded in Other noninterest expense in the Consolidated Statements of Income.
In establishing a provision for income tax expense, we must make judgments and interpretations about the application of
complex tax laws as well as make estimates about when in the future certain items will affect taxable income. First Financial
regularly reviews its tax positions and establishes reserves for income tax-related uncertainties based on estimates of whether it
is more likely than not that the tax uncertainty would be sustained upon challenge by the appropriate tax authorities which
would then result in additional taxes, penalties and interest due. Reserves for uncertain tax positions, if any, are included in
income tax expense in the Consolidated Financial Statements.
Pension. First Financial sponsors a non-contributory defined-benefit pension plan covering substantially all employees.
Accounting for the pension plan involves material estimates regarding future plan obligations and investment returns on plan
assets. Significant assumptions used in the pension plan include the discount rate, expected return on plan assets and the rate of
compensation increase. First Financial determines the discount rate assumption using published corporate bond indices and the
projected cash flows of the pension plan. First Financial also utilizes external surveys for industry comparisons to assess the
discount rate for reasonableness. The expected long-term return on plan assets is determined based on the composition of plan
assets, actual returns and economic forecasts, while the rate of compensation increase is compared to historical increases for
plan participants. Changes in these assumptions can have a material impact on the amount of First Financial’s future pension
obligations, on the funded status of the plan and on the Company's operating results.
Derivative instruments. First Financial accounts for its derivative financial instruments in accordance with FASB ASC Topic
815, Derivatives and Hedging. FASB ASC Topic 815 requires all derivative instruments to be carried at fair value on the
balance sheet.
The accounting for changes in the fair value of derivatives is based on the intended use of the derivative and the resulting
designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability or firm commitment
attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the
exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
Interest rate client derivatives - First Financial utilizes matched interest rate swaps as a means to offer commercial borrowers
fixed rate funding while providing the Company with floating rate assets. Upon entering into an interest rate swap with a
First Financial Bancorp 2023 Annual Report 61
Notes to Consolidated Financial Statements
borrower, the Bank simultaneously enters into an offsetting swap agreement with an institutional counterparty, with
substantially matching terms. These matched interest rate swap agreements generally involve the receipt by First Financial of
floating rate amounts from the counterparties in exchange for payments to these counterparties by First Financial of fixed rate
amounts received from commercial borrowers over the life of the agreements.
First Financial's matched interest rate swaps qualify as derivatives, but are not designated as hedging instruments. The net
interest receivable or payable on matched interest rate swaps is accrued and recognized as an adjustment to interest
income. The fair values of client derivatives are included within Accrued interest and other assets and Accrued interest and
other liabilities in the Consolidated Balance Sheets.
Foreign exchange contracts - First Financial may enter into foreign exchange derivative contracts for the benefit of commercial
customers to hedge their exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from interest rate
derivative contracts, First Financial also enters into foreign exchange contracts with major financial institutions to economically
hedge a substantial portion of the exposure from client driven foreign exchange activity. These derivatives are classified as
free-standing instruments with the revaluation gain or loss recorded in Foreign exchange income in the Consolidated Statements
of Income.
Cash flow hedges - First Financial may enter into interest rate collars and floors, which are designated as cash flow hedges.
These cash flow hedges are utilized to mitigate interest rate risk on variable-rate commercial loan pools. Changes in the fair
value of cash flow hedges included in the assessment of hedge effectiveness are recorded in AOCI and reclassified from AOCI
to current period earnings when the hedged item affects earnings. Reclassified gains and losses on interest rate contracts related
to commercial and industrial loans are recorded within interest income in the Consolidated Statements of Income.
Credit derivatives - In conjunction with participating interests in commercial loans, First Financial periodically enters into risk
participation agreements with counterparties whereby First Financial assumes a portion of the credit exposure associated with
an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make
payments to the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with
the counterparty. The fair value of these agreements is recorded in the Consolidated Balance Sheets in Accrued interest and
other liabilities.
Mortgage derivatives - First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans to
third party investors, which are considered derivatives. When borrowers secure an IRLC with First Financial and the loan is
intended to be sold, First Financial will enter into forward commitments for the future delivery of the loans to third party
investors in order to hedge against the effect of changes in interest rates impacting IRLCs and Loans held for sale. The fair
value of these agreements is recorded in the Consolidated Balance Sheets in Accrued interest and other assets.
Stock-based compensation. First Financial grants stock-based awards, including restricted stock awards and options to
purchase the Company’s common stock. Restricted stock award grants are for a fixed number of shares to employees and
directors with an exercise price equal to the fair value of the shares at the date of grant. Stock-based compensation expense is
recognized in the Consolidated Statements of Income on a straight-line basis over the vesting period. As compensation expense
is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise. At the time
stock-based awards are exercised, canceled or expire, First Financial may be required to recognize an adjustment to tax
expense.
Earnings per share. Basic earnings per common share is computed by dividing net income available to common shareholders
by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share
is computed by dividing net income available to common shareholders by the weighted average number of common shares
outstanding, unvested shares and dilutive common stock equivalents outstanding during the period. Common stock equivalents,
which consist of common stock issuable under the assumed exercise of stock options granted under First Financial's stock-
based compensation plans and the assumed conversion of common stock warrants, are calculated using the treasury stock
method.
Segments and related information. While the Company monitors the operating results of its six lines of business, operations
are managed and financial performance is evaluated on a consolidated basis. Accordingly, and consistent with prior years, all
of the Company's operations are considered by management to be aggregated in one reportable operating segment.
62 First Financial Bancorp 2023 Annual Report
2. Accounting Standards Recently Adopted or Issued
Standards Adopted in 2023
In March, 2022, the FASB issued ASU 2022-02 - Financial Instruments—Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures. This standard eliminates the accounting guidance on TDRs for creditors in ASC
310-40 and amends the guidance on “vintage disclosures” to require disclosure of current period gross write-offs by year of
origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced
disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.
The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods
within those fiscal years, for any entities that have adopted ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. The adoption of this standard resulted in amended disclosures in the
Company's Consolidated Financial Statements, but did not materially impact the Company's results of operations.
Standards Adopted in 2022
During the first quarter of 2022, the SEC issued SAB No. 121. This bulletin adds interpretive guidance on the accounting and
disclosure of obligations to safeguard crypto assets held for platform users. This guidance was applicable no later than the
financial statements covering the first interim or annual period ending after June 15, 2022. Management reviewed its business
activities and determined SAB 121 was not impactful to the Company’s Consolidated Financial Statements as the Company did
not safeguard crypto assets at the time of adoption or as of December 31, 2023.
Standards Issued But Not Yet Adopted
In March, 2023, the FASB issued ASU No. 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting
for Investments in Tax Credit Structures Using the Proportional Amortization Method, that is intended to improve the
accounting and disclosures for investments in tax credit structures. The ASU is a ratification of the FASB’s EITF consensus
that was issued in December, 2022. The ASU allows reporting entities to elect to account for qualifying tax equity investments
using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The
amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal
years, and early adoption is permitted.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements -- Codification Amendments in Response to the
SEC’s Disclosure Update and Simplification Initiative, which amends the disclosure or presentation requirements related to
various subtopics in the FASB Accounting Standards Codification. The ASU was issued in response to the SEC’s August 2018
final rule that updated and simplified disclosure requirements that the SEC believed were redundant, duplicative, overlapping,
outdated, or superseded. The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to
facilitate the application of U.S. GAAP for all entities. The effective date of ASU 2023-06 for each amendment will be the date
on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective,
with early adoption prohibited. Entities would apply the amendments in ASU 2023-06 prospectively after the effective dates.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures. The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures
about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify
circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure
requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the
amendments is to enable investors to better understand an entity’s overall performance” and assess “potential future cash flows.
The ASU applies to all public entities that are required to report segment information in accordance with ASC 280. The
amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023 and interim
periods within fiscal years beginning after December 15, 2024.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires consistent
categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by
jurisdiction. The amendments are intended to address investors’ requests for income tax disclosures that provide more
information to help them better understand an entity’s exposure to potential changes in tax laws and the ensuing risks and
opportunities and to assess income tax information that affects cash flow forecasts and capital allocation decisions. The
First Financial Bancorp 2023 Annual Report 63
Notes to Consolidated Financial Statements
guidance also eliminates certain existing requirements related to uncertain tax positions and unrecognized deferred tax. The
guidance is effective for annual periods beginning after December 15, 2024.
All of the new standards issued but not adopted are expected to result in amended disclosures in the Company's Consolidated
Financial Statements; however, none are expected to materially impact the Company's results of operations.
3. Restrictions on Cash and Dividends
As of December 31, 2023 and 2022, First Financial had $21.6 million and $25.0 million, respectively, in cash restricted for
withdrawal and usage due to the centrally cleared derivative initial margin requirement included in Cash and due from banks on
the Consolidated Balance Sheets. Additionally, First Financial had no required reserves with the FRB as of December 31, 2023
and 2022.
Dividends paid by First Financial to its shareholders are principally funded through dividends paid to the Company by its
subsidiaries; however, certain restrictions exist regarding the ability of the Bank to transfer funds to First Financial in the form
of cash dividends, loans or advances. The approval of the Federal Reserve Board and the ODFI is required for the Bank to pay
dividends in excess of the regulatory limit, which is equal to the net income of the current year through the dividend date
combined with the Bank's retained net income from the two preceding years. As of December 31, 2023, First Financial's
subsidiaries had retained earnings of $923.0 million, of which $248.7 million was available for distribution to First Financial
without prior regulatory approval.
4. Investment Securities
During the year ended December 31, 2023, proceeds on the sale of $92.2 million of AFS securities resulted in losses of
$1.3 million and insignificant gains. During the year ended December 31, 2022, proceeds on the sale of $277.1 million of AFS
securities resulted in gains of $1.0 million and losses of $1.6 million. During the year ended December 31, 2021, proceeds on
the sale of $375.3 million of AFS securities resulted in gains of $6.8 million and losses of $7.6 million. The impact to income
tax expense from these sales was insignificant in all three years.
In 2023 and 2022, there were no reclassifications of HTM securities to AFS securities.
The carrying value of investment securities pledged as collateral to secure public deposits, repurchase agreements and for other
purposes as required by law totaled $1.6 billion at December 31, 2023 and $1.5 billion at December 31, 2022.
The following is table a summary of HTM and AFS investment securities as of December 31, 2023:
(Dollars in thousands)
Amortized
cost
Unrecognized
gain
Unrecognized
loss
Fair
value
Amortized
cost
Unrealized
gain
Unrealized
loss
Fair
value
Held-to-maturity
Available-for-sale
U.S. Treasuries
$
0 $
0 $
0 $
0 $
34,904 $
0 $
(3,661) $
31,243
Securities of U.S. government
agencies and corporations
Mortgage-backed securities -
residential
Mortgage-backed securities -
commercial
Collateralized mortgage
obligations
Obligations of state and other
political subdivisions
Asset-backed securities
Other securities
Total
0
0
32,926
7,970
8,175
0
31,250
0
0
0
0
130
0
0
0
0
0
0
81,790
0
(12,010)
69,780
744,546
2,034
(85,532)
661,048
(4,628)
28,298
543,134
7
(35,911)
507,230
(539)
7,431
478,744
181
(60,277)
418,648
(215)
0
8,090
0
(3,381)
27,869
765,223
600,055
134,208
1,614
(114,320)
6
0
(39,813)
(13,796)
652,517
560,248
120,412
$
80,321 $
130 $
(8,763) $
71,688 $ 3,382,604 $
3,842 $ (365,320) $ 3,021,126
64 First Financial Bancorp 2023 Annual Report
The following is a summary of HTM and AFS investment securities as of December 31, 2022:
(Dollars in thousands)
Amortized
cost
Unrecognized
gain
Unrecognized
loss
Fair
value
Amortized
cost
Unrealized
gain
Unrealized
loss
Fair
value
Held-to-maturity
Available-for-sale
U.S. Treasuries
$
0 $
0 $
0 $
0 $
37,312 $
0 $
(4,616) $
32,696
Securities of U.S. government
agencies and corporations
Mortgage-backed securities -
residential
Mortgage-backed securities -
commercial
Collateralized mortgage
obligations
Obligations of state and other
political subdivisions
Asset-backed securities
Other securities
Total
0
0
35,363
9,280
8,128
0
31,250
0
0
0
0
105
0
0
0
0
0
0
80,382
747,478
(4,114)
31,249
676,934
0
47
2
(13,914)
66,468
(97,462)
650,063
(47,374)
629,562
(827)
8,453
538,970
181
(61,439)
477,712
(201)
0
8,032
0
(2,499)
28,751
832,066
772,261
142,015
565
(124,168)
39
0
(60,975)
(8,656)
708,463
711,325
133,359
$
84,021 $
105 $
(7,641) $
76,485 $ 3,827,418 $
834 $ (418,604) $ 3,409,648
The following table provides a summary of investment securities by contractual maturity as of December 31, 2023, except for
residential and commercial mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, which
are shown as single totals, due to the unpredictability of the timing in principal repayments:
(Dollars in thousands)
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Mortgage-backed securities - residential
Mortgage-backed securities - commercial
Collateralized mortgage obligations
Asset-backed securities
Total
Held-to-maturity
Available-for-sale
Amortized
cost
Fair
value
Amortized
cost
$
$
0 $
4,595
33,130
1,700
0
32,926
7,970
0
80,321 $
0 $
4,729 $
4,690
29,781
1,488
0
28,298
7,431
0
71,688 $
161,803
225,993
623,600
744,546
543,134
478,744
600,055
3,382,604 $
Fair
value
4,721
148,088
195,230
525,913
661,048
507,230
418,648
560,248
3,021,126
Unrealized gains and losses on debt securities available-for-sale are generally due to fluctuations in current market yields
relative to the yields of the securities at their amortized cost. All AFS securities with unrealized losses are reviewed quarterly
to determine if any impairment exists, requiring a write-down to fair value. For AFS securities in an unrealized loss position,
the Company first assesses whether it intends to sell or it is more likely than not that it will be required to sell the security
before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s
amortized cost basis is written down to fair value through income. For debt securities available-for-sale in an unrealized loss
position that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from
credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than
amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the
security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to
be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows
expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit
losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis.
First Financial does not intend to sell, and it is not more likely than not that the Company will be required to sell, debt securities
prior to maturity or recovery of the recorded value. Additionally, based on the Company's credit assessment of AFS securities
in an unrealized loss position, the Company recorded no reserves on investment securities for the twelve months ended
December 31, 2023 or 2022.
First Financial Bancorp 2023 Annual Report 65
Notes to Consolidated Financial Statements
As of December 31, 2023, the Company's investment securities portfolio consisted of 1,018 securities, of which 783 were in an
unrealized loss position. As of December 31, 2022, the Company's investment securities portfolio consisted of 1,251 securities,
of which 891 were in an unrealized loss position.
Primarily all of First Financial's HTM debt securities are issued by U.S. government-sponsored enterprises. These securities
carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long
history of zero credit loss. The remainder of the Company's HTM securities are non-agency collateralized mortgage obligations
and obligations of state and other political subdivisions which currently carry ratings no lower than A+. There were no HTM
securities on nonaccrual status or past due as of December 31, 2023, or 2022.
Management measures expected credit losses on HTM debt securities on a collective basis by security type. The estimate of
expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and
supportable forecasts. The Company did not record an ACL for these securities as of December 31, 2023 or 2022.
The following tables provide the fair value and gross unrealized losses on AFS investment securities in an unrealized loss
position for which an allowance for credit losses was not recorded, aggregated by investment category and the length of time
the individual securities have been in a continuous loss position:
(Dollars in thousands)
U.S. Treasuries
Securities of U.S. government
agencies and corporations
Mortgage-backed securities -
residential
Mortgage-backed securities -
commercial
Collateralized mortgage obligations
Obligations of state and other political
subdivisions
Asset-backed securities
Other securities
Total
Less than 12 months
Fair
value
Unrealized
loss
December 31, 2023
12 months or more
Fair
value
Unrealized
loss
Total
Fair
value
Unrealized
loss
$
0 $
0 $
31,243 $
(3,661) $
31,243 $
(3,661)
0
0
69,780
(12,010)
69,780
(12,010)
31,892
(483)
538,863
(85,049)
570,755
(85,532)
1,772
10,699
15,155
6,853
14,605
(11)
495,451
(35,900)
497,223
(157)
393,884
(60,120)
404,583
(35,911)
(60,277)
(132)
562,740
(114,188)
577,895
(114,320)
(15)
542,029
(39,798)
548,882
(396)
105,807
(13,400)
120,412
(39,813)
(13,796)
$
80,976 $
(1,194) $ 2,739,797 $ (364,126) $ 2,820,773 $ (365,320)
(Dollars in thousands)
U.S. Treasuries
Securities of U.S. Government
agencies and corporations
Mortgage-backed securities -
residential
Mortgage-backed securities -
commercial
Collateralized mortgage obligations
Obligations of state and other political
subdivisions
Asset-backed securities
Other securities
Total
Less than 12 months
Fair
value
Unrealized
loss
December 31, 2022
12 months or more
Fair
value
Unrealized
loss
Total
Fair
value
Unrealized
loss
$
2,383 $
(46) $
30,313 $
(4,570) $
32,696 $
(4,616)
0
0
66,468
(13,914)
66,468
(13,914)
195,972
(10,413)
443,415
(87,049)
639,387
(97,462)
440,207
199,138
295,913
250,946
118,262
(18,823)
175,530
(28,551)
615,737
(12,453)
269,242
(48,986)
468,380
(47,374)
(61,439)
(31,196)
368,673
(92,972)
664,586
(124,168)
(9,410)
422,090
(51,565)
673,036
(6,865)
9,959
(1,791)
128,221
(60,975)
(8,656)
$ 1,502,821 $
(89,206) $ 1,785,690 $ (329,398) $ 3,288,511 $ (418,604)
66 First Financial Bancorp 2023 Annual Report
The following tables provide the fair value and gross unrealized losses on HTM investment securities in an unrealized loss
position for which an allowance for credit losses was not recorded, aggregated by investment category and the length of time
the individual securities have been in a continuous loss position:
(Dollars in thousands)
U.S. Treasuries
Securities of U.S. government agencies
and corporations
Mortgage-backed securities - residential
Mortgage-backed securities -
commercial
Collateralized mortgage obligations
Obligations of state and other political
subdivisions
Asset-backed securities
Other securities
0
0
0
0
1,128
0
0
0
0
0
0
Less than 12 months
Fair
value
Unrealized
loss
December 31, 2023
12 months or more
Fair
value
Unrealized
loss
Total
Fair
value
Unrealized
loss
$
0 $
0 $
0 $
0 $
0 $
0
0
0
0
0
0
0
0
0
28,298
(4,628)
28,298
(4,628)
7,431
(539)
7,431
(539)
(3)
0
0
1,488
0
27,869
(212)
0
(3,381)
2,616
0
27,869
(215)
0
(3,381)
Total
$
1,128 $
(3) $
65,086 $
(8,760) $
66,214 $
(8,763)
(Dollars in thousands)
U.S. Treasuries
Securities of U.S. government agencies
and corporations
Mortgage-backed securities - residential
Mortgage-backed securities -
commercial
Collateralized mortgage obligations
Obligations of state and other political
subdivisions
Asset-backed securities
Other securities
Total
Less than 12 months
Fair
value
Unrealized
loss
December 31, 2022
12 months or more
Fair
value
Unrealized
loss
Total
Fair
value
Unrealized
loss
$
0 $
0 $
0 $
0 $
0 $
0
0
0
0
0
0
0
0
0
0
17,656
6,317
(2,197)
(606)
13,593
2,136
(1,917)
(221)
31,249
8,453
5,160
0
7,081
36,214 $
(201)
0
(418)
(3,422) $
0
0
21,670
37,399 $
$
0
0
(2,081)
(4,219) $
5,160
0
28,751
73,613 $
0
0
0
(4,114)
(827)
(201)
0
(2,499)
(7,641)
For further detail on the fair value of investment securities, see Note 23 – Fair Value Disclosures.
First Financial Bancorp 2023 Annual Report 67
Notes to Consolidated Financial Statements
5. Loans and Leases
First Financial offers clients a variety of commercial and consumer loan and lease products with various interest rates and
payment terms. Commercial loan categories include C&I, CRE, construction real estate and lease financing. Consumer loan
categories include residential real estate, home equity, installment and credit card.
Lending activities are primarily concentrated in states where the Bank operates banking centers (Ohio, Indiana, Kentucky and
Illinois). First Financial also offers two nationwide lending platforms, one that provides equipment and leasehold improvement
financing for franchisees in the quick service and casual dining restaurant sector and another that provides loans that are secured
by commissions and cash collateral accounts to insurance agents and brokers.
Credit quality. To facilitate the monitoring of credit quality for commercial loans, First Financial utilizes the following
categories of credit grades:
Pass - Higher quality loans that do not fit any of the other categories described below.
Special Mention - First Financial assigns a special mention rating to loans and leases with potential weaknesses that deserve
management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment
prospects for the loan or lease or in First Financial's credit position at some future date.
Substandard - First Financial assigns a substandard rating to loans or leases that are inadequately protected by the current sound
financial worth and paying capacity of the borrower or the collateral pledged, if any. Substandard loans and leases have well-
defined weaknesses that jeopardize repayment of the debt. Substandard loans and leases are characterized by the distinct
possibility that the Company will sustain some loss if the deficiencies are not addressed.
Doubtful - First Financial assigns a doubtful rating to loans and leases with all of the attributes of a substandard rating with the
added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis
of currently existing facts, conditions and values. The possibility of loss is extremely high, but because of certain important and
reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan or lease,
its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include
proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral and
refinancing plans.
The credit grades previously described are derived from standard regulatory rating definitions and are assigned upon initial
approval of credit to borrowers and updated periodically thereafter.
First Financial considers repayment performance to be the best indicator of credit quality for consumer loans. Consumer loans
that have principal and interest payments that are past due by 90 days or more are generally classified as nonperforming. In
2022 and all years prior that are presented below, consumer loans that have been modified in a TDR are classified as
nonperforming.
68 First Financial Bancorp 2023 Annual Report
The following table sets forth the Company's loan portfolio at December 31, 2023 by risk attribute and origination date as well
as detailing current period chargeoffs by year of origination:
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Term Total
Revolving
Total
Commercial & industrial
Pass
Special mention
Substandard
Doubtful
Total
$ 848,448 $ 736,213 $ 414,460 $ 265,143 $ 113,296 $ 226,970 $ 2,604,530 $ 774,080 $ 3,378,610
0
3,133
0
13,373
21,505
0
4,970
11,483
0
882
1,205
0
19,560
1,023
0
1,328
9,990
0
40,113
48,339
0
8,882
25,277
0
48,995
73,616
0
$ 851,581 $ 771,091 $ 430,913 $ 267,230 $ 133,879 $ 238,288 $ 2,692,982 $ 808,239 $ 3,501,221
YTD Gross chargeoffs
$
10 $
2,978 $
7,267 $
7,055 $
936 $
929 $ 19,175 $
0 $
19,175
Lease financing
Pass
Special mention
Substandard
Doubtful
Total
$ 261,064 $ 186,997 $
6,404 $
1,189 $
2,222 $
523 $ 458,399 $
0 $
458,399
4,761
1,407
0
8,047
1,961
0
0
97
0
0
0
0
0
145
0
0
0
0
12,808
3,610
0
0
0
0
12,808
3,610
0
$ 267,232 $ 197,005 $
6,501 $
1,189 $
2,367 $
523 $ 474,817 $
0 $
474,817
YTD Gross chargeoffs
$
0 $
0 $
4,423 $
0 $
0 $
0 $
4,423 $
0 $
4,423
Construction real estate
Pass
Special mention
Substandard
Doubtful
Total
$ 170,259 $ 208,446 $ 108,886 $ 27,686 $
7,784 $
6,165 $ 529,226 $
19,275 $
548,501
0
0
0
0
0
0
0
0
0
16,331
0
0
0
0
0
0
0
0
16,331
0
0
0
0
0
16,331
0
0
$ 170,259 $ 208,446 $ 108,886 $ 44,017 $
7,784 $
6,165 $ 545,557 $
19,275 $
564,832
YTD Gross chargeoffs
$
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0 $
0
Commercial real estate - investor
Pass
Special mention
Substandard
Doubtful
Total
$ 468,579 $ 595,423 $ 473,325 $ 261,794 $ 554,893 $ 636,598 $ 2,990,612 $
39,668 $ 3,030,280
7,894
9,345
12,134
0
0
0
0
0
0
110
6,238
0
32,756
0
0
14,204
25,668
0
76,443
31,906
0
0
0
0
76,443
31,906
0
$ 476,473 $ 604,768 $ 485,459 $ 268,142 $ 587,649 $ 676,470 $ 3,098,961 $
39,668 $ 3,138,629
YTD Gross chargeoffs
$
0 $
0 $
859 $
2,030 $
0 $
3,119 $
6,008 $
0 $
6,008
Commercial real estate - owner
Pass
Special mention
Substandard
Doubtful
Total
$ 138,932 $ 175,336 $ 130,240 $ 138,919 $ 86,182 $ 215,458 $ 885,067 $
22,639 $
907,706
396
0
0
45
0
0
179
3,919
0
2,403
835
0
462
1,324
0
19,807
5,234
0
23,292
11,312
0
0
0
0
23,292
11,312
0
$ 139,328 $ 175,381 $ 134,338 $ 142,157 $ 87,968 $ 240,499 $ 919,671 $
22,639 $
942,310
YTD Gross chargeoffs
$
0 $
0 $
0 $
2,643 $
1 $
71 $
2,715 $
0 $
2,715
Residential real estate
Performing
Nonperforming
Total
$ 325,304 $ 234,583 $ 255,964 $ 188,212 $ 101,663 $ 210,583 $ 1,316,309 $
0 $ 1,316,309
243
917
2,584
3,496
2,160
7,965
17,365
0
17,365
$ 325,547 $ 235,500 $ 258,548 $ 191,708 $ 103,823 $ 218,548 $ 1,333,674 $
0 $ 1,333,674
YTD Gross chargeoffs
$
0 $
0 $
8 $
1 $
27 $
3 $
39 $
0 $
39
Home equity
Performing
Nonperforming
Total
$ 28,979 $ 23,175 $ 29,084 $ 32,917 $
9,883 $ 22,419 $ 146,457 $ 606,183 $
752,640
20
69
258
162
138
317
964
5,072
6,036
$ 28,999 $ 23,244 $ 29,342 $ 33,079 $ 10,021 $ 22,736 $ 147,421 $ 611,255 $
758,676
YTD Gross chargeoffs
$
0 $
0 $
7 $
0 $
174 $
159 $
340 $
0 $
340
Installment
Performing
Nonperforming
Total
$ 16,026 $ 39,212 $ 22,961 $
3,923 $
1,691 $
3,768 $ 87,581 $
68,673 $
156,254
196
1,142
742
12
12
30
2,134
690
2,824
$ 16,222 $ 40,354 $ 23,703 $
3,935 $
1,703 $
3,798 $ 89,715 $
69,363 $
159,078
YTD Gross chargeoffs
$
168 $
3,189 $
2,903 $
154 $
5 $
23 $
6,442 $
0 $
6,442
First Financial Bancorp 2023 Annual Report 69
Notes to Consolidated Financial Statements
Credit cards
Performing
Nonperforming
Total
YTD Gross chargeoffs
$
$
$
0 $
0
0 $
0 $
0 $
0
0 $
0 $
0 $
0
0 $
0 $
0 $
0
0 $
0 $
0 $
0
0 $
0 $
0 $
0
0 $
0 $
0 $
59,438 $
59,438
0
501
501
0 $
59,939 $
59,939
0 $
1,173 $
1,173
Grand Total Loans
$ 2,275,641 $ 2,255,789 $ 1,477,690 $ 951,457 $ 935,194 $ 1,407,027 $ 9,302,798 $ 1,630,378 $ 10,933,176
Grand Total YTD
Gross Chargeoffs
$
178 $
6,167 $ 15,467 $ 11,883 $
1,143 $
4,304 $ 39,142 $
1,173 $
40,315
70 First Financial Bancorp 2023 Annual Report
The following table sets forth the Company's loan portfolio at December 31, 2022 by risk attribute and origination date:
(Dollars in thousands)
2022
2021
2020
2019
2018
Prior
Term Total Revolving
Total
Commercial & industrial
Pass
Special mention
Substandard
Doubtful
Total
Lease financing
Pass
Special mention
Substandard
Doubtful
Total
Construction real estate
Pass
Special mention
Substandard
Doubtful
Total
$ 879,836 $ 561,890 $ 348,123 $ 209,758 $ 112,282 $ 206,656 $ 2,318,545 $ 971,080 $ 3,289,625
2,740
2,335
0
13,821
5,176
0
4,125
11,886
0
14,047
8,016
0
8,523
3,331
0
5,544
13,812
0
48,800
44,556
0
18,055
9,236
0
66,855
53,792
0
$ 884,911 $ 580,887 $ 364,134 $ 231,821 $ 124,136 $ 226,012 $ 2,411,901 $ 998,371 $ 3,410,272
$ 167,035 $ 25,638 $ 13,705 $ 12,797 $
9,402 $
2,930 $ 231,507 $
0 $ 231,507
0
4,363
0
0
0
0
70
0
0
0
164
0
0
11
0
0
9
0
70
4,547
0
0
0
0
70
4,547
0
$ 171,398 $ 25,638 $ 13,775 $ 12,961 $
9,413 $
2,939 $ 236,124 $
0 $ 236,124
$ 89,116 $ 276,639 $ 96,823 $
4,902 $
390 $
353 $ 468,223 $ 23,266 $ 491,489
0
0
0
14,395
0
0
0
0
0
0
0
0
6,166
0
0
0
0
0
20,561
0
0
0
0
0
20,561
0
0
$ 89,116 $ 291,034 $ 96,823 $
4,902 $
6,556 $
353 $ 488,784 $ 23,266 $ 512,050
Commercial real estate - investor
Pass
Special mention
Substandard
Doubtful
Total
$ 643,174 $ 470,085 $ 301,510 $ 719,699 $ 300,772 $ 508,639 $ 2,943,879 $ 26,153 $ 2,970,032
0
0
0
13,090
6,950
0
23,111
6
0
9,297
4,025
0
26,079
17,178
0
13,804
9,631
0
85,381
37,790
0
861
0
0
86,242
37,790
0
$ 643,174 $ 490,125 $ 324,627 $ 733,021 $ 344,029 $ 532,074 $ 3,067,050 $ 27,014 $ 3,094,064
Commercial real estate - owner
Pass
Special mention
Substandard
Doubtful
Total
Residential real estate
Performing
Nonperforming
Total
Home equity
Performing
$ 165,411 $ 155,041 $ 170,587 $ 101,137 $ 112,063 $ 211,377 $ 915,616 $ 11,125 $ 926,741
0
0
0
0
525
0
0
844
0
1,479
5,114
0
0
3,501
0
14,040
6,451
0
15,519
16,435
0
0
0
0
15,519
16,435
0
$ 165,411 $ 155,566 $ 171,431 $ 107,730 $ 115,564 $ 231,868 $ 947,570 $ 11,125 $ 958,695
$ 320,676 $ 274,816 $ 205,948 $ 110,745 $ 51,583 $ 114,642 $ 1,078,410 $
0 $ 1,078,410
414
1,615
1,286
2,554
1,755
6,231
13,855
0
13,855
$ 321,090 $ 276,431 $ 207,234 $ 113,299 $ 53,338 $ 120,873 $ 1,092,265 $
0 $ 1,092,265
$ 26,411 $ 33,414 $ 38,226 $ 11,733 $
8,051 $ 24,985 $ 142,820 $ 585,712 $ 728,532
Nonperforming
5
136
298
78
104
430
1,051
4,208
5,259
Total
Installment
Performing
$ 26,416 $ 33,550 $ 38,524 $ 11,811 $
8,155 $ 25,415 $ 143,871 $ 589,920 $ 733,791
$ 100,256 $ 38,694 $
7,244 $
3,915 $
2,861 $
3,242 $ 156,212 $ 51,854 $ 208,066
Nonperforming
650
794
18
6
20
42
1,530
299
1,829
Total
Credit cards
Performing
Nonperforming
Total
$ 100,906 $ 39,488 $
7,262 $
3,921 $
2,881 $
3,284 $ 157,742 $ 52,153 $ 209,895
$
$
0 $
0
0 $
0 $
0
0 $
0 $
0
0 $
0 $
0
0 $
0 $
0
0 $
0 $
0
0 $
0 $ 51,287 $ 51,287
0
528
528
0 $ 51,815 $ 51,815
Grand Total
$ 2,402,422 $ 1,892,719 $ 1,223,810 $ 1,219,466 $ 664,072 $ 1,142,818 $ 8,545,307 $ 1,753,664 $ 10,298,971
Delinquency. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the
terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment.
First Financial Bancorp 2023 Annual Report 71
Notes to Consolidated Financial Statements
Loan delinquency, including nonaccrual loans, was as follows:
(Dollars in thousands)
Loans
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate-investor
Commercial real estate-owner
Residential real estate
Home equity
Installment
Credit card
Total
(Dollars in thousands)
Loans
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate-investor
Commercial real estate-owner
Residential real estate
Home equity
Installment
Credit card
Total
As of December 31, 2023
30 – 59
days
past due
60 – 89
days
past due
> 90 days
past due
Total
past
due
Current
Total
> 90 days
past due
and still
accruing
$
1,717 $
733 $
4,822 $
7,272 $ 3,493,949 $ 3,501,221 $
790
0
19
269
4,786
1,998
1,157
320
1,028
0
16,455
205
1,929
1,082
864
211
4,224
0
6,238
5,290
3,744
1,919
669
501
6,042
0
468,775
564,832
474,817
564,832
22,712
3,115,917
3,138,629
5,764
936,546
942,310
10,459
1,323,215
1,333,674
4,999
2,690
1,032
753,677
156,388
58,907
758,676
159,078
59,939
376
1,151
0
0
0
0
0
0
501
$
11,056 $
22,507 $
27,407 $
60,970 $ 10,872,206 $ 10,933,176 $
2,028
As of December 31, 2022
30 - 59
days
past due
60 - 89
days
past due
> 90 days
past due
Total
past
due
Current
Total
> 90 days
past due
and still
accruing
$
5,375 $
72 $
501 $
5,948 $ 3,404,324 $ 3,410,272 $
5,212
1,052
0
0
26
4,254
1,725
874
261
0
0
5,216
2,074
729
490
150
843
0
0
44
3,260
1,209
414
116
7,107
0
0
229,017
512,050
236,124
512,050
3,094,064
3,094,064
5,286
953,409
958,695
9,588
1,082,677
1,092,265
3,663
1,778
527
730,128
208,117
51,288
733,791
209,895
51,815
$
17,727 $
9,783 $
6,387 $
33,897 $ 10,265,074 $ 10,298,971 $
0
742
0
0
0
0
0
0
115
857
Financial Difficulty Modifications. Effective January 1, 2023, First Financial prospectively adopted ASU 2022-02 which
eliminated the accounting for TDRs while establishing a new standard for the treatment of modifications made to borrowers
experiencing financial difficulties, defined by First Financial as FDMs. As such, effective with the adoption of the standard, the
Company prospectively will not include FDMs in the calculation of nonperforming loans, nonperforming assets or classified
assets. Prior period data, which included TDRs, has not been adjusted.
FDM might result when a borrower is in financial distress, and may be in the form of principal forgiveness, an interest rate
reduction, a term extension or an other-than-insignificant payment delay. In some cases, the Company might provide multiple
types of modifications for a single loan. One type of modification, such as payment delay, may be granted initially, however, if
the borrower continues to experience financial difficulty, another modification, such as term extension and/or interest rate
reduction might be granted. Loans included in the "combination" column in the table that follows have more than one
modification made to the same loan within the current reporting period. Additionally, modifications with a term extension or
interest rate reduction are intended to reduce the borrower’s monthly payment, while modifications with a payment delay,
which typically allow borrowers to make monthly payments, interest only payments for a period of time, are structured to cure
the payment defaults by making delinquent payments due at maturity. Payment deferrals may be up to one year and have
minimal financial impact since the deferred payments are paid at maturity.
72 First Financial Bancorp 2023 Annual Report
The following table provides the amortized cost basis of FDM that had a payment default during the year ended December 31,
2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty during the year
by class and type of modification:
Year ended December 31, 2023
Principal
forgiveness
Payment
delay
Term
extension
Interest rate
reduction
Combination:
Term
extension and
interest rate
reduction
Percent of
total class
of loans
Total
$
$
0 $
1,181 $
3,329 $
0 $
0 $
4,510
0.13 %
0
0
1,889
181
96
0
0
0
55
0
2,040
181
0 $
3,251 $
3,425 $
0 $
55 $
6,731
0.15 %
0.02 %
0.06 %
(Dollars in thousands)
Commercial &
industrial
Residential real
estate
Home equity
Total
The following table provides the financial effect of FDM during the year ended December 31, 2023 by class of loans:
(Dollars in thousands)
Commercial & industrial
Residential real estate
Total
Principal forgiveness
Year ended December 31, 2023
Weighted average
interest rate reduction
Weighted average
term extension
$
$
.
0
0
0
0.00 %
2.00 %
2.00 %
0.2 years
11.4 years
0.7 years
The Company has committed to lend no additional amounts to the borrowers who have been classified as FDM. Additionally,
there were 18 FDMs with a balance of $4.4 million that defaulted during the year ended December 31, 2023.
The Company closely monitors the performance of FDMs to understand the effectiveness of its modification efforts. The
following table provides the performance of loans that have been modified since the January 1, 2023 adoption date of ASU
2022-02:
(Dollars in thousands)
Commercial & industrial
Residential real estate
Home equity
Total
Payment status as of
December 31, 2023
60 – 89
days
past due
> 89 days
past due
30 – 59
days
past due
Current
$
1,181 $
1,021
111
821
500
70
$
0 $
2,508 $
240
0
279
0
$
2,313 $
1,391
$
240 $
2,787 $
Total
4,510
2,040
181
6,731
Nonaccrual. Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is
doubtful or when principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due
to the continued failure to adhere to contractual payment terms by the borrower, coupled with other pertinent factors. When a
loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued but unpaid interest is
reversed. Any payments received while a loan is on nonaccrual status are applied as a reduction to the carrying value of the
loan. A loan classified as nonaccrual may return to accrual status if none of the principal and interest is due and unpaid, and the
Bank expects repayment of the remaining contractual principal and interest.
Nonperforming loans. Effective January 1, 2023, loans classified as nonaccrual are considered nonperforming. Prior to the
adoption of ASU 2022-02, nonperforming loans included nonaccrual loans as well as TDRs.
First Financial individually reviews all nonperforming loan relationships greater than $250,000 to determine if a specific
reserve is required based on the borrower’s overall financial condition, resources and payment record, support from guarantors
First Financial Bancorp 2023 Annual Report 73
Notes to Consolidated Financial Statements
and the realizable value of any collateral. Specific reserves are based on discounted cash flows using the loan's initial effective
interest rate or the fair value of the collateral for certain collateral dependent loans.
The following table provides information on nonperforming loans as of December 31:
Nonaccrual
loans with
a related
ACL
2023
Nonaccrual
loans with
no related
ACL
Total
nonaccrual
Nonaccrual
loans with
a related
ACL
2022
Nonaccrual
loans with
no related
ACL
Total
nonaccrual
Nonaccrual
loans with
a related
ACL
2021
Nonaccrual
loans with
no related
ACL
Total
nonaccrual
(Dollars in thousands)
Nonaccrual loans (1)
Commercial & industrial
$
3,329 $
12,417 $ 15,746 $
6,692 $
1,550 $
8,242 $
11,077 $
6,285 $ 17,362
Lease financing
1,505
2,105
3,610
Construction real estate
0
Commercial real estate
16,356
0
11,628
14,067
3,476
870
0
27,984
14,067
3,476
870
0
0
0
0
0
5,216
0
0
0
178
0
570
178
0
0
0
5,786
17,716
10,691
10,691
3,123
603
3,123
603
0
0
0
203
0
1,796
8,305
2,922
88
203
0
19,512
8,305
2,922
88
$
21,190 $
44,563 $ 65,753 $
11,908 $
16,715 $ 28,623 $
28,793 $
19,599 $ 48,392
Residential real estate
Home equity
Installment
Total nonaccrual
loans
Interest income effect
2023
2022
2021
$
5,694 $
3,247 $
5,132
1,673
0
1,673
1,134
424
1,558
1,618
314
1,932
$
4,021 $
1,689 $
3,200
$
0 $
0 $
0
Gross amount of interest that would have been recorded under original terms
Interest included in income
Nonaccrual loans
Troubled debt restructurings
Total interest included in income
Net impact on interest income
Commitments outstanding to borrowers
with nonaccrual loans
(1) Nonaccrual loans include nonaccrual TDRs of $10.0 million and $16.0 million as of December 31, 2022 and 2021, respectively.
74 First Financial Bancorp 2023 Annual Report
A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty and the repayment is
expected to be provided substantially through the operation or sale of collateral. The following table presents the amortized
cost basis of collateral dependent loans by class of loan.
December 31, 2023
Type of Collateral
(Dollar in thousands)
Class of loan
Commercial & industrial
Lease financing
Commercial real estate-
investor
Commercial real estate-
owner
Residential real estate
Home equity
Installment
Total
Business
assets
Commercial
real estate
Equipment
Land
Residential
real estate
Other
Total
$
10,952 $
0
0 $
0
3,869 $
3,610
0
22,694
0
0
0
0
0
10,952
0
0$
3,397
0
0
0
26,091 $
1,893
0
0
0
9,372 $
$
0 $
0
0
0
0
0
0
0 $
0 $
0
0
925 $
0
15,746
3,610
0
22,694
0
14,067
3,476
0
17,543 $
0
0
0
870
1,795 $
5,290
14,067
3,476
870
65,753
(Dollar in thousands)
Class of loan
Commercial & industrial
$
Lease financing
Commercial real estate-
investor
Commercial real estate-
owner
Residential real estate
Home equity
Installment
Total
$
Business
assets
Commercial
real estate
Equipment
Land
Residential
real estate
Other
Total
December 31, 2022
Type of Collateral
8,205 $
0
0 $
0
0
353
0
0
0
0
8,205 $
3,399
0
0
0
3,752 $
0 $
178
0
1,893
0
0
0
2,071 $
0 $
0
0
119
0
0
0
119 $
0 $
0
37 $
0
8,242
178
22
0
375
0
10,691
3,123
0
13,836 $
0
0
0
603
640 $
5,411
10,691
3,123
603
28,623
Lease financing - Lessor. First Financial originates both sales-type and direct financing leases, and the Company manages and
reviews lease residuals in accordance with its credit policies. Payments are generally fixed, however, in some agreements, lease
payments may be indexed. Sales-type lease contracts contain the ability to purchase the underlying equipment at lease maturity
and profit or loss is recognized at lease commencement. Direct financing leases are generally three to five years in length and
may be extended at maturity, however, early cancellation may result in a fee to the borrower. For direct financing leases, the
net unearned income is deferred and amortized over the life of the lease.
The components of the Company's net investments in direct financing and sales-type leases, which are included in Lease
financing on the Consolidated Balance Sheets are as follows:
(Dollar in thousands)
Direct financing leases
Lease receivables
Unguaranteed residual values
Sales-type leases
Lease receivables
Unguaranteed residual values
Total net investment in direct financing and sales-type leases
$
474,817 $
December 31, 2023
December 31, 2022
$
16,272 $
11,402
444,144
2,999
35,081
16,058
184,985
0
236,124
First Financial Bancorp 2023 Annual Report 75
Notes to Consolidated Financial Statements
Interest income for direct financing and sales-type leases was $25.2 million, $11.8 million and $2.7 million for the years ended
December 31, 2023, 2022 and 2021, respectively.
The remaining maturities of lease receivables were as follows:
(Dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: unearned interest income
Net lease receivables
Direct financing and
Sales-type
$
$
139,108
129,796
109,181
82,552
38,694
30,422
529,753
(69,337)
460,416
OREO. OREO is comprised of properties acquired by the Company primarily through the loan foreclosure or repossession
process, that result in partial or total satisfaction of problem loans.
Changes in OREO were as follows:
(Dollars in thousands)
Balance at beginning of year
Additions
Commercial real estate
Residential real estate
Total additions
Disposals
Commercial real estate
Residential real estate
Total disposals
Valuation adjustments
Commercial real estate
Residential real estate
Total valuation adjustments
Balance at end of year
6. Allowance for Credit Losses
Years ended December 31,
2023
2022
2021
$
191 $
98
$
1,287
0
387
387
0
(288)
(288)
0
(184)
(184)
106 $
0
327
327
(98)
(94)
(192)
0
(42)
(42)
191
$
98
0
98
(947)
(331)
(1,278)
(9)
0
(9)
98
$
Allowance for credit losses - loans and leases. The ACL is a valuation account that is deducted from the loans’ amortized
cost basis to present the net amount expected to be collected on the loans. The ACL is increased by provision expense and
decreased by charge-offs, net of recoveries of amounts previously charged-off. First Financial's policy is to charge-off all or a
portion of a loan when, in management's opinion, it is unlikely to collect the principal amount owed in full either through
payments from the borrower or a guarantor or from the liquidation of collateral. Cumulative recovery payments credited to the
ACL for any loan do not exceed the amount charged-off. Accrued interest receivable on loans and leases, which totaled $56.9
million and $47.5 million as of December 31, 2023 and December 31, 2022, respectively, is excluded from the estimate of
credit losses.
Management estimates the allowance using relevant available information from both internal and external sources, relating to
past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic
76 First Financial Bancorp 2023 Annual Report
forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its
quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are
commonly known as the Qualitative Framework.
The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the
following portfolio segments and measures the ACL using the following methods:
Commercial and industrial – C&I loans include revolving lines of credit and term loans to commercial customers for use in
normal business operations to finance working capital needs, equipment purchases, leasehold improvements or other projects.
C&I loans are generally underwritten individually and secured with the assets of the Company and/or the personal guarantee of
the business owners. C&I loans also include ABL, equipment and leasehold improvement financing for franchisees in the
quick service and casual dining restaurant sector and commission-based loans to insurance agents and brokers. ABL
transactions typically involve larger commercial clients and are secured by specific assets, such as inventory, accounts
receivable, machinery and equipment. In the franchise lending space, First Financial focuses on a limited number of restaurant
concepts that have sound economics, low closure rates and strong brand awareness within specified local, regional or national
markets. Within the insurance lending platform, First Financial serves insurance agents and brokers that are looking to
maximize their book-of-business value and grow their agency business. Expected default activity in the C&I portfolio is based
on forecasted manufacturing overtime hours and business bankruptcies. Changes in forecasted expectations for these economic
variables could result in volatility in the Company’s ACL in future periods.
Lease financing – Lease financing consists of lease transactions for the acquisition of both new and used business equipment
for commercial clients. Lease products may include tax leases, finance leases, lease lines of credit and interim funding. The
credit underwriting for lease transactions includes detailed analysis of the lessee's industry and business model, nature of the
equipment, equipment resale values, historical and projected cash flow analysis, secondary sources of repayment and guarantor,
in addition to other considerations.
The ACL model for leases sources expected default rates from the C&I portfolio model. Therefore, changes in forecasted
expectations for manufacturing overtime hours and business bankruptcies could result in volatility in the Company's ACL as it
pertains to finance leases in future periods.
Construction real estate – Real estate construction loans are term loans to individuals, companies or developers used for the
construction or development of a commercial or residential property for which repayment will be generated by the sale or
permanent financing of the property. Generally, these loans are for construction projects that have been pre-sold, pre-leased or
have secured permanent financing, as well as loans to real estate companies with significant equity invested in the project. An
independent credit team underwrites construction real estate loans, which are managed by experienced lending officers and
monitored through the construction phase by a centralized funding desk that manages loan disbursements.
The construction ACL model is adjusted for forecasted changes in rental vacancy rates in the Bank’s geographic footprint and
the housing price index. Changes in forecasted expectations for these economic variables could result in volatility in the
Company's ACL in future periods.
Commercial real estate - owner & investor – Commercial real estate loans consist of term loans secured by a mortgage lien on
real estate properties such as apartment buildings, office and industrial buildings and retail shopping centers. Additionally, the
Company's franchise lending activities discussed in the "Commercial and Industrial" section often include the financing of real
estate in addition to equipment. The credit underwriting for both owner-occupied and investor income producing real estate
loans includes detailed market analysis, historical and projected cash flow analysis, appropriate equity margins, assessment of
lessees and lessors, environmental risks and the type, age, condition and location of real estate, among other factors.
First Financial models owner-occupied and investor CRE separately when determining the ACL. For owner occupied CRE, the
model is adjusted for forecasted changes in S&P 500 performance, CRE prices, and business bankruptcies. The investor CRE
loans model is adjusted by forecasted S&P 500 performance, the return on rental property (NCREIF Property Index) and
business bankruptcies. Changes in forecasted expectations for these economic variables could result in volatility in the
Company’s ACL in future periods.
Residential real estate – Residential real estate loans represent loans to consumers for the financing of a residence. These loans
generally have a 15 to 30 year term and a fixed interest rate, but may have a shorter term to maturity or an adjustable interest
rate. In most cases, these loans are extended to borrowers to finance their primary residence. First Financial sells residential
real estate loan originations into the secondary market on both servicing retained and servicing released bases. Residential real
First Financial Bancorp 2023 Annual Report 77
Notes to Consolidated Financial Statements
estate loans are generally underwritten to secondary market lending standards, utilizing underwriting processes that rely on
empirical data to assess credit risk as well as analysis of the borrower's ability to repay their obligations, credit history, the
amount of any down payment and the market value or other characteristics of the property. First Financial also offers a
residential mortgage product that features similar borrower credit characteristics but a more streamlined underwriting process
than typically required to sell to government-sponsored enterprises and thus is retained on the Consolidated Balance Sheets.
The residential real estate ACL model is adjusted for forecasted changes in household price index, housing starts, mortgage
debt service ratio, home sales, and disposable income. Changes in forecasted expectations for these economic variables could
result in volatility in the Company's ACL in future periods.
Home equity – Home equity lending includes both term loans and revolving lines of credit secured by a first or second lien on
the borrower’s residence. Home equity lending underwriting considerations include the borrower's credit history as well as
debt-to-income and loan-to-value policy limits.
The home equity ACL model is adjusted for forecasted changes in personal bankruptcies and outstanding consumer credit.
Changes in forecasted expectations for these economic variables could result in volatility in the Company's ACL in future
periods.
Installment – Installment lending consists of consumer loans not secured by real estate, including loans secured by automobiles
and unsecured personal loans.
The installment ACL model is adjusted for forecasted changes in household consumer debt service ratio, outstanding consumer
credit and CPI. Changes in forecasted expectations for these economic variables could result in volatility in the Company's
ACL in future periods.
Credit card – Credit card lending consists of secured and unsecured revolving lines of credit to consumer and business
customers. Credit card lines are generally available for an indefinite period of time as long as the borrower's credit
characteristics do not materially or adversely change, but lines are unconditionally cancellable by the Company at any time.
The credit card ACL model is adjusted for forecasted changes in prime rate, outstanding consumer credit and household
mortgage debt service ratio. Changes in forecasted expectations for these economic variables could result in volatility in the
Company's ACL in future periods.
The Company utilized the Moody's December baseline forecast as its R&S forecast in the quantitative model. For
reasonableness, the Company also considered the impact to the model from alternative, more adverse economic forecasts, and
slower prepayment speeds. These alternative analyses were utilized to inform the Company's qualitative adjustments.
Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future credit stress,
such as franchise, office, hotel and investor commercial real estate lending when making qualitative adjustments to the ACL
model.
First Financial's ACL is influenced by loan volumes, risk rating migration or delinquency status, and other conditions impacting
loss expectations, such as reasonable and supportable forecasts of economic conditions. For the twelve months ended
December 31, 2023, the ACL increased slightly as the impact from slower prepayment speeds and loan growth were partially
offset by improvements in economic forecasts and credit quality. For the twelve months ended, December 31, 2022, the ACL
was relatively stable as strong loan growth and slower prepayment speeds offset the impact from stable credit quality.
78 First Financial Bancorp 2023 Annual Report
Changes in the allowance by loan category as of December 31 were as follows:
2023
(Dollars in thousands)
Allowance for credit losses
Commercial
& industrial
Lease
financing
Construction
real estate
Commercial
real estate
Residential
real estate
Home
equity
Installment
Credit
card
Total
Balance at beginning of year
$
42,313
$
3,571
$
13,527
$
41,106
$
12,684
$ 12,447
$
4,945
$ 2,384
$
132,977
Provision for credit losses
19,647
13,162
(2,524)
(3)
5,196
Gross charge-offs
Recoveries
Total net charge-offs
(19,175)
(4,423)
1,534
55
(17,641)
(4,368)
0
0
0
(8,723)
2,523
(6,200)
(39)
247
208
600
(340)
615
275
5,944
1,052
43,074
(6,442)
(1,173)
(40,315)
441
(6,001)
282
(891)
5,697
(34,618)
Ending allowance for credit losses
$
44,319
$ 12,365
$
11,003
$
34,903
$
18,088
$ 13,322
$
4,888
$ 2,545
$
141,433
2022
(Dollars in thousands)
Allowance for credit losses
Commercial
& industrial
Lease
financing
Construction
real estate
Commercial
real estate
Residential
real estate
Home
equity
Installment
Credit
card
Total
Balance at beginning of year
$
44,052
$
1,633
$
11,874
$
53,420
$
6,225
$
9,643
$
1,097
$ 4,048
$
131,992
Provision for credit losses
Gross charge-offs
Recoveries
Total net charge-offs
3,221
(5,899)
939
(4,960)
2,041
(152)
49
(103)
1,653
(12,951)
6,509
0
0
0
(3,667)
4,304
637
(224)
174
(50)
2,066
(160)
898
738
5,232
(1,040)
(1,549)
165
(1,384)
(907)
283
(624)
6,731
(12,558)
6,812
(5,746)
Ending allowance for credit losses
$
42,313
$
3,571
$
13,527
$
41,106
$
12,684
$ 12,447
$
4,945
$ 2,384
$
132,977
(Dollars in thousands)
Allowance for credit losses
Beginning balance, prior to adoption of
ASC 326
Purchase accounting ACL for PCD
Provision for credit losses
Gross charge-offs
Recoveries
Total net charge-offs
Commercial
& industrial
Lease
financing
Construction
real estate
Commercial
real estate
Residential
real estate
Home
equity
Installment
Credit
card
Total
2021
$
51,454
$
995
$
21,736
$
76,795
$
8,560
$ 11,869
$
1,215
$ 3,055
$
175,679
0
6,606
(15,620)
1,612
(14,008)
17
621
0
0
0
0
(8,367)
(1,498)
3
(1,495)
0
(14,689)
(13,471)
4,785
(8,686)
0
(2,436)
(127)
228
101
0
(2,376)
(1,073)
1,223
150
0
65
(334)
151
(183)
0
1,552
(780)
221
(559)
17
(19,024)
(32,903)
8,223
(24,680)
Ending allowance for credit losses
$
44,052
$
1,633
$
11,874
$
53,420
$
6,225
$
9,643
$
1,097
$ 4,048
$
131,992
Allowance for credit losses - unfunded commitments. First Financial estimates expected credit losses over the contractual
period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is
unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and
an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the
Company's ACL methodology for loans and leases.
First Financial determined the adequacy of this reserve based upon an evaluation of the unfunded credit facilities, which
included consideration of historical commitment utilization experience, credit risk ratings and historical loss rates, consistent
with the Company's ACL methodology at the time.
The ACL on unfunded commitments was $18.4 million as of December 31, 2023 and December 31, 2022. First Financial
recorded immaterial provision expense related to the ACL on unfunded commitments for the twelve months ended December
31, 2023 but recorded $5.0 million and $0.9 million of provision expense related to the ACL on unfunded commitments for the
twelve months ended December 31, 2022, and 2021, respectively.
First Financial Bancorp 2023 Annual Report 79
Notes to Consolidated Financial Statements
7. Premises and Equipment
Premises and equipment at December 31 were as follows:
(Dollars in thousands)
Land and land improvements
Buildings
Furniture and fixtures
Leasehold improvements
Construction in progress
Less: Accumulated depreciation and amortization
Total
$
2023
2022
48,575 $
162,423
72,580
32,060
8,413
324,051
49,016
157,620
69,855
32,515
5,644
314,650
129,311
125,570
$ 194,740 $ 189,080
Depreciation expense recorded on premises and equipment in 2023, 2022 and 2021 was $13.3 million, $12.9 million and $14.1
million, respectively.
8. Leases - Lessee
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or
equipment for a period of time in exchange for consideration. For contracts where First Financial is a lessee, the recipient of
the right to control, substantially all of those agreements are for real estate property for branches, ATM locations and office
space.
Substantially all of the Company's leases are classified as operating leases. Under Accounting Topic 842, operating lease
agreements are required to be recognized on the Consolidated Balance Sheets as a ROU asset and a corresponding lease
liability. The Company's right to use an asset over the life of a lease is recorded as a ROU asset in Accrued interest and other
assets on the Consolidated Balance Sheet and was $54.2 million and $54.3 million at December 31, 2023 and 2022,
respectively. Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives
received. First Financial recorded a $64.5 million and $64.5 million lease liability in Accrued interest and other liabilities on
the Consolidated Balance Sheet at December 31, 2023 and 2022, respectively.
The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate
used to calculate the present value of minimum lease payments. Regarding the discount rate, Topic 842 requires the use of the
rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its
incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.
Leases with an initial term of 12 months or less are not recorded on the balance sheet and First Financial recognizes lease
expense for these leases on a straight-line basis over the term of the lease. Most leases include one or more options to renew,
with renewal terms that can extend the lease term from one to 20 years or more. The exercise of renewal options on operating
leases is at the Company's sole discretion, and certain leases may include options to purchase the leased property. If at lease
inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the
extended term in the calculation of the ROU asset and lease liability. First Financial does not enter into lease agreements which
contain material residual value guarantees or material restrictive covenants.
Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements and leases
generally also include real estate taxes and common area maintenance charges in the annual rental payments.
The components of lease expense for the years ended December 31, 2023, 2022 and 2021 were as follows:
80 First Financial Bancorp 2023 Annual Report
(Dollars in thousands)
Operating lease cost
Short-term lease cost
Variable lease cost
Total operating lease cost
December 31, 2023
December 31, 2022
December 31, 2021
$
$
7,773 $
7,626 $
0
3,107
8
2,827
10,880 $
10,461 $
7,425
108
2,621
10,154
Future minimum commitments due under these lease agreements as of December 31, 2023 are as follows:
(Dollars in thousands)
Operating leases
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total
$
$
7,962
7,701
7,509
7,181
7,117
43,793
81,263
(16,779)
64,484
The weighted average lease term and discount rate for the Company's operating leases were as follows:
Operating leases
Weighted-average remaining lease term
Weighted-average discount rate
December 31, 2023
December 31, 2022
December 31, 2021
12.3 years
3.43 %
13.1 years
3.29 %
13.9 years
3.25 %
Supplemental cash information at year end related to leases was as follows:
(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
December 31, 2023
December 31, 2022
December 31, 2021
Operating cash flows from operating leases
$
7,819 $
7,824 $
ROU assets obtained in exchange for lease obligations
Operating leases
6,585
4,730
6,860
6,076
9. Operating Leases - Lessor
First Financial provides financing for various types of equipment through a operating leasing arrangements. Operating leases
are carried at cost less accumulated depreciation in the Consolidated Balance Sheets. Operating leases were $153.2 million and
$91.7 million at December 31, 2023 and December 31, 2022, respectively, net of accumulated depreciation of $62.1 million and
$35.0 million at December 31, 2023 and December 31, 2022, respectively. The Company recorded lease income of
$39.8 million and $24.5 million related to lease payments for operating leases in leasing business income in the Consolidated
Statements of Income for the years ended December 31, 2023 and 2022, respectively. Depreciation expense related to
operating lease equipment was $32.5 million and $20.4 million for the years ended December 31, 2023 and 2022, respectively.
First Financial performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate
that their carrying values may not be recoverable. First Financial recognized no impairment losses associated with operating
lease assets for the twelve months ended December 31, 2023 or 2022. Recognized impairment losses, if any, would be
recorded in Leasing business income in the Consolidated Statements of Income.
The future lease payments receivable from operating leases as of December 31, 2023 are as follows:
First Financial Bancorp 2023 Annual Report 81
(Dollars in thousands)
Undiscounted cash flows
2024
2025
2026
2027
2028
Thereafter
Total operating lease payments
10. Goodwill and Other Intangible Assets
$
$
44,105
35,091
24,871
12,718
5,682
2,863
125,330
Goodwill. Assets and liabilities acquired in a business combination are recorded at their estimated fair values as of the
acquisition date. The excess of the purchase price of the acquisition over the fair value of net assets acquired is recorded as
goodwill.
Changes in the carrying amount of goodwill for the years ended December 31, 2023, 2022 and 2021 are shown below.
(Dollars in thousands)
Balance at beginning of year
Goodwill resulting from business combinations
Balance at end of year
2023
2022
2021
$ 1,001,507
$ 1,000,749
$ 937,771
4,361
758
62,978
$ 1,005,868
$ 1,001,507
$ 1,000,749
In the first quarter of 2023, First Financial recorded $4.2 million of goodwill related to the acquisition of the assets of Brady
Ware Capital. Brady Ware Capital specializes in buy-side and sell-side consulting services for mid-sized businesses. This
acquisition is consistent with First Financial's approach of adding niche financial services to core banking capabilities and
further expands its broad service offerings. In May 2023, First Financial also acquired Brady Ware Corporate Finance, a
broker-dealer and member of FINRA. First Financial recorded $0.1 million of goodwill in connection with the acquisition of
Brady Ware Corporate Finance. The fair value measurements of Brady Ware assets and liabilities are subject to refinement for
up to one year after the closing date of the acquisition as additional information relative to closing date fair values become
available, and the measurement period ends in January 2024 for Brady Ware Capital. The measurement period for recording
adjustments to the fair value of assets and liabilities ends in May 2024 for Brady Ware Corporate Finance.
In December 2021, First Financial recorded $63.0 million of goodwill resulting from the acquisition of Summit Funding Group,
Inc. During 2022, First Financial recorded adjustments of $0.8 million to goodwill from the Summit merger. First Financial
recorded its final adjustments to goodwill related to the Summit merger in the fourth quarter of 2022.
Goodwill is evaluated for impairment on an annual basis as of October 1 of each year, or whenever events or changes in
circumstances indicate that the fair value of a reporting unit may be below its carrying value. First Financial performed its most
recent annual qualitative impairment test as of October 1, 2023 and no impairment was indicated. As of December 31, 2023, no
events or changes in circumstances indicated that the fair value of the reporting unit was below its carrying value.
Other intangible assets. Other intangible assets consist primarily of core deposit intangibles, customer list, mortgage servicing
rights and other miscellaneous intangibles, such as purchase commissions, non-compete agreements and trade name intangibles.
Core deposit intangibles represent the estimated fair value of acquired customer deposit relationships on the date of acquisition
and are amortized on an accelerated basis over their estimated useful lives. First Financial's core deposit intangibles have an
estimated weighted average remaining life of 4.3 years.
First Financial recorded a customer list intangible asset in conjunction with the Summit acquisition to account for the obligation
or advantage on the part of either the Company or the customer to continue the pre-existing relationship subsequent to the
merger. The Summit customer list intangible asset is being amortized on a straight-line basis over its estimated useful life of 12
years and was $25.1 million and $27.6 million at December 31, 2023 and December 31, 2022, respectively. Additionally, First
82 First Financial Bancorp 2023 Annual Report
Financial recorded a customer list intangible asset in conjunction with the Bannockburn acquisition which is being amortized
on a straight-line basis over its estimated useful life of 11 years and was $23.9 million and $27.5 million at December 31, 2023
and December 31, 2022, respectively.
Mortgage servicing rights represent the value of servicing fees First Financial expects to receive from the servicing
responsibilities it retained when selling fixed and adjustable-rate residential mortgage loans. In those sales, First Financial
retained servicing responsibilities and provided certain standard representations and warranties; however, the investors have no
recourse to the Company’s other assets for failure of debtors to pay when due. First Financial receives servicing fees based on
a percentage of the outstanding balance. When First Financial sells mortgage loans with servicing rights retained, these
servicing rights are initially recorded at fair value. First Financial has selected the “amortization method” as permissible within
U.S. GAAP, whereby the servicing rights capitalized are amortized in proportion to and over the period of estimated future
servicing income with respect to the underlying loan. At the end of each reporting period, the carrying value of MSRs is
assessed for impairment with a comparison to fair value. MSRs are carried at the lower of their amortized cost or fair value.
The amortization of MSRs is included within other noninterest income in the Consolidated Statements of Income.
Amortization expense recognized on intangible assets for 2023, 2022 and 2021 was $13.4 million, $14.3 million and $14.1
million, respectively, which includes MSR amortization of $3.0 million, $3.1 million and $4.3 million, respectively.
The gross carrying amount and accumulated amortization of other intangible assets were as follows:
(Dollars in thousands)
Amortized intangible assets
Core deposit intangibles
Customer list
Other
Mortgage servicing rights
Total
December 31, 2023
December 31, 2022
Gross
carrying
amount
Accumulated
amortization
Gross
carrying
amount
Accumulated
amortization
$
41,750
$
(29,395) $
41,750
$
69,563
10,960
23,791
(20,553)
(5,477)
(6,690)
69,563
14,079
21,347
(26,488)
(14,457)
(7,064)
(4,811)
$
146,064
$
(62,115) $
146,739
$
(52,820)
The estimated amortization expense of intangible assets for the next five years is as follows:
(Dollars in thousands)
2024
2025
2026
2027
2028
Intangible
amortization
$
9,193
9,145
9,092
9,051
6,842
First Financial Bancorp 2023 Annual Report 83
11. Deposits
Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2023 and 2022 were $300.1 million
and $165.1 million, respectively.
Scheduled maturities of all time deposits for the next five years were as follows:
(Dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
Total
12. Borrowings
Time
deposits
$ 2,441,560
225,140
33,439
12,371
5,612
268
$ 2,718,390
Short-term borrowings, or borrowings that mature in less than one year, on the Consolidated Balance Sheets include repurchase
agreements utilized for corporate sweep accounts with cash management account agreements in place, federal funds purchased,
overnight advances from the FHLB and a short-term line of credit.
The following is a summary of short-term borrowings for the last three years:
(Dollars in thousands)
At December 31,
Federal funds purchased and securities sold
under agreements to repurchase
FHLB borrowings
Other short-term borrowings
Total
Average for the year
Federal funds purchased and securities sold
under agreements to repurchase
FHLB borrowings
Other short-term borrowings
Total
2023
2022
2021
Amount
Rate
Amount
Rate
Amount
Rate
$
0
800,000
137,814
$ 937,814
0.00 % $
0
5.47 % 1,130,000
5.33 % 157,156
5.45 % $ 1,287,156
0.00 % $ 51,203
4.58 % 225,000
20,000
4.33 %
4.55 % $ 296,203
0.01 %
0.18 %
1.90 %
0.27 %
$ 15,583
845,666
158,221
$ 1,019,470
5.25 % $ 29,526
5.25 % 672,928
5.18 % 115,041
5.24 % $ 817,495
1.42 % $ 160,967
43,371
2.37 %
165
2.38 %
2.34 % $ 204,503
0.07 %
0.20 %
1.92 %
0.10 %
All repurchase agreements are subject to terms and conditions agreed to by the Bank and the client. To secure its liability to the
client, the Bank is authorized to sell or repurchase U.S. Treasury, government agency and mortgage-backed securities. As of
both December 31, 2023 and 2022, the Bank had no securities sold under agreements to repurchase.
First Financial had outstanding FHLB advances included in short-term borrowings of $800.0 million as of December 31, 2023
and $1.1 billion outstanding short-term FHLB advances as of December 31, 2022. Additionally, at December 31, 2023 and
2022, other short-term borrowings included $137.8 million and $157.2 million, respectively, of collateral owed to counterparty
banks by First Financial.
First Financial Bancorp 2021 Annual Report 84
First Financial also has a $40.0 million short-term credit facility with an unaffiliated bank that matures in December, 2024,
which is included in short-term borrowings. This facility has a variable interest rate and provides First Financial additional
liquidity, if needed, for various corporate activities including the repurchase of First Financial common stock and the payment
of dividends to shareholders. As of both December 31, 2023 and December 31, 2022, First Financial had no outstanding
balance. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality
and capital levels, and First Financial was in compliance with all covenants associated with this facility as of both
December 31, 2023 and December 31, 2022. This credit facility also required First Financial to pledge as collateral the Bank's
common stock where the lender is granted a security interest in this collateral.
The following is a summary of First Financial's long-term debt:
(Dollars in thousands)
Subordinated debt
Unamortized debt issuance costs
Notes issued in conjunction with acquisition of property and
equipment
Capital lease liability
Capital loan with municipality
Total long-term debt
2023
2022
Amount
Average Rate
Amount
$
314,163
(1,613)
5.60 % $
n/a
313,705
(1,998)
Average Rate
5.48 %
n/a
29,179
1,611
775
344,115
$
4.40 %
3.84 %
0.00 %
5.51 % $
32,492
1,698
775
346,672
4.44 %
3.82 %
0.00 %
5.40 %
As of December 31, 2023, First Financial's long-term debt matures as follows:
(Dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
Total
Long-term
debt
$
$
6,773
2,988
5,355
6,579
2,620
319,800
344,115
In 2015, First Financial issued $120.0 million of subordinated notes, which have a fixed interest rate of 5.13% payable
semiannually and mature in August 2025. These notes are not redeemable by the Company or callable by the holders of the
notes prior to maturity. Subordinated notes are included in Long-term debt on the Consolidated Balance Sheets and treated as
Tier 2 capital for regulatory capital purposes, subject certain limitations. When subordinated notes are within five years of
maturity, the tier 2 capital eligibility reduces by 20% each year. This subordinated debt issued is eligible to be treated as Tier 2
capital for 20% of its original issuance amount at December 31, 2023 for regulatory capital purposes.
In April 2020, First Financial issued $150.0 million of fixed to floating rate subordinated notes. The subordinated notes have
an initial fixed interest rate of 5.25% to, but excluding, May 15, 2025, payable semi-annually in arrears. From, and including,
May 15, 2025, the interest rate on the subordinated notes will reset quarterly to a floating rate per annum equal to a benchmark
rate, which is expected to be the then-current three-month term SOFR, plus 509 basis points, payable quarterly in arrears. The
subordinated notes mature on May 15, 2030. These notes are redeemable by the Company in whole or in part beginning with
the interest payment date of May 15, 2025. This subordinated debt issued in April 2020 that matures in May 2030, is eligible to
be treated as Tier 2 capital for 100% of its original issuance amount at December 31, 2023 for regulatory capital purpose.
In addition, First Financial acquired $49.5 million of variable rate subordinated notes in the MSFG merger that were issued to
previously formed trusts in exchange for the trust proceeds. These notes were recorded at fair value at the date of the MSFG
merger and the Consolidated Balance Sheets include $44.2 million and $43.7 million for these notes at December 31, 2023 and
December 31, 2022, respectively. Interest on the acquired subordinated notes is payable quarterly, in arrears, and the Company
has the option to defer interest payments for a period not to exceed 20 consecutive quarters. These acquired subordinated notes
mature 30 years after the date of original issuance and may be called at par following the 5 year anniversary of issuance. These
variable rate subordinated notes are treated as Tier 1 capital for regulatory capital purposes.
First Financial Bancorp 2023 Annual Report 85
Notes to Consolidated Financial Statements
Additionally, long-term borrowings also included $29.2 million and $32.5 million of term notes, both with and without
recourse, with an average interest rate of 4.40% and 4.44% at December 31, 2023 and 2022, respectively. These term notes
were used to finance Summit's equity investment in the purchase of equipment to be leased to customers.
FHLB advances, both short-term and long-term, must be collateralized with qualifying assets, typically certain commercial and
residential real estate loans, as well as certain government and agency securities. For ease of borrowing execution, First
Financial utilizes a blanket collateral agreement with the FHLB, and at December 31, 2023, had collateral pledged with a book
value of $6.2 billion.
13. Derivatives
First Financial maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce
certain risks related to interest rate, prepayment and foreign currency volatility. Additionally, First Financial holds derivative
instruments for the benefit of its commercial customers and for other business purposes. The Company does not enter into
unhedged speculative derivative positions. The Company’s interest rate risk management strategy involves modifying the
repricing characteristics of certain financial instruments so that changes in interest rates do not adversely affect First Financial’s
net interest margin and cash flows. Derivative instruments that the Company may use as part of its interest rate risk
management strategy include interest rate caps, floors, swaps, and foreign exchange contracts, to meet the needs of its clients
while managing the interest and currency rate risk associated with certain transactions. First Financial may also utilize interest
rate swaps to manage the interest rate risk profile of the Company. These derivatives are reported within Accumulated other
comprehensive income (loss).
Interest rate payments are exchanged with counterparties based on the notional amount established in the interest rate
agreement. As only interest rate payments are exchanged, the cash requirements and credit risk associated with interest rate
swaps are significantly less than the notional amount and the Company’s credit risk exposure is limited to the market value of
the instruments. First Financial does not use derivatives for speculative purposes.
First Financial manages this market value credit risk through counterparty credit policies including a review of total derivative
notional position to total assets, total credit exposure to total capital and counterparty credit exposure risk.
For discussion of First Financial's accounting for derivative instruments, see Note 1 – Summary of Significant Accounting
Policies.
Interest rate client derivatives. First Financial utilizes interest rate swaps as a means to offer commercial borrowers fixed rate
funding while providing the Company with floating rate assets. These derivatives are classified as free-standing instruments
with the revaluation gain or loss recorded in Client derivative fees in the Consolidated Statements of Income. While these
derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.
At December 31, 2023, for interest rate derivatives, the Company had a total counterparty notional amount outstanding of $2.2
billion, spread among six counterparties, with an estimated fair value of $95.7 million. At December 31, 2022, the Company
had interest rate derivatives with a total counterparty notional amount outstanding of $2.2 billion, spread among six
counterparties, with an estimated fair value of $145.8 million.
First Financial monitors its derivative credit exposure to borrowers by monitoring the creditworthiness of the related loan
customers through the Company's normal credit review processes. Additionally, the Company's monitors derivative credit risk
exposure related to problem loans through the its ACL committee. First Financial considers the market value of a derivative
instrument to be part of the carrying value of the related loan for these purposes as the borrower is contractually obligated to
pay First Financial this amount in the event the derivative contract is terminated.
In connection with its use of derivative instruments, First Financial and its counterparties may be required to post cash collateral
to offset the market position of the derivative instruments. First Financial maintains the right to offset these derivative positions
with the collateral posted against them by or with the relevant counterparties.
Foreign Exchange Contracts. First Financial may enter into foreign exchange derivative contracts for the benefit of
commercial customers to hedge their exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from
interest rate derivative contracts, First Financial also enters into foreign exchange contracts with major financial institutions to
economically hedge a substantial portion of the exposure from client driven foreign exchange activity. These derivatives are
86 First Financial Bancorp 2023 Annual Report
classified as free-standing instruments with the revaluation gain or loss recorded in Foreign exchange income in the
Consolidated Statements of Income. The Company has risk limits and internal controls in place to help ensure excessive risk is
not being taken when providing this service to customers. These controls include a determination of currency volatility and
credit equivalent exposure on these contracts. At December 31, 2023, the Company had total counterparty notional amount
outstanding of $7.0 billion spread among five counterparties, with an estimated fair value of $23.9 million related to foreign
exchange contracts, which is included in Accrued interest and other liabilities in the Consolidated Balance Sheets. At
December 31, 2022, the Company had total counterparty notional amounts outstanding of $7.7 billion spread among five
counterparties, with an estimated fair value of $17.3 million.
In connection with its use of foreign exchange contracts, First Financial and its counterparties may be required to post cash
collateral to offset the market position of the derivative instruments. First Financial maintains the right to offset these
derivative positions with the collateral posted against them by or with the relevant counterparties.
Cash Flow Hedges. In 2023, First Financial entered into interest rate collars and floors, which are designated as cash flow
hedges. These cash flow hedges are utilized to mitigate interest rate risk on variable-rate commercial loan pools. As of
December 31, 2023, the hedges were determined to be effective during the period and are expected to remain effective during
the remaining terms. Changes in the fair value of cash flow hedges included in the assessment of hedge effectiveness are
recorded in AOCI and reclassified from AOCI to current period earnings when the hedged item affects earnings. Reclassified
gains and losses on interest rate contracts related to commercial and industrial loans are recorded within interest income in the
Consolidated Statements of Income.
The structure of the interest rate collars is such that First Financial pays the counterparty an incremental amount if the collar
index exceeds the cap rate. Conversely, First Financial receives an incremental amount if the index is below the floor rate. No
payments are required if the collar index is between the cap and floor rates.
The structure of First Financial's interest rate floors is such that First Financial receives an incremental amount if the index falls
below the floor strike rate. No payments are required if the index remains above the floor strike rate.
The notional value of the Company's cash flow hedges was $1.0 billion as of December 31, 2023, with the $3.8 million change
in the fair value recorded in AOCI in the Consolidated Balance Sheet. There were no cash flow hedges outstanding at
December 31, 2022. As of December 31, 2023, the maximum length of time over which the Company is hedging its exposure
to the variability in future cash flows is 60 months. It is estimated that $0.7 million will be reclassified from OCI to interest
income during the next 12 months.
The effect of derivative instruments in cash flow hedging relationships on the Consolidated Statements of Income were as
follows:
(Dollars in thousands)
Derivatives in Cash Flow Hedging
Relationship
Interest rate contracts
Location of Gain or (Loss)
Reclassified from AOCI into income
Interest income/(expense)
Twelve months ended
December 31, 2023
Gain (loss)
recognized in
AOCI on
Derivatives
Gain (loss)
reclassified in
AOCI on
Derivatives
$
(3,755) $
237
The following table details the classification and amounts of interest rate derivatives, foreign exchange contracts and cash flow
hedges recognized in the Consolidated Balance Sheets:
First Financial Bancorp 2023 Annual Report 87
Notes to Consolidated Financial Statements
(Dollars in thousands)
Derivatives not designated as qualifying hedging instruments
Client derivatives-instruments associated with loans (3)
Matched interest rate swaps with borrower
Matched interest rate swaps with counterparty
Foreign exchange contracts (4)
December 31, 2023
December 31, 2022
Estimated fair value
Estimated fair value
Notional
amount
Gain (1)
Loss (2)
Notional
amount
Gain (1)
Loss (2)
$ 2,172,714
$
13,232
$ (104,343) $ 2,206,351
$
5,057
$ (147,759)
2,172,714
104,092
(13,232)
2,206,351
147,759
(5,057)
Matched foreign exchange contracts with customers
Matched foreign exchange contracts with counterparty
7,021,569
6,972,870
84,731
60,825
(60,825)
7,734,395
111,078
(93,804)
(84,731)
7,681,006
93,804
(111,078)
Derivatives not designated as qualifying hedging instruments
18,339,867
262,880
(263,131)
19,828,103
357,698
(357,698)
Derivatives designated as qualifying hedging instruments
Cash flow hedges (5)
Interest rate collars and floors on loan pools
Total derivatives designated as qualifying hedging instruments
Total
1,000,000
1,000,000
0
0
(6,896)
(6,896)
0
0
0
0
0
0
$ 19,339,867
$ 262,880
$ (270,027) $ 19,828,103
$ 357,698
$ (357,698)
(1) Derivative assets are included in Accrued interest and other assets in the Consolidated Balance Sheets.
(2) Derivative liabilities are included in Accrued interest and other liabilities in the Consolidated Balance Sheets.
(3) Changes in fair value are included in Client derivative fees in the Consolidated Statements of Income.
(4) Changes in fair value are included in Foreign exchange income in the Consolidated Statements of Income.
(5) Changes in fair value are included in Accumulated comprehensive income in the Consolidated Balance sheets.
The following table discloses the gross and net amounts of client derivatives and foreign exchange contracts recognized in the
Consolidated Balance Sheets:
December 31, 2023
December 31, 2022
Gross amounts
of recognized
liabilities
Gross amounts
offset in the
Consolidated
Balance Sheets
Net amounts of
(assets)/
liabilities
presented in
the
Consolidated
Balance Sheets
Gross amounts
of recognized
liabilities
Gross amounts
offset in the
Consolidated
Balance Sheets
Net amounts of
(assets)/
liabilities
presented in
the
Consolidated
Balance Sheets
(Dollars in thousands)
Client derivatives
Matched interest rate swaps
$
117,324 $
(270,678) $
(153,354) $
152,816 $
(314,048) $
(161,232)
Foreign exchange contracts with counterparty
145,556
(55,959)
(6,896)
4,886
89,597
(2,010)
204,882
(101,945)
102,937
0
0
0
$
255,984 $
(321,751) $
(65,767) $
357,698 $
(415,993) $
(58,295)
Cash flow hedges
Total
88 First Financial Bancorp 2023 Annual Report
The following table details the derivative financial instruments and the average remaining maturities at December 31, 2023:
(Dollars in thousands)
Interest rate contracts
Receive fixed, matched interest rate swaps with borrower
Pay fixed, matched interest rate swaps with counterparty
Foreign exchange contracts
Foreign exchange contracts - pay USD
Foreign exchange contracts - receive USD
Total client derivatives
Cash flow hedges
Interest rate collars and floors on loan pools
Total cash flow hedges
Total client derivatives
Notional
amount
Average
maturity
(years)
Fair
value
$
2,172,714
2,172,714
7,021,569
6,972,870
18,339,867
1,000,000
1,000,000
$ 19,339,867
4.7
4.7
0.6
0.6
1.6
3.5
3.5
1.7
$
(91,111)
90,860
23,906
(23,906)
(251)
(6,896)
(6,896)
(7,147)
$
At December 31, 2023, derivative collateral owed by the Company to counterparty banks was $116.2 million with
$21.6 million restricted within cash and due from banks on the Company's Consolidated Balance Sheets and $137.8 million
recorded in short-term borrowings. Derivative collateral owed by the Company to counterparty banks at December 31, 2022
was $132.2 million with $25.0 million restricted within cash and due from banks and $157.2 million recorded in short-term
borrowings.
Credit derivatives. In conjunction with participating interests in commercial loans, First Financial periodically enters into risk
participation agreements with counterparties whereby First Financial assumes or sells a portion of the credit exposure
associated with an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will
either make a payment or receive a payment from the counterparty if the loan customer defaults on its obligation to perform
under the interest rate swap contract. The total notional value of the purchased risk agreements totaled $232.5 million as of
December 31, 2023 and $246.8 million as of December 31, 2022. The total notional value of the sold risk agreements totaled
$109.2 million as of December 31, 2023 and $132.5 million as of December 31, 2022. The net fair value of these agreements is
recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets and was $0.1 million at December 31,
2023 and insignificant at December 31, 2022.
Mortgage Derivatives. First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans
to third party investors, which are considered derivatives. When borrowers secure an IRLC with First Financial and the loans
are intended to be sold, First Financial will enter into forward commitments for the future delivery of the loans to third party
investors in order to hedge against the effect of changes in interest rates impacting IRLCs and and loans held for sale. At
December 31, 2023, the notional amount of the IRLCs was $25.2 million and the notional amount of forward commitments was
$25.5 million. As of December 31, 2022, the notional amount of IRLCs was $12.0 million and the notional amount of forward
commitments was $15.3 million. The fair value of these agreements was $0.3 million at December 31, 2023 and $0.1 million at
December 31, 2022 and was recorded in Accrued interest and other assets on the Consolidated Balance Sheets. The impact of
these derivatives on Net gain on sale of loans in the Consolidated Statements of Income was a $0.7 million and $4.3 million
gain for the years ended December 31, 2023 and 2022, respectively and a $3.3 million loss for the year ended December 31,
2021.
14. Commitments and Contingencies
First Financial offers a variety of financial instruments including letters of credit and outstanding commitments to extend credit
to assist clients in meeting their requirement for liquidity and credit enhancement. GAAP does not require these financial
instruments to be recorded in the Consolidated Financial Statements.
First Financial utilizes the same credit policies in issuing commitments and conditional obligations as it does for credit
instruments recorded on the Consolidated Balance Sheets. First Financial’s exposure to credit loss in the event of
nonperformance by the counterparty is represented by the contractual amounts of those instruments. First Financial estimates
First Financial Bancorp 2023 Annual Report 89
Notes to Consolidated Financial Statements
credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend
credit, unless that obligation is unconditionally cancellable by the Company in accordance with ASC 326. The estimate
includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments
expected to be funded over its estimated useful life consistent with the Company's ACL methodology for loans and leases.
Adjustments to the reserve for unfunded commitments are recorded in Provision for credit losses - unfunded commitments in
the Consolidated Statements of Income. First Financial had $18.4 million of reserves for unfunded commitments recorded in
Accrued interest and other liabilities on the Consolidated Balance Sheets as of both December 31, 2023 and 2022.
Loan commitments. Loan commitments are agreements to extend credit to a client absent any violation of conditions
established in the commitment agreement. Commitments generally have fixed expiration dates or other termination clauses and
may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed
necessary by First Financial upon extension of credit, is based on management’s credit evaluation of the client. The collateral
held varies, but may include securities, real estate, inventory, plant or equipment. First Financial had commitments outstanding
to extend credit, totaling $4.5 billion and $4.4 billion at December 31, 2023 and 2022, respectively. As of December 31, 2023,
loan commitments with a fixed interest rate totaled $108.2 million while commitments with variable interest rates totaled $4.4
billion. At December 31, 2022, loan commitments with a fixed interest rate totaled $126.3 million while commitments with
variable interest rates totaled $4.2 billion. The fixed rate loan commitments have interest rates ranging from 0.00% to 21.00%
and maturities ranging from less than 1 year to 31.6 years for both December 31, 2023 and 2022.
The following table presents by type First Financial's loan balances and contractual obligations to extend credit:
(dollars in thousands)
Commercial & industrial
Lease financing
Construction real estate
Commercial real estate-investor
Commercial real estate-owner
Residential real estate
Home equity
Installment
Credit card
Total
December 31, 2023
December 31, 2022
Unfunded
commitment
Loan balance
Unfunded
commitment
Loan balance
$
1,942,868 $
3,501,221 $
1,833,977 $
3,410,272
0
565,009
101,689
40,346
98,686
972,474
25,841
235,686
474,817
564,832
3,138,629
942,310
1,333,674
758,676
159,078
59,939
6,842
689,015
107,205
48,208
74,089
903,459
16,073
225,864
236,124
512,050
3,094,064
958,695
1,092,265
733,791
209,895
51,815
$
3,982,599 $
10,933,176 $
3,904,732 $
10,298,971
Letters of credit. Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a
client to a third party. First Financial’s letters of credit consist of performance assurances made on behalf of clients who have a
contractual commitment to produce or deliver goods or services. The risk to First Financial arises from its obligation to make
payment in the event of the client's contractual default to produce the contracted good or service to a third party. First Financial
has issued letters of credit aggregating $34.9 million and $31.5 million at December 31, 2023, and 2022, respectively.
Management conducts regular reviews of these instruments on an individual client basis.
Risk participation agreements. First Financial is a party in risk participation transactions of interest rate swaps, which had
total notional amount of $341.7 million and $379.3 million at December 31, 2023 and 2022, respectively.
Affordable housing projects and other tax credit investments. First Financial is a limited partner in several tax-advantaged
limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation
or community revitalization projects. These investments are included in Accrued interest and other assets in the Consolidated
Balance Sheets, with any unfunded commitments included in Accrued interest and other liabilities in the Consolidated Balance
Sheets. As of December 31, 2023, First Financial expects to recover its remaining investments through the use of the tax
credits that are generated by the investments.
The following table summarizes First Financial's investments in affordable housing projects and other tax credit investments.
90 First Financial Bancorp 2023 Annual Report
(Dollars in thousands)
December 31, 2023
December 31, 2022
Investment
Accounting Method
Investment
Unfunded
commitment
Investment
Unfunded
commitment
Proportional amortization
$
142,933 $
80,465 $
126,537 $
LIHTC
HTC
NMTC
Equity
Equity
Renewable energy
Equity
Total
19,798
1,938
23,981
14,043
0
1,857
17,108
2,944
11,851
$
188,650 $
96,365 $
158,440 $
70,690
11,955
0
1,689
84,334
The following tables summarize First Financial's amortization expense and tax benefit recognized in affordable housing
projects and other tax credit investments.
December 31, 2023
Twelve months ended
December 31, 2022
December 31, 2021
(Dollars in thousands)
LIHTC
HTC
NMTC
Renewable energy
Total
Amortization
expense (1)
Tax expense
(benefit)
recognized (2)
Amortization
expense (1)
Tax expense
(benefit)
recognized (2)
Amortization
expense (1)
Tax expense
(benefit)
recognized (2)
$
$
14,545 $
0
415
0
14,960 $
(14,563) $
(319)
(210)
0
(15,092) $
11,929 $
0
415
23,411
35,755 $
(11,088) $
(319)
(210)
(25,473)
(37,090) $
8,894 $
1,116
210
11,467
21,687 $
(8,581)
(263)
(210)
(12,216)
(21,270)
(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC,
NMTC, and Renewable energy tax credits is included in other noninterest expense.
(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable
energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and
deferred tax liability of the investments’ income (loss).
Contingencies/Litigation. First Financial and its subsidiaries are engaged in various matters of litigation from time to time,
and have a number of unresolved claims pending.
Like many banks, First Financial has been the subject of lawsuits relating to overdraft fees. This type of litigation is time
consuming and expensive in large part due to the amount of data to be sorted and disclosed, in some cases going back multiple
years. During the second and fourth quarters of 2021, First Financial determined that it was in its best interest to settle lawsuits
in the states of Indiana and Ohio and had signed settlement agreements that were presented to the court for approval. As such,
First Financial recorded legal settlement expenses of $7.1 million, which were recorded in Other noninterest expenses in the
Consolidated Statements of Income during 2021. For years ended December 31, 2022 and 2021, legal settlement expenses of
$3.3 million and $3.8 million were paid. No legal settlement expenses were accrued or paid in the year ended December 31,
2023.
Additionally, as part of the ordinary course of business, First Financial and its subsidiaries are parties to other litigation,
including claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security
interests in collateral, foreclosure interests that are incidental to our regular business activities and other matters. While the
ultimate liability with respect to these litigation matters and claims cannot be determined at this time, First Financial believes
that damages, if any, and other amounts relating to pending matters are not probable or cannot be reasonably estimated as of
December 31, 2023. Reserves are established for these various matters of litigation, when appropriate, under FASB ASC Topic
450, Contingencies, based in part upon the advice of legal counsel. First Financial had no reserves related to litigation matters
as of December 31, 2023 or December 31, 2022.
First Financial Bancorp 2023 Annual Report 91
Notes to Consolidated Financial Statements
15. Related Party Transactions
Outstanding balance of loans to directors, executive officers, principal holders of First Financial’s common stock and certain
related persons were as follows:
(Dollars in thousands)
Beginning balance
Additions
Deductions
Ending balance
Loans 90 days or more past due
2023
5,618
810
(3,175)
3,253
0
$
$
$
Related parties of First Financial, as defined for inclusion in the table above, were clients of, and had transactions with,
subsidiaries of First Financial during the periods noted. Similar transactions with related parties may be expected in future
periods.
16. Income Taxes
Income tax expense consisted of the following components:
(Dollars in thousands)
Current expense
Federal
State
Total current expense
Deferred expense (benefit)
Federal
State
Total deferred expense (benefit)
Income tax expense
2023
2022
2021
$
$
46,800 $
2,568
49,368
24,307 $
3,308
27,615
11,769
1,596
13,365
62,733 $
(4,399)
894
(3,505)
24,110 $
21,397
2,289
23,686
10,944
1,143
12,087
35,773
The difference between the federal income tax rates applied to income before income taxes and the effective rates were due to
the following:
(Dollars in thousands)
Income taxes computed at federal statutory rate (21%) on income before
income taxes
Benefit from tax-exempt income
Tax credits
Basis reduction on tax credit
Tax expense (benefit) of equity compensation
State income taxes, net of federal tax benefit
Affordable housing investments
Other
Income tax expense
2023
2022
2021
$
$
66,905 $
(6,165)
(15,271)
87
(418)
3,290
12,097
2,208
62,733 $
50,762 $
(5,743)
(37,331)
2,761
(154)
3,320
9,341
1,154
24,110 $
50,596
(5,613)
(21,561)
1,346
(243)
2,711
7,194
1,343
35,773
92 First Financial Bancorp 2023 Annual Report
The major components of the temporary differences that gave rise to deferred tax assets and liabilities at December 31, 2023,
and 2022, were as follows:
(Dollars in thousands)
Deferred tax assets
Allowance for credit losses
Deferred compensation
Postretirement benefits other than pension liability
Accrued stock-based compensation
Interest on nonaccrual loans
Accrued expenses
Net unrealized losses on investment securities
State net operating loss
Leasing liability
Reserve for unfunded commitments
Section 174 capitalized expense
Other
Total deferred tax assets
Deferred tax liabilities
Tax depreciation in excess of book depreciation
FHLB and FRB stock
Mortgage-servicing rights
Leasing activities
Retirement obligation
Intangible assets
Deferred loan fees and costs
Prepaid expenses
Limited partnership investments
Fair value adjustments on business combinations
Net unrealized gains on derivatives
ASU 2016-01 unrealized gain/loss-equity securities
Right of use assets
Other
Total deferred tax liabilities
Total net deferred tax asset (liability)
2023
2022
$
32,453 $
326
537
2,317
336
7,822
79,652
960
15,290
4,261
656
13,400
158,010
(7,568)
(3,911)
(3,956)
(36,940)
(9,811)
(20,789)
(2,408)
(353)
(3,062)
(5,788)
(1,130)
(2,401)
(12,868)
(3,918)
(114,903)
$
43,107 $
30,464
346
636
2,216
406
7,454
92,072
1,152
15,308
4,254
0
516
154,824
(7,172)
(3,912)
(3,825)
(12,829)
(10,197)
(18,462)
(1,638)
(645)
(312)
(6,736)
0
(2,237)
(12,911)
(3,653)
(84,529)
70,295
At December 31, 2023 and 2022, the Company had a state net operating loss carryforward from MSFG of $1.7 million and $1.5
million, respectively. This carryforward begins to expire in 2026. The Company expects to fully utilize this net operating loss
and, therefore, a valuation allowance was not required at December 31, 2023 and 2022. The acquired MSFG state net operating
loss is subject to IRC Section 382 and is limited annually.
The realization of the Company’s deferred tax assets is dependent upon the Company’s ability to generate taxable income in
future periods and the reversal of deferred tax liabilities during the same period. The Company has evaluated the available
evidence supporting the realization of its deferred tax assets and determined it is more likely than not that the assets will be
realized and thus no valuation allowance was recorded at December 31, 2023 and 2022.
The Bank’s retained earnings at December 31, 2023 and 2022 included base-year bad debt reserves of $16.1 million. Base-year
reserves are subject to recapture in the event the Bank redeems its stock, makes distributions in excess of current and
accumulated earnings and profits (as calculated for federal income tax purposes), loses its “bank” status or liquidates. The
First Financial Bancorp 2023 Annual Report 93
Notes to Consolidated Financial Statements
Bank has no intention of meeting any of the criteria for recapture. Accordingly, a deferred income tax liability of $3.4 million
has not been recorded.
At December 31, 2023, First Financial had no unrecognized tax benefits compared to $1.9 million at both December 31, 2022
and 2021. As defined by FASB ASC Topic 740-10, Income Taxes, an unrecognized tax benefit is a position that if recognized
would favorably impact the effective income tax rate in future periods. The unrecognized tax benefits in 2022 and 2021 were
related to state income tax exposures where the Company believed it was likely that, upon examination, a state may have taken
a position contrary to the position taken by First Financial. A resolution regarding the Company's uncertain tax position
resulted in partial recognition of the benefit in the second quarter of 2023. First Financial recognizes interest accrued related to
unrecognized tax benefits and penalties as income tax expense. At December 31, 2023, 2022 and 2021, the Company had no
interest or penalties recorded.
At December 31, 2023, First Financial had no unrecognized tax benefits as determined in FASB ASC Topic 740-10, Income
Taxes, that, if recognized, would favorably affect the effective income tax rate in future periods. As of both December 31, 2022
and 2021, First Financial had $1.9 million of unrecognized tax benefits, as determined in FASB ASC Topic 740-10, Income
Taxes, that, if recognized, would favorably affect the effective income tax rate in future periods. A progression of gross
unrecognized tax benefits as of December 31, 2023, 2022 and 2021 is as follows:
(Dollars in thousands)
Balance at beginning of year
Reductions for tax positions of prior years
Settlements
Balance at end of year
2023
2022
2021
$
2,386 $
2,386 $
2,386
(1,909)
(477)
0
0
0
0
$
0 $
2,386 $
2,386
First Financial and its subsidiaries are subject to U.S. federal income tax as well as state and local income tax in several
jurisdictions. Tax years prior to 2020 have been closed and are no longer subject to U.S. federal income tax examinations. Tax
years 2020 through 2023 remain open to examination by the federal taxing authority. With limited exception, First Financial is
no longer subject to state and local income tax examinations for years prior to 2019.
17. Employee Benefit Plans
Pension plan. First Financial sponsors a non-contributory defined benefit pension plan covering substantially all employees
and uses a December 31 measurement date for the plan. Plan assets were primarily invested in fixed income and equity mutual
funds. The pension plan does not directly own any shares of First Financial common stock or any other First Financial security
or product.
The investment objective of the Plan is to structure the assets to mirror the liabilities of the Plan, with the fixed income
component matching the identified near and long-term plan distributions and the equity component generating growth of capital
to meet other future Plan liabilities. The determination of the overall expected long-term return on plan assets was based on the
composition of plan assets and long-term asset class return estimates developed by the Plan advisor, as well as a consensus of
estimates from similarly managed portfolios of expected future returns.
First Financial recorded expense related to its pension plan of $3.5 million for 2023, $2.0 million for 2022 and $3.4 million for
2021. The components of net periodic benefit cost other than the service cost component are included in Other noninterest
expense while service costs are recorded as a component Salaries and employee benefits in the Consolidated Statements of
Income.
First Financial made no cash contributions to the pension plan in 2023, 2022 or 2021 and does not expect to make any
contributions in 2024.
94 First Financial Bancorp 2023 Annual Report
The following tables set forth information concerning amounts recognized in First Financial's Consolidated Balance Sheets and
Consolidated Statements of Income related to the Company's pension plan:
(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid, excluding settlement
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Benefits paid, excluding settlement
Fair value of plan assets at end of year
Amounts recognized in the Consolidated Balance Sheets
Assets
Liabilities
Net amount recognized
Amounts recognized in accumulated other comprehensive income (loss)
Net actuarial loss
Net prior service cost
Deferred tax assets
Net amount recognized
Change in accumulated other comprehensive income (loss)
Accumulated benefit obligation
December 31,
2023
2022
80,006 $
9,291
4,279
6,687
(6,830)
93,433
93,271
9,065
2,585
(16,655)
(8,260)
80,006
133,449
17,921
(6,830)
144,540
163,382
(21,673)
(8,260)
133,449
51,106
0
51,106 $
53,443
0
53,443
40,459 $
22
(9,364)
31,117 $
41,628
32
(9,637)
32,023
(906) $
11,177
92,953 $
79,236
$
$
$
$
$
$
The change in the defined benefit obligations for the period was a result of the liabilities generating gains due to a large
negative change in the interest crediting rate as well as an increase in the discount rate.
First Financial Bancorp 2023 Annual Report 95
Notes to Consolidated Financial Statements
The components of net periodic benefit cost are shown in the table that follows:
(Dollars in thousands)
Service cost
Interest cost
Expected return on assets
Amortization of prior service cost (credit)
Recognized net actuarial loss
Net periodic benefit (income) cost
$
December 31,
2022
2023
9,291 $
4,279
(10,802)
10
737
3,515
9,065 $
2,585
(10,982)
(302)
1,636
2,002
2021
9,128
2,157
(10,118)
(413)
2,611
3,365
Other changes recognized in accumulated other comprehensive income (loss)
Net actuarial (gain) loss
Prior service cost
Amortization of prior service cost
Amortization of gain
Total recognized in accumulated other comprehensive income (loss)
Total recognized in net periodic benefit cost and accumulated other
comprehensive income (loss)
(432)
0
(10)
(737)
(1,179)
16,001
0
302
(1,636)
14,667
(3,068)
0
413
(2,611)
(5,266)
$
2,336 $
16,669 $
(1,901)
The pension plan assumptions are shown in the table that follows:
Benefit obligations
Discount rate
Rate of compensation increase
Weighted average interest crediting rate
Net periodic benefit cost
Discount rate
Expected return on plan assets
Rate of compensation increase
Weighted average interest crediting rate
December 31,
2022
2021
2023
5.18 %
3.50 %
4.93 %
5.50 %
7.25 %
3.50 %
5.20 %
5.50 %
3.50 %
5.20 %
2.89 %
7.25 %
3.50 %
2.58 %
2.89 %
3.50 %
2.58 %
2.55 %
7.25 %
3.50 %
2.14 %
The fair value of the plan assets as of December 31, 2023 by asset category is shown in the table that follows:
(Dollars in thousands)
Asset Category
Cash
U. S. Government agencies
Fixed income mutual funds
Equity mutual funds
Total assets in fair value hierarchy
Collective trusts
Fair Value Measurements
Quoted Prices in
Active Markets
for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
193 $
193 $
0 $
2,751
53,022
74,301
130,267
14,273
0
53,022
74,301
127,516
0
2,751
0
0
2,751
0
Investments at fair value
$
144,540 $
127,516 $
2,751 $
0
0
0
0
0
0
0
96 First Financial Bancorp 2023 Annual Report
The fair value of the plan assets as of December 31, 2022 by asset category is shown in the table that follows:
(Dollars in thousands)
Asset Category
Cash
U. S. Government agencies
Fixed income mutual funds
Equity mutual funds
Total assets in fair value hierarchy
Collective trusts
Fair Value Measurements
Quoted Prices in
Active Markets
for
Identical Assets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
158 $
158 $
0 $
4,602
47,234
67,316
119,310
14,139
0
47,234
67,316
114,708
0
4,602
0
0
4,602
0
Investments at fair value
$
133,449 $
114,708 $
4,602 $
0
0
0
0
0
0
0
The pension plan utilizes values provided by third-party pricing vendors to price investment securities in accordance with the
fair value hierarchy of the Fair Value Topic and reviews the pricing methodologies utilized by the pricing vendors to ensure that
the fair value determination is consistent with the applicable accounting guidance.
The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement.
The following methods, assumptions and valuation techniques were used by First Financial to measure the financial assets in
the Company's pension plan.
U.S. Government and Government Agency Securities. These securities are valued using matrix pricing models developed
by a third party and consider standard input factors such as observable market data, benchmark yields, interest rate volatilities,
broker/dealer quotes, credit spreads and new issue data. Matrix pricing is widely used to value securities without solely
relying on quoted market prices for specific securities (Level 2).
Mutual funds. Mutual funds held by the pension plan are open-end mutual funds that are registered with the U.S. Securities
and Exchange Commission and are valued at the daily closing price as reported by the fund. These funds are required to
publish their daily net asset value and to transact at that price. The mutual funds held by the Plan are deemed to be actively
traded (Level 1).
Collective trusts. The collective trusts are alternative investments valued at the net asset value of units of the collective trusts.
The net asset value is used as a practical expedient to estimate fair value and is priced quarterly on a month lag. This practical
expedient would not be used if it is determined to be probable that the fund will sell the investment for an amount different
from the reported net asset value. Participant transactions (purchases and sales) may occur daily. If the plan initiates a full
redemption of the collective trusts, the issuer reserves the right to require 12 months notification in order to ensure that
securities liquidations will be carried out in an orderly business manner.
Investments measured at fair value using net asset value per share (or its equivalent) as a practical expedient have not been
classified in the fair value hierarchy. The fair value amounts presented in the hierarchy tables for such investments are intended
to permit reconciliation to the fair value of plan assets at the end of the year.
See Note 23 – Fair Value Disclosures for further information related to the framework for measuring fair value and the fair
value hierarchy.
First Financial Bancorp 2023 Annual Report 97
Notes to Consolidated Financial Statements
The following benefit payments, which reflect expected future service, are expected to be paid:
(Dollars in thousands)
2024
2025
2026
2027
2028
Thereafter
$
Expected
benefit
payments
6,184
6,994
6,772
8,137
7,645
49,048
401(k) plan. First Financial sponsors a defined contribution 401(k) plan which covers substantially all employees. Employees
may contribute up to 50% of their earnings into the plan, not to exceed applicable limitations prescribed by the Internal
Revenue Service. First Financial's contributions to the 401(k) plan are discretionary. The Company made no contributions to
the 401(k) plan during the years ended December 31, 2023, 2022 or 2021.
18. Revenue Recognition
The majority of the Company's revenues come from sources that are outside of the scope of ASU 2014-09, Revenue from
Contracts with Customers. Income sources that are outside of this standard include income earned on loans, leases, securities,
derivatives and foreign exchange, excluding spot transactions. The Company's services that fall within the scope of ASU
2014-09 are presented within Noninterest income and are recognized as revenue when the Company satisfies its obligation to
the customer. Services within the scope of this guidance include service charges on deposits, trust and wealth management
fees, bankcard income, foreign exchange spot income, gain/loss on the sale of OREO and investment brokerage fees.
Service charges on deposit accounts. The Company earns revenues from its deposit customers for transaction-based fees,
account maintenance fees and overdraft fees. Transaction-based fees, which include services such as ATM use fees, stop
payment charges, statement rendering and ACH fees, are recognized at the time the transaction is executed as that is the point in
time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance,
are earned over the course of a month, representing the period over which the Company satisfies the performance obligation.
Similarly, overdraft fees are recognized at the point in time that the overdraft occurs as this corresponds with the Company's
performance obligation. Service charges on deposit accounts are withdrawn from the customer's deposit account.
Wealth management fees. Wealth management fees are primarily asset-based, but can also include flat fees based upon a
specific service rendered, such as tax preparation services. The Company’s performance obligation is generally satisfied over
time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management
and the applicable fees. The Company does not earn performance-based incentives. Optional services such as real estate sales
and tax return preparation services are also available to existing trust and wealth management customers. The Company’s
performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, as incurred.
Wealth management fees also includes brokerage revenue. Brokerage revenue represents fees from investment brokerage
services provided to customers by a third party provider. The Company receives commissions from the third-party service
provider on a monthly basis based upon customer activity for the month. The fees are recognized monthly and a receivable is
recorded until commissions are paid the following month. Because the Company (i) acts as an agent in arranging the
relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the
customers, investment brokerage fees are presented net of related costs.
Bankcard income. The Company earns interchange fees from cardholder transactions conducted through the Visa payment
network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are
recognized concurrent with the transaction processing services provided to the cardholder. Interchange income is presented on
the Consolidated Statements of Income net of expenses. Gross interchange income for 2023 was $29.7 million, and was
partially offset by $15.7 million of expenses within Noninterest income. Gross interchange income for 2022 was $29.5 million,
and was partially offset by $15.1 million of expenses within Noninterest income, while gross interchange income for 2021 was
$27.9 million, and was partially offset by $13.6 million of expenses within Noninterest income.
98 First Financial Bancorp 2023 Annual Report
Foreign exchange income. Foreign exchange income includes both spot and forward income in First Financial's Consolidated
Statements of Income. Forward income is excluded from the scope of ASU 2019-04, however, spot income is within the scope
of the guidance. A foreign exchange spot trade is a trade made for immediate exchange and delivery of the currency, thus
satisfying the performance obligation. Income from foreign exchange spot trades was $9.8 million, $7.3 million and
$6.5 million for 2023, 2022 and 2021, respectively.
Other. Other noninterest income includes other recurring revenue streams such as transaction fees, safe deposit rental income,
insurance commissions, merchant referral income and gain (loss) on sale of OREO. Transaction fees primarily include check
printing sales commissions, collection fees and wire transfer fees which arise from in-branch transactions. Safe deposit rental
income arises from fees charged to the customer on an annual basis and recognized upon receipt of payment. Insurance
commissions are agent commissions earned by the Company and earned upon the effective date of the bound coverage.
Merchant referral income is associated with a program whereby the Company receives a share of processing revenue that is
generated from clients that were referred by First Financial to the service provider. Revenue is recognized at the time when the
transaction occurs.
The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally
occurs at the time of the executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses
whether the buyer is committed to perform their obligations under the contract and whether collectibility of the transaction price
is probable. Once these criteria are met, the OREO asset is removed and the gain or loss on sale is recorded upon the transfer of
control of the property to the buyer.
19. Accumulated Other Comprehensive Income (Loss)
Shareholders’ equity is affected by transactions and valuations of asset and liability positions that require adjustments to
accumulated other comprehensive income (loss). The related tax effects allocated to other comprehensive income and
accumulated other comprehensive income (loss) are as follows:
December 31, 2023
Total other comprehensive income (loss)
Prior to
reclass
Reclass
from
Pre-tax
Tax effect
Net of tax
Total accumulated
other comprehensive income (loss)
Beginning
balance
Net activity
Ending
balance
$
55,129 $
(1,258) $
56,387 $
(12,420) $
43,967 $ (325,925) $
43,967 $ (281,958)
4,648
432
216
(237)
(747)
0
4,885
1,179
216
(1,130)
3,755
0
3,755
3,755
(273)
0
906
216
(32,023)
(715)
906
216
(31,117)
(499)
(Dollars in thousands)
Unrealized gain (loss) on debt
securities
Unrealized gain (loss) on
derivatives
Retirement obligation
Foreign currency translation
Total
$
60,425 $
(2,242) $
62,667 $
(13,823) $
48,844 $ (358,663) $
48,844 $ (309,819)
December 31, 2022
Total other comprehensive income (loss)
Prior to
reclass
Reclass
from
Pre-tax
Tax-effect
Net of tax
Total accumulated other
comprehensive income (loss)
Beginning
Balance
Net Activity
Ending
Balance
$
(444,257) $
569 $ (444,826) $ 97,863 $
(346,963) $ 21,038
$
(346,963) $
(325,925)
(Dollars in thousands)
Unrealized gain (loss) on debt
securities
Retirement obligation
(16,000)
(1,334)
(14,666)
3,489
(11,177)
(20,846)
(11,177)
(32,023)
Foreign currency translation
(90)
0
(90)
0
(90)
(625)
(90)
(715)
Total
$
(460,347) $
(765) $ (459,582) $ 101,352 $
(358,230) $
(433) $
(358,230) $
(358,663)
First Financial Bancorp 2023 Annual Report 99
Notes to Consolidated Financial Statements
December 31, 2021
Total other comprehensive income (loss)
Prior to
reclass
Reclass
from
Pre-tax
Tax-effect
Net of tax
Total accumulated other
comprehensive income (loss)
Beginning
Balance
Net Activity
Ending
Balance
$
(67,759) $
(759) $
(67,000) $
14,462 $
(52,538) $
73,576 $
(52,538) $
21,038
3,068
(625)
(2,198)
0
5,266
(625)
(1,200)
4,066
(24,912)
4,066
(20,846)
0
(625)
0
(625)
(625)
(Dollars in thousands)
Unrealized gain (loss) on debt
securities
Retirement obligation
Foreign currency translation
Total
$
(65,316) $
(2,957) $
(62,359) $
13,262 $
(49,097) $
48,664 $
(49,097) $
(433)
The following table details the activity reclassified from accumulated other comprehensive income into income during the
period:
(Dollars in thousands)
Gain and loss on cash flow hedges
Amount Reclassified from Accumulated Other
Comprehensive Income (1)
December 31,
2023
2022
2021
Affected Line Item in the Consolidated
Statements of Income
Interest rate contracts
$
(237) $
0
$
0
Interest expense - deposits
Realized gains and losses on securities available-for-sale
(1,258)
Defined benefit pension plan
Amortization of prior service cost (2)
Recognized net actuarial loss (2)
(10)
(737)
569
302
(759)
Net gain (loss) on sales/transfers of
investment securities
413 Other noninterest expense
(1,636)
(2,611) Other noninterest expense
Amortization and settlement charges of defined
benefit pension items
(747)
(1,334)
(2,198)
Total reclassifications for the period, before tax
$
(2,242) $
(765) $
(2,957)
(1) Negative amounts are debits to profit/loss.
(2) Included in the computation of net periodic pension cost (see Note 17 - Employee Benefit Plans for additional details)
20. Capital
Risk-based capital. First Financial and its subsidiary, First Financial Bank, are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action
regulations involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to
meet minimum capital requirements can initiate regulatory action.
The Board of Governors of the Federal Reserve System approved Basel III in order to strengthen the regulatory capital
framework for all banking organizations, subject to a phase-in period for certain provisions. Basel III established and defined
quantitative measures to ensure capital adequacy. These measures require First Financial to maintain minimum amounts and
ratios of Common equity Tier 1 capital, Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets
(Leverage ratio).
Basel III includes a minimum ratio of Common equity Tier 1 capital to risk-weighted assets of 7.0% and a fully phased-in
capital conservation buffer of 2.5% of risk-weighted assets. Further, the minimum ratio of Tier 1 capital to risk-weighted assets
is 8.5% and all banks are subject to a 4.0% minimum leverage ratio, while the required Total risk-based capital ratio is 10.50%.
Failure to maintain the required Common equity Tier 1 capital will result in potential restrictions on a bank’s ability to pay
dividends, repurchase stock and pay discretionary compensation to its employees. The capital requirements also provide strict
eligibility criteria for regulatory capital instruments and change the method for calculating risk-weighted assets in an effort to
better identify riskier assets, such as highly volatile commercial real estate and nonaccrual loans.
As of December 31, 2023, First Financial met all capital adequacy requirements to which it was subject. To be categorized as
well-capitalized, First Financial must maintain minimum Total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage
100 First Financial Bancorp 2023 Annual Report
ratios as set forth in the table that follows. The Company's most recent regulatory notifications categorized First Financial as
"well-capitalized" under the regulatory framework for prompt corrective action. There have been no conditions or events since
those notifications that management believes have changed the Company's categorization. Total regulatory capital exceeded
the minimum requirement by $416.0 million on a consolidated basis at December 31, 2023.
The following tables present the actual and required capital amounts and ratios as of December 31, 2023 and 2022 under the
Basel III Capital Rules. Capital levels required to be considered "well capitalized" are based upon prompt corrective action
regulations, as reflected in the Basel III Capital Rules.
(Dollars in thousands)
December 31, 2023
Common equity tier 1 capital to risk-weighted assets
Actual
Minimum capital
required - Basel III
PCA requirement to be
considered well
capitalized
Capital
amount
Ratio
Capital
amount
Ratio
Capital
amount
Ratio
Consolidated
First Financial Bank
$ 1,568,815
1,701,338
11.73 % $ 936,192
935,746
12.73 %
N/A
7.00 %
7.00 % $ 868,907
N/A
6.50 %
Tier 1 capital to risk-weighted assets
Consolidated
First Financial Bank
Total capital to risk-weighted assets
Consolidated
First Financial Bank
Leverage
Consolidated
First Financial Bank
(Dollars in thousands)
December 31, 2022
Common equity tier 1 capital to risk-weighted assets
1,613,480
1,701,840
12.06 % 1,136,805
12.73 % 1,136,263
N/A
8.50 %
8.50 % 1,069,424
N/A
8.00 %
1,820,285
1,743,521
13.61 % 1,404,289
13.04 % 1,403,619
N/A
10.50 %
10.50 % 1,336,780
N/A
10.00 %
1,613,480
1,701,840
9.70 %
10.24 %
665,125
664,781
4.00 %
4.00 %
N/A
830,976
N/A
5.00 %
Actual
Minimum capital
required - Basel III
PCA requirement to be
considered well
capitalized
Capital
amount
Ratio
Capital
amount
Ratio
Capital
amount
Ratio
Consolidated
First Financial Bank
$ 1,399,420
10.83 % $ 904,626
7.00 %
N/A
N/A
1,581,328
12.26 %
903,244
7.00 % $ 838,726
6.50 %
Tier 1 capital to risk-weighted assets
Consolidated
First Financial Bank
Total capital to risk-weighted assets
Consolidated
First Financial Bank
Leverage
Consolidated
First Financial Bank
1,443,698
11.17 % 1,098,475
8.50 %
N/A
N/A
1,581,900
12.26 % 1,096,796
8.50 % 1,032,278
8.00 %
1,691,255
13.09 % 1,356,939
10.50 %
N/A
N/A
1,640,671
12.71 % 1,354,865
10.50 % 1,290,348
10.00 %
1,443,698
8.89 %
649,636
4.00 %
N/A
N/A
1,581,900
9.76 %
648,607
4.00 %
810,759
5.00 %
First Financial Bancorp 2023 Annual Report 101
Notes to Consolidated Financial Statements
Share repurchases. The 2022 Repurchase Plan replaced the plan that expired on December 31, 2022 (the 2020 Repurchase
Plan). Under the 2022 Repurchase Plan, First Financial did not repurchase any shares during 2023 or 2022. Under the 2020
Repurchase Plan, First Financial repurchased 4,633,355 shares at an average market price of $23.33 during 2021.
Effective January 2024, First Financial's board of directors approved a stock repurchase plan (the 2024 Repurchase Plan),
replacing the 2022 Repurchase Plan which became effective in January 2022. The 2024 Repurchase Plan continues for two
years and authorizes the purchase of up to 5,000,000 shares of the Company's common stock and will expire in December 2025.
21. Stock Options and Awards
Compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation expense over
the service period for all awards expected to vest. First Financial recorded share-based compensation expense within salaries
and employee benefits on the Consolidated Statements of Income of $14.9 million, $13.4 million and $9.6 million for the years
ended December 31, 2023, 2022 and 2021, respectively, related to stock options and restricted stock awards. Total
unrecognized compensation cost related to non-vested share-based compensation was $12.7 million at December 31, 2023 and
is expected to be recognized over a weighted average period of 1.89 years.
As of December 31, 2023, First Financial had one active stock-based compensation plans, the 2020 Stock Plan, and there were
2,400,802 shares available for issuance.
In April 2018, in conjunction with the MSFG merger, First Financial assumed existing MSFG stock options, which were
converted into options to purchase 83,551 shares of First Financial common stock. The converted MSFG options remain
subject to all of the terms and conditions of the plan and grant agreements under which the MSFG Stock Options were
originally issued. The assumed options were exercisable at the time of the merger and remained outstanding for 10 years after
the initial grant date with all options expiring at the end of the exercise period. All options were exercised prior to their
expiration date of April 10, 2023. Therefore, as of December 31, 2023, no options were outstanding under the Plan.
First Financial utilizes the Black-Scholes valuation model to determine the fair value of stock options granted. In addition to
the stock option strike price, the Black-Scholes valuation model incorporates the following assumptions: the expected dividend
yield based on historical dividend payouts; the expected stock price volatility based on the historical volatility of Company
stock for a period approximating the expected life of the options; the risk-free rate based on the U.S. Treasury yield curve in
effect at the time of grant for periods corresponding with the expected life of the option; and the expected option life
represented by the period of time the options are expected to be outstanding, and is based on historical trends. No new options
were granted in 2023, 2022 or 2021.
Stock option activity for the year ended December 31, 2023, is summarized as follows:
(Dollars in thousands, except share and per share data)
Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Exercisable at end of year
Number
of shares
4,855 $
Weighted
average
exercise price
9.86
Weighted average
remaining
contractual life
Aggregate
intrinsic value
0
(4,855)
0
0 $
0 $
0.00
9.86
0.00
0
0
0.00 years $
0.00 years $
0
0
The intrinsic value of stock options is defined as the difference between the current market value and the exercise price. First
Financial uses treasury shares purchased under the Company's share repurchase program to satisfy share-based exercises.
Total intrinsic value of options exercised
Cash received from exercises
Tax benefit from exercises
102 First Financial Bancorp 2023 Annual Report
2023
2022
2021
$
$
$
71 $
48 $
208 $
177 $
114
64
3,446 $
3,095 $
2,229
Restricted stock awards are recorded at fair value as of the grant date as a component of shareholders' equity and amortized on a
straight-line basis to salaries and benefits expense over the specified vesting periods, which is currently three years for
employees and one year for non-employee directors. The vesting of these awards for employees and non-employee directors
may require a service period to be met, and certain awards may also require performance measures to be met.
Activity in restricted stock for the previous three years ended December 31 is summarized as follows:
2023
2022
2021
Number
of shares
Weighted
average
grant date
fair value
Nonvested at beginning of year
1,229,346 $
Granted
Vested
Forfeited
623,742
(728,126)
(52,931)
21.28
20.05
18.87
25.68
Number
of shares
839,733 $
945,193
(407,386)
(148,194)
Nonvested at end of year
1,072,031 $
21.75
1,229,346 $
Weighted
average
grant date
fair value
22.30
23.57
28.05
18.40
21.28
Number
of shares
763,283 $
539,020
(386,848)
(75,722)
839,733 $
Weighted
average
grant date
fair value
22.04
22.69
22.24
22.86
22.30
The fair value of restricted stock is determined based on the number of shares granted and the quoted price of First Financial's
common stock. The fair value of restricted stock vested during 2023, 2022 and 2021 was $13.7 million, $11.4 million and $8.6
million, respectively.
22. Earnings per Common Share
The following table sets forth the computation of basic and diluted earnings per share:
(Dollars in thousands, except share and per share data)
2023
2022
2021
Numerator
Net income
Denominator
$ 255,863 $ 217,612 $ 205,160
Basic earnings per common share - weighted average shares
93,938,772
93,528,712
95,034,690
Effect of dilutive securities
Employee stock awards
Diluted earnings per common share - adjusted weighted average shares
Earnings per share available to common shareholders
Basic
Diluted
1,157,295
95,096,067
1,058,139
94,586,851
862,695
95,897,385
$
$
2.72 $
2.69 $
2.33 $
2.30 $
2.16
2.14
Stock options and warrants with exercise prices greater than the average market price of the common shares are excluded from
the computation of net income per diluted share, as they would be antidilutive. Using the end of period price of the Company's
common shares, there were no antidilutive options at December 31, 2023, 2022, or 2021.
As of December 31, 2023, 2022, and 2021, First Financial was authorized to issue 10,000,000 preferred shares; however, no
preferred shares were issued or outstanding.
23. Fair Value Disclosures
The fair value framework as disclosed in the Fair Value Topic includes a hierarchy which focuses on prioritizing the inputs
used in valuation techniques. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical
First Financial Bancorp 2023 Annual Report 103
Notes to Consolidated Financial Statements
assets or liabilities (Level 1), a lower priority to observable inputs other than quoted prices in active markets for identical assets
and liabilities (Level 2) and the lowest priority to unobservable inputs (Level 3). When determining the fair value
measurements for assets and liabilities, First Financial looks to active markets to price identical assets or liabilities whenever
possible and classifies such items in Level 1. When identical assets and liabilities are not traded in active markets, First
Financial looks to observable market data for similar assets and liabilities and classifies such items as Level 2. Certain assets
and liabilities are not actively traded in observable markets and First Financial must use alternative techniques, based on
unobservable inputs, to determine the fair value and classifies such items as Level 3. The level within the fair value hierarchy is
based on the lowest level of input that is significant in the fair value measurement.
The estimated fair values of First Financial's financial instruments not measured at fair value on a recurring or nonrecurring
basis in the consolidated financial statements were as follows:
(Dollars in thousands)
December 31, 2023
Financial assets
Carrying
value
Estimated fair value
Total
Level 1
Level 2
Level 3
Cash and short-term investments
$ 1,006,019 $ 1,006,019 $ 1,006,019 $
0 $
Investment securities held-to-maturity
Other investments (1)
Loans and leases
Accrued interest receivable
80,321
20,554
71,688
20,554
10,791,743
10,468,144
72,620
72,620
0
1,194
0
0
71,688
10,040
0
0
9,320
0
10,468,144
15,697
56,923
Financial liabilities
Deposits
Short-term borrowings
Long-term debt
Accrued interest payable
(Dollars in thousands)
December 31, 2022
Financial assets
13,360,797
13,347,319
0
13,347,319
937,814
344,115
51,454
937,814
350,426
51,454
937,814
0
15,494
0
350,426
35,960
0
0
0
0
Carrying
Value
Estimated Fair Value
Total
Level 1
Level 2
Level 3
Cash and short-term investments
$
595,683 $
595,683 $
595,683 $
0 $
Investment securities held-to-maturity
Other investments (1)
Loans and leases
Accrued interest receivable
84,021
20,347
10,165,994
63,721
76,485
20,347
9,916,353
63,721
0
1,171
0
0
76,485
10,040
0
16,233
0
0
9,136
9,916,353
47,488
Financial liabilities
Deposits
Short-term borrowings
Long-term debt
Accrued interest payable
12,701,177
12,670,747
0
12,670,747
1,287,156
1,287,156
1,287,156
346,672
11,150
348,041
11,150
0
3,835
0
348,041
7,315
0
0
0
0
(1) FHLB stock and FRB stock of $109.4 million and $122.8 million as of December 31, 2023 and 2022, respectively, are excluded from the numbers above.
The following methods, assumptions and valuation techniques were used by First Financial to measure different financial assets
and liabilities at fair value on a recurring or nonrecurring basis.
Investment securities. Investment securities classified as available-for-sale are recorded at fair value on a recurring basis. Fair
value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair
104 First Financial Bancorp 2023 Annual Report
values are measured utilizing independent valuation techniques of identical or similar investment securities. First Financial
compiles prices from various sources who may apply such techniques as matrix pricing to determine the value of identical or
similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value
investment securities without relying exclusively on quoted prices for the specific investment securities but rather relying on the
investment securities’ relationship to other benchmark quoted investment securities. Any investment securities not valued
based upon the methods previously described are considered Level 3.
First Financial utilizes values provided by third-party pricing vendors to price the investment securities portfolio in accordance
with the fair value hierarchy of the Fair Value Topic and reviews the pricing methodologies utilized by the pricing vendors to
ensure that the fair value determination is consistent with the applicable accounting guidance. First Financial’s pricing process
includes a series of quality assurance activities where prices are compared to recent market conditions, historical prices and
other independent pricing services. Further, the Company periodically validates the fair value of a sample of securities in the
portfolio by comparing the fair values to prices from other independent sources for the same or similar securities. First
Financial analyzes unusual or significant variances, conducts additional research with the pricing vendor, and if necessary, takes
appropriate action based on its findings. The results of the quality assurance process are incorporated into the selection of
pricing providers by the portfolio manager.
Loans held for sale. The fair value of the Company’s residential mortgage loans held for sale is determined on a recurring
basis based on quoted prices for similar loans in active markets, and therefore, is classified as Level 2 in the fair value
hierarchy.
Derivatives. The fair values of derivative instruments are based primarily on a net present value calculation of the cash flows
related to the interest rate swaps and foreign exchange contracts at the reporting date, using primarily observable market inputs
such as interest rate yield curves, which represents the cost to terminate the swap if First Financial should choose to do so.
Additionally, First Financial utilizes an internally-developed model to value the credit risk component of derivative assets and
liabilities, which is recorded as an adjustment to the fair value of the derivative asset or liability on the reporting date.
Derivative instruments are classified as Level 2 in the fair value hierarchy.
Collateral dependent loans. Collateral dependent loans are defined as loans for which the repayment is expected to be
provided substantially through the operation or sale of the collateral when the borrowers are experiencing financial difficulty.
Collateral dependent loans are carried at fair value when the value of the operation or collateral less any costs to sell is not
sufficient to cover the remaining balance. In these instances, the loans will either be partially charged-off or receive specific
allocations of the allowance for credit losses. For collateral dependent loans, fair value is generally based on real estate
appraisals, a calculation of enterprise value or a valuation of business assets including equipment, inventory and accounts
receivable. These loans had a principal amount of $19.7 million and $11.9 million at December 31, 2023 and December 31,
2022, respectively, with a valuation allowance of $4.4 million and $3.7 million at December 31, 2023 and December 31, 2022,
respectively.
The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal
conducted by an independent, licensed third-party appraiser (Level 3). These appraisals may utilize a single valuation approach
or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely
made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income
data available. Collateral is then adjusted or discounted based on management’s historical knowledge, changes in market
conditions from the time of the valuation, and management’s expertise and knowledge of the client and the client’s business,
resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis for additional
write-downs and are adjusted accordingly.
Enterprise value is defined as imputed value for the entire underlying business. To determine an appropriate range of enterprise
value, FFB relies on a standardized set of valuation methodologies that take into account future projected cash flows, market
based multiples as well as asset values. Valuations involve both quantitative and qualitative considerations and professional
judgments concerning differences in financial and operating characteristics in addition to other factors that may impact values
over time (Level 3).
The value of business equipment is based on an outside appraisal, if deemed significant, or the net book value on the applicable
borrower financial statements. Likewise, values for inventory and accounts receivable collateral are based on borrower
financial statement balances or aging reports on a discounted basis as appropriate (Level 3).
First Financial Bancorp 2023 Annual Report 105
Notes to Consolidated Financial Statements
The fair value of collateral dependent loans is measured at fair value on a nonrecurring basis. Any fair value adjustments are
recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income.
Mortgage servicing rights. Mortgage servicing rights are evaluated for impairment based upon the fair value of the rights as
compared to the carrying amount. If the carrying amount of the servicing asset exceeds fair value, impairment is recorded so
that the servicing asset is carried at fair value. Fair value is determined based on a valuation model that calculates the present
value of estimated future net servicing income. The valuation model utilizes a discount rate of 11.50% and 12.20% for 2023
and 2022, respectively, weighted average prepayment speed of 5.92% and 3.43% for 2023 and 2022, respectively, and other
economic factors that market participants would use in estimating future net servicing income and that can be validated against
available market data.
OREO. Assets acquired through loan foreclosure are recorded at fair value less costs to sell, with any difference between the
fair value of the property and the carrying value of the loan recorded as a charge-off establishing a new cost basis. Subsequent
changes in value are reported as adjustments to the carrying amount and are recorded in noninterest expense. The carrying
value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying
value differs from the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated
at least annually. The Company classifies OREO in level 3 of the fair value hierarchy.
Operating leases. First Financial performs assessments of the recoverability of long-lived assets when events or changes in
circumstances indicate that their carrying values may not be recoverable and therefore, the carrying value of Operating leases is
re-measured at fair value on a nonrecurring basis. When evaluating whether an individual asset is impaired, First Financial
considers the current fair value of the asset, the changes in overall market demand for the asset and the rate of change in
advancements associated with technological improvements that impact the demand for the specific asset under review. First
Financial determines whether the carrying values of certain operating leases are not recoverable and as a result, records an
impairment loss equal to the amount by which the carrying value of the assets exceeds the fair value. The fair value amounts
are generally based on appraised values of the assets, resulting in a classification within Level 3 of the valuation hierarchy.
The financial assets and liabilities measured at fair value on a recurring basis in the consolidated financial statements, were as
follows:
(Dollars in thousands)
December 31, 2023
Assets
Fair Value Measurements Using
Assets/
Liabilities
Level 1
Level 2
Level 3
at Fair Value
Investment securities available-for-sale
$
31,243 $
2,956,938 $
32,945 $
3,021,126
Loans held for sale
Interest rate derivative contracts
Foreign exchange derivative contracts
Interest rate floors
Total
Liabilities
Interest rate derivative contracts
Foreign exchange derivative contracts
Total
0
0
0
9,213
117,344
145,556
0
0
0
9,213
117,344
145,556
0
31,243 $
6,896
3,235,947 $
0
32,945 $
6,896
3,300,135
0 $
118,105 $
0
145,556
0 $
263,661 $
0 $
0
0 $
118,105
145,556
263,661
$
$
$
106 First Financial Bancorp 2023 Annual Report
(Dollars in thousands)
December 31, 2022
Assets
Fair Value Measurements Using
Assets/
Liabilities
Level 1
Level 2
Level 3
at Fair Value
Investment securities available-for-sale
$
32,696 $
3,341,095 $
35,857 $
3,409,648
Loans held for sale
Interest rate derivative contracts
Foreign exchange derivative contracts
Total
Liabilities
Interest rate derivative contracts
Foreign exchange derivative contracts
Total
$
$
$
0
0
0
7,918
152,846
204,882
0
0
0
7,918
152,846
204,882
32,696 $
3,706,741 $
35,857 $
3,775,294
0 $
153,119 $
0
204,882
0 $
358,001 $
0 $
0
0 $
153,119
204,882
358,001
The following table presents a reconciliation for certain AFS securities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) for the years ended December 31, 2023, 2022 and 2021.
(dollars in thousands)
Beginning balance
Accretion (amortization)
Increase (decrease) in fair value
Purchases (settlements)
Ending balance
December 31, 2023
December 31, 2022
December 31, 2021
$
$
35,857 $
(104)
(99)
(2,709)
32,945 $
38,181 $
(56)
45
(2,313)
35,857 $
40,575
(38)
44
(2,400)
38,181
Certain financial assets and liabilities are measured at fair value on a nonrecurring basis. Adjustments to the fair market value
of these assets usually result from the application of fair value accounting or write-downs of individual assets. The following
table summarizes financial assets and liabilities measured at fair value on a nonrecurring basis:
(Dollars in thousands)
December 31, 2023
Assets
Collateral dependent loans
Commercial
Commercial real estate
OREO
Operating leases
Fair Value Measurements Using
Level 1
Level 2
Level 3
$
0 $
0 $
0
0
0
0
0
0
1,795
13,538
106
0
First Financial Bancorp 2023 Annual Report 107
Notes to Consolidated Financial Statements
(Dollars in thousands)
December 31, 2022
Assets
Collateral dependent loans
Commercial
Commercial real estate
OREO
Operating leases
Fair Value Measurements Using
Level 1
Level 2
Level 3
$
0 $
0 $
0
0
0
0
0
0
4,240
4,015
0
0
Fair value option. First Financial may elect to report most financial instruments and certain other items at fair value on an
instrument-by instrument basis with changes in fair value reported in net income. After the initial adoption, the election is
made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified
reconsideration events occur. The fair value election may not be revoked once an election is made.
The Company elected the fair value option for residential mortgage loans held for sale. This election allows for a more
effective offset of the changes in fair values of the loans held for sale and the derivative financial instruments used to financially
hedge them without having to apply complex hedge accounting requirements. The fair value of the Company’s residential
mortgage loans held for sale was determined based on quoted prices for similar loans in active markets.
The aggregate fair value of the Company’s residential mortgage loans held for sale as of December 31, 2023 and 2022 was $9.2
million and $7.9 million, respectively. The aggregate unpaid principal balance of the Company’s residential mortgage loans
held for sale as of December 31, 2023 and 2022 was $8.5 million and $7.5 million, respectively. The resulting difference
between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has
been elected was $0.7 million and $0.4 million as of December 31, 2023 and 2022, respectively.
Changes in the estimated fair value of residential mortgage loans held for sale are reported as a component of Net gain from
sales of loans in the Company’s Consolidated Statements of Income. For the years ended December 31, 2023 and 2022, the
change in fair value of the Company’s residential mortgage loans held for sale was a net gain of $0.3 million and a net loss of
$1.9 million, respectively.
108 First Financial Bancorp 2023 Annual Report
24. First Financial Bancorp. (Parent Company Only) Financial Information
Balance Sheets
(Dollars in thousands)
Assets
Cash
Investment securities
Subordinated notes from subsidiaries
Investment in subsidiaries
Commercial bank
Non-banks
Total investment in subsidiaries
Premises and equipment
Other assets
Total assets
Liabilities
Subordinated notes
Dividends payable
Other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
December 31,
2023
2022
$
134,745 $
91,013
1,134
7,500
1,681
7,500
2,334,411
2,161,338
8,915
11,246
2,343,326
2,172,584
274
101,001
283
86,355
$ 2,587,980 $ 2,359,416
$
312,550 $
311,707
1,440
6,016
1,271
5,065
320,006
318,043
2,267,974
2,041,373
$ 2,587,980 $ 2,359,416
First Financial Bancorp 2023 Annual Report 109
Notes to Consolidated Financial Statements
Statements of Income and Comprehensive Income (Loss)
(Dollars in thousands)
Income
Interest income
Noninterest income
Net gain (loss) on equity securities
Dividends from subsidiaries
Total income
Expenses
Interest expense
Salaries and employee benefits
Professional services
Other
Total expenses
Income before income taxes and equity in undistributed net earnings
of subsidiaries
Income tax expense (benefit)
Equity in undistributed earnings (loss) of subsidiaries
Net income
Years Ended December 31,
2023
2022
2021
$
42 $
1,230
(546)
37 $
13
(156)
34
215
448
164,974
165,700
171,900
171,794
202,000
202,697
18,305
16,351
1,510
5,281
41,447
16,624
13,547
256
5,581
36,008
15,900
9,784
2,343
5,186
33,213
124,253
135,786
169,484
(9,879)
(8,523)
121,731
73,303
(7,787)
27,889
$
255,863 $
217,612 $
205,160
Comprehensive income (loss)
$
304,707 $
(140,618) $
156,063
110 First Financial Bancorp 2023 Annual Report
Statements of Cash Flows
(Dollars in thousands)
Operating activities
Years Ended December 31,
2022
2021
2023
Net income
$
Adjustments to reconcile net income to net cash provided by operating activities
Equity in undistributed (earnings) loss of subsidiaries
Depreciation and amortization
Stock-based compensation expense
Unrealized (gain) loss on equity securities
Deferred income taxes
(Decrease) increase in dividends payable
(Decrease) increase in other liabilities
Decrease (increase) in other assets
Net cash provided by (used in) operating activities
255,863 $
217,612 $
205,160
(121,731)
975
14,898
546
(285)
169
(213)
(10,129)
140,093
(73,303)
860
13,379
156
(475)
229
634
(8,748)
150,344
(27,889)
859
9,635
(448)
(224)
368
(751)
(8,096)
178,614
Investing activities
Capital contributions to subsidiaries
Net cash acquired (paid) in business combinations
Purchases of premises and equipment
Other
Net cash (used in) provided by investing activities
Financing activities
(Decrease) increase in short-term borrowings
Proceeds from long-term borrowings
Cash dividends paid on common stock
Purchases of common stock
Proceeds from exercise of stock options, net of shares purchased
Other
Net cash provided by (used in) financing activities
Net increase (decrease) in cash
Cash at beginning of year
Cash at end of year
(167)
(3,400)
(13)
0
(3,580)
0
0
0
1,011
1,011
(113,152)
0
0
0
(113,152)
0
0
(20,000)
20,000
0
(87,159)
(86,606)
0
48
(5,670)
(92,781)
43,732
91,013
134,745 $
0
177
(3,659)
(110,088)
41,267
49,746
91,013 $
$
(10,592)
(87,316)
(108,077)
64
(2,697)
(188,618)
(123,156)
172,902
49,746
First Financial Bancorp 2023 Annual Report 111
Total Return to Shareholders
The following graph compares the five-year cumulative total return to shareholders of First Financial Bancorp common stock
with that of companies that comprise the Nasdaq Composite Index and the KBW Regional Bank Index. The KBW Regional
Bank Index is comprised of 50 banks headquartered throughout the country and is used frequently by investors when comparing
First Financial Bancorp's stock performance to that of other similarly sized institutions. First Financial Bancorp is included in
the KBW Regional Bank Index.
The following table assumes $100 invested on December 31, 2018 in First Financial Bancorp, the Nasdaq Composite Index and
the KBW Regional Bank Index, and assumes that dividends are reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG FIRST FINANCIAL BANCORP, NASDAQ COMPOSITE INDEX
AND KBW REGIONAL BANK INDEX
First Financial Bancorp
Nasdaq Composite Index
KBW Regional Bank Index
2018
2019
2020
2021
2022
2023
100.00
100.00
100.00
111.29
136.73
123.87
90.21
140.76
106.35
105.56
134.29
115.61
105.01
113.08
109.51
104.48
118.79
107.46
112 First Financial Bancorp 2023 Annual Report
First Financial BancorpNasdaq Composite IndexKBW Regional Bank Index181920212223050100150200250
shareholder information
Investor Relations
Corporate and investor information, including news
releases, webcasts, investor presentations, annual reports,
proxy statements and SEC filings, as well as information on
the Company’s corporate governance practices are
available within the Investor Relations section of our
website at www.bankatfirst.com.
Shareholders, analysts and other investment professionals
who would like corporate and financial information on First
Financial Bancorp should contact:
James M. Anderson
Chief Financial Officer and Chief Operating Officer
First Financial Bancorp
255 East Fifth Street, 29th Floor
Cincinnati, OH 45202
(513) 887-5400
Email: InvestorRelations@bankatfirst.com
Securities and Exchange Commission Filings
All reports filed electronically by First Financial Bancorp
with the United States Securities and Exchange Commission
(SEC), including the Annual Report on Form 10-K,
quarterly reports on Form 10-Q, and current reports on
Form 8-K, as well as any amendments to those reports, are
accessible at no cost within the Investor Relations section
of our website at www.bankatfirst.com, or by contacting
Investor Relations. These filings are also accessible on the
SEC’s website at www.sec.gov.
Annual Meeting of Shareholders
The virtual annual meeting of shareholders will be held on
Tuesday, May 28, 2024, at 10 a.m. (EDT).
Common Stock Listing
First Financial Bancorp’s common stock
trades on the Nasdaq Stock Market
(NASDAQ) under the symbol FFBC.
Registrar and Transfer Agent
Computershare Shareholder Services serves as the
registrar and transfer agent for First Financial Bancorp
common stock for registered shareholders. Shareholder
account inquiries, including changes of address or
ownership, transferring stock and replacing lost certificates
or dividend checks should be directed to Computershare
Shareholder Services at:
Transfer Agent
Computershare Shareholder Services
P.O. Box 505000
Louisville, KY 40233
(800) 368-5948
Shareholders of record can also access their shareholder
account records and request information related to their
shareholder account via the internet. To register for online
account access, go to:
www.computershare.com/investor.
Dividend Reinvestment and Stock Purchase Plan
Shareholders of record holding 25 shares or more are
eligible to participate in our Dividend Reinvestment Plan.
Shareholders of record may elect to have cash dividends
automatically reinvested in additional common shares and
can also purchase additional common shares by making
optional cash payments. To obtain a prospectus, enroll in
the plan, or to contact Investor Relations, please visit
the Investor Relations section of our website at
www.bankatfirst.com.
First Financial Bank
First Financial Center
255 East Fifth Street
Cincinnati, OH 45202-4248
bankatfirst.com
©2024 First Financial Bancorp