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What changed in FIRST FINANCIAL CORP /IN/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FIRST FINANCIAL CORP /IN/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+178 added−156 removedSource: 10-K (2024-03-11) vs 10-K (2023-03-08)

Top changes in FIRST FINANCIAL CORP /IN/'s 2023 10-K

178 paragraphs added · 156 removed · 134 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFFB Risk Management Co., Inc. located in Las Vegas, Nevada is a captive insurance subsidiary which insures various liability and property damage policies for First Financial Corporation subsidiaries. JBMM, LLC and Fort Webb LP, LLC are both located in Christian County, Ky. 5 Table of Contents COMPETITION First Financial Bank faces competition from other financial institutions.
Biggest changeJBMM, LLC and Fort Webb LP, LLC are both located in Christian County, Ky. 5 Table of Contents COMPETITION First Financial Bank faces competition from other financial institutions. These competitors consist of commercial banks, a mutual savings bank and other financial institutions, including consumer finance companies, insurance companies, brokerage firms and credit unions.
Commercial construction loans are closely monitored, subject to industry standards, and disbursements are controlled during the construction process. Residential Retail real estate mortgages that are secured by 1-4 family residences are generally owner occupied and include residential real estate and residential real estate construction loans.
Commercial construction loans are closely monitored, subject to industry standards, and disbursements are controlled during the construction process. Residential Real estate mortgages that are secured by 1-4 family residences are generally owner occupied and include residential real estate and residential real estate construction loans.
The Corporation believes that, as of December 31, 2022, the Bank was “well capitalized” based on the aforementioned ratios. Temporary Regulatory Capital Relief Related to Impact of CECL.
The Corporation believes that, as of December 31, 2023, the Bank was “well capitalized” based on the aforementioned ratios. Temporary Regulatory Capital Relief Related to Impact of CECL.
It operates nine full-service banking branches within the county; three in Clay County, Ind.; one in Daviess County, Ind.; one in Greene County, Ind.; one in Knox County, Ind.; two in Parke County, Ind.; one in Putnam County, Ind., three in Sullivan County, Ind.; one in Vanderburgh, County, Ind.; three in Vermillion County, Ind.; four in Champaign County, Illinois; one in Clark County, Ill.; two in Coles County, Ill.; two in Crawford County, Ill.; one in Franklin County, Ill.; one in Jasper County, Ill.; two in Jefferson County, Ill.; one in Lawrence County, Ill.; two in Livingston County, Ill.; two in Marion County, Ill.; two in McLean County, Ill.; one in Richland County, Ill.; six in Vermilion County, Ill.; one in Wayne County, Ill; one in Breckinridge County, Kentucky; two in Calloway County, Ky; three in Christian County, Ky; two in Fulton County, Ky; two in Hancock County, Ky; two in Hopkins County, Ky; two in Marshall County, Ky; one in Todd County, Ky; one in Trigg County, Ky; two in Warren County, Ky; three in Cheatham County, Tennessee; one in Houston County, Tn; and three in Montgomery County, Tn.
It operates seven full-service banking branches within the county; three in Clay County, Ind.; one in Daviess County, Ind.; one in Greene County, Ind.; one in Knox County, Ind.; two in Parke County, Ind.; one in Putnam County, Ind., two in Sullivan County, Ind.; one in Vanderburgh, County, Ind.; three in Vermillion County, Ind.; four in Champaign County, Illinois; one in Clark County, Ill.; one in Coles County, Ill.; one in Crawford County, Ill.; one in Franklin County, Ill.; one in Jasper County, Ill.; two in Jefferson County, Ill.; one in Lawrence County, Ill.; two in Livingston County, Ill.; two in Marion County, Ill.; two in McLean County, Ill.; one in Richland County, Ill.; five in Vermilion County, Ill.; one in Wayne County, Ill; one in Breckinridge County, Kentucky; one in Calloway County, Ky; three in Christian County, Ky; two in Fulton County, Ky; two in Hancock County, Ky; two in Hopkins County, Ky; two in Marshall County, Ky; one in Todd County, Ky; one in Trigg County, Ky; one in Warren County, Ky; three in Cheatham County, Tennessee; and three in Montgomery County, Tn.
The Bank paid a total FDIC assessment of $2.0 million in 2022. In addition to the FDIC insurance premiums, the Bank is required to make quarterly payments on bonds issued by the Financing Corporation (“FICO”), an agency of the Federal government established to recapitalize a predecessor deposit insurance fund. These assessments will continue until the FICO bonds are repaid.
The Bank paid a total FDIC assessment of $2.8 million in 2023. In addition to the FDIC insurance premiums, the Bank is required to make quarterly payments on bonds issued by the Financing Corporation (“FICO”), an agency of the Federal government established to recapitalize a predecessor deposit insurance fund. These assessments will continue until the FICO bonds are repaid.
There are five loan production offices, one in Hamilton County, Indiana; one in Monroe County, Indiana; one in Vanderburgh County, Indiana; one in Rutherford County, Tennessee; and one in Williamson County, Tn.
There are six loan production offices, one in Allen County, Indiana; one in Hamilton County, Indiana; one in Monroe County, Indiana; one in Vanderburgh County, Indiana; one in Rutherford County, Tennessee; and one in Williamson County, Tn.
The Corporation, which is headquartered in Terre Haute, Indiana, offers a wide variety of financial services including commercial, mortgage and consumer lending, lease financing, trust account services, depositor services and insurance services through its two subsidiaries. At the close of business in 2022 the Corporation and its subsidiaries had 900 full-time equivalent employees.
The Corporation, which is headquartered in Terre Haute, Indiana, offers a wide variety of financial services including commercial, mortgage and consumer lending, lease financing, trust account services, and depositor services through its subsidiary. At the close of business in 2023 the Corporation and its subsidiaries had 861 full-time equivalent employees.
Certain regulatory capital ratios for the Bank as of December 31, 2022, are shown below: ● 12.09% CET1 to risk-weighted assets; ● 12.09% Tier 1 capital to risk-weighted assets; ● 13.14% Total capital to risk-weighted assets; and ● 9.50% leverage ratio. The Corporation The Bank Holding Company Act .
Certain regulatory capital ratios for the Bank as of December 31, 2023, are shown below: ● 13.84% CET1 to risk-weighted assets; ● 13.84% Tier 1 capital to risk-weighted assets; ● 14.89% Total capital to risk-weighted assets; and ● 10.73% leverage ratio. The Corporation The Bank Holding Company Act .
Certain regulatory capital ratios for the Corporation as of December 31, 2022, are shown below: ● 13.58% CET1 to risk-weighted assets; ● 13.58% Tier 1 capital to risk-weighted assets; ● 14.61% Total capital to risk-weighted assets; and ● 10.78% leverage ratio.
Certain regulatory capital ratios for the Corporation as of December 31, 2023, are shown below: ● 14.76% CET1 to risk-weighted assets; ● 14.76% Tier 1 capital to risk-weighted assets; ● 15.80% Total capital to risk-weighted assets; and ● 12.14% leverage ratio.
These competitors consist of commercial banks, a mutual savings bank and other financial institutions, including consumer finance companies, insurance companies, brokerage firms and credit unions. The Corporation’s business activities are centered in west-central Indiana, east-central Illinois, western Kentucky, and central Tennessee. The Corporation has no foreign activities.
The Corporation’s business activities are centered in west-central Indiana, east-central Illinois, western Kentucky, and central Tennessee. The Corporation has no foreign activities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAn economic downturn or sustained, high unemployment levels, inflation, supply chain disruptions that impact borrowers, recession, currency devaluation, changes in the monetary supply, decreased investor or business confidence, trade wars and the imposition of tariffs on goods purchased or sold by our customers, the effect of a pandemic, epidemic, or outbreak of an infectious disease on our customers, stock market volatility, and other factors beyond our control may have a negative effect on the ability of our borrowers to make timely repayments of their loans (thereby, increasing the risk of loan defaults and losses), the value of collateral securing those loans, demand for loans and other products and services we offer, and our deposit levels and composition. ​ Given the current economic environment, an economic recession or downturn is a greater risk than in previous years.
Biggest changeAn economic downturn or sustained, high unemployment levels, inflation, supply chain disruptions that impact borrowers, recession, currency devaluation, changes in the monetary supply, changes in fiscal and monetary policy, decreased investor or business confidence, trade wars and the imposition of tariffs on goods purchased or sold by our customers, the effect of a pandemic, epidemic, or outbreak of an infectious disease on our customers, stock market volatility, and other factors beyond our control may have a negative effect on the ability of our borrowers to make timely repayments of their loans (thereby, increasing the risk of loan defaults and losses), the value of collateral securing those loans, demand for loans and other products and services we offer, and our deposit levels and composition. ​ Worsening conditions in the current economic market could make an economic recession or a downturn more likely in various industries or markets and could have the following adverse effects on our business: ​ • A decrease in net interest income derived from our lending and deposit gathering activities; • A decrease in the demand of our loans and other products we offer; • A decrease in our deposit balances due to overall reductions in the number or value in client accounts; • A decrease in the value of collateral securing our loans • An increase in the level of nonperforming and classified loans; • An increase in provisions for credit losses and loan charge-offs; and • An increase in our operating expenses associated with attending to the effects of certain circumstances listed above. ​ As a result of these potential economic conditions, our operating results could be negatively impacted. ​ Unrelated bank failures, other issues of unrelated banks, and decreased depositor confidence in depository institutions could negatively impact our stock price and we may experience a material adverse effect on our financial condition and results of operations. ​ A collection of bank failures that began in March 2023 materially impacted depositor and investor confidence in community and regional depository institutions.
The plaintiffs in these actions frequently seek injunctions and substantial damages. ​ Regardless of the scope or validity of alleged patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Corporation may have to engage in protracted litigation, which may be expensive, time-consuming, disruptive to the Corporation’s operations, and distracting to management.
The plaintiffs in these actions frequently seek injunctions and substantial damages. ​ Regardless of the scope or validity of alleged patents or other intellectual property rights, or the merits of any claims by potential or actual litigants, the Corporation may have to engage in protracted litigation, which may be expensive, time-consuming, and disruptive to the Corporation’s operations, and distracting to management.
Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things: • the time and costs associated with identifying and evaluating potential new markets, hiring experienced local management, and opening new offices, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; • the time and costs associated with identifying potential acquisition and merger targets; • the accuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to a target company; • the diversion of our management’s attention to the negotiation of a transaction, and the integration of the operations and personnel of the combined businesses; • our ability to finance an acquisition and possible dilution to our existing shareholders; • closing delays and expenses related to the resolution of lawsuits filed by shareholders of targets; • entry into new markets where we lack experience; • introduction of new products and services into our business; • potential exposure to unknown or contingent liabilities of the target company; • exposure to potential asset quality issues of the target company; • the risk of loss of key employees and customers; and • incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations. ​ 23 Table of Contents Acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of the Corporation’s tangible book value and net income per common share may occur in connection with any future transaction.
Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including, among other things: ​ • the time and costs associated with identifying and evaluating potential new markets, hiring experienced local management, and opening new offices, and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion; • the time and costs associated with identifying potential acquisition and merger targets; • the accuracy of the estimates and judgments used to evaluate credit, operations, management, and market risks with respect to a target company; • the diversion of our management’s attention to the negotiation of a transaction, and the integration of the operations and personnel of the combined businesses; • our ability to finance an acquisition and possible dilution to our existing shareholders; • closing delays and expenses related to the resolution of lawsuits filed by shareholders of targets; • entry into new markets where we lack experience; • introduction of new products and services into our business; • potential exposure to unknown or contingent liabilities of the target company; • exposure to potential asset quality issues of the target company; • the risk of loss of key employees and customers; and 24 Table of Contents • incurrence and possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations. ​ Acquisitions typically involve the payment of a premium over book and market values and, therefore, some dilution of the Corporation’s tangible book value and net income per common share may occur in connection with any future transaction.
Losses of accounts managed by key personnel could have a material adverse impact on our business. ​ Terrorist attacks, threats or actual war, natural disasters, global climate change, pandemics, other catastrophic events, trade policies, civil unrest, protests, and other global and domestic conflicts may impact all aspects of our operations, revenues, costs, and stock price in unpredictable ways. ​ Terrorist attacks in the U.S. and abroad, as well as future events occurring in response to or in connection with them, including, without limitation, future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the U.S. or its allies, or military or trade disruptions, may impact our operations.
Losses of accounts managed by key personnel could have a material adverse impact on our business. ​ Terrorist attacks, threats, or actual war, natural disasters, global climate change, pandemics, other catastrophic events, trade policies, civil unrest, protests, and other global and domestic conflicts may impact all aspects of our operations, revenues, costs, and stock price in unpredictable ways. ​ Terrorist attacks in the U.S. and abroad, as well as future events occurring in response to or in connection with them, including, without limitation, future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the U.S. or its allies, or military or trade disruptions, may impact our operations as well as the operations of some of our customers.
Factors that could reduce its access to liquidity sources include a downturn in the markets in which our loans are concentrated or adverse regulatory actions against the Corporation. The Corporation’s access to deposits may also be affected by the liquidity needs of depositors.
Factors that could reduce our access to liquidity sources include a downturn in the markets in which our loans are concentrated or adverse regulatory actions against the Corporation. The Corporation’s access to deposits may also be affected by the liquidity needs of depositors.
If legal matters related to intellectual property claims were resolved against the Corporation or settled, the Corporation could be required to make payments in amounts that could have a material adverse effect on its business, financial condition, and results of operations. ​ Changes in consumer use of banks and changes in consumer spending and savings habits could adversely affect the Corporation’s financial results. ​ Technology and other changes now allow many customers to complete financial transactions without using banks.
If legal matters related to intellectual property claims were resolved against the Corporation or settled, the Corporation could be required to make payments and/or incur costs in amounts that could have a material adverse effect on its business, financial condition, and results of operations. ​ Changes in consumer use of banks and changes in consumer spending and savings habits could adversely affect the Corporation’s financial results. ​ Technology and other changes now allow many customers to complete financial transactions without using banks.
Changes in monetary policy, including changes in interest rates, could influence not only the interest that is received on loans and securities and the interest that is paid on deposits and borrowings, but such changes could also affect the Corporation’s ability to originate loans and obtain deposits and the fair value of the Corporation’s financial assets and liabilities. ​ If the interest rates paid on deposits and other interest-bearing liabilities increase at a faster rate than the interest rates received on loans and other interest-earning assets, our net interest income, and, therefore, our earnings, could be adversely affected.
Changes in monetary policy, including changes in interest rates, could influence not only the interest that is received on loans and securities and the interest that is paid on deposits and borrowings, but such changes could also affect the Corporation’s ability to originate loans and obtain deposits and the fair value of the Corporation’s financial assets and liabilities. ​ If the interest received on loans and other interest-earning assets decreases at a faster rate than the interest rates paid on deposits and other interest-bearing liabilities, our net interest income, and, therefore, our earnings could be adversely affected.
The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Corporation’s business, financial condition, and results of operations. ​ 22 Table of Contents ​ ​ The Corporation may become subject to claims and litigation pertaining to intellectual property. ​ Banking and other financial services companies, such as the Corporation, rely on technology companies to provide information technology products and services necessary to support the Corporation’s day-to-day operations.
The remediation costs and any other financial liabilities 23 Table of Contents associated with an environmental hazard could have a material adverse effect on the Corporation’s business, financial condition, and results of operations. ​ The Corporation may become subject to claims and litigation pertaining to intellectual property. ​ Banking and other financial services companies, such as the Corporation, rely on technology companies to provide information technology products and services necessary to support the Corporation’s day-to-day operations.
These actions 24 Table of Contents include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil money penalties, to fine or remove officers and directors, and, if it is concluded that these conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship.
These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil money penalties, to fine or remove officers and directors, and, if it is concluded that these conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship.
Any security breach could result in the misappropriation, loss, or unauthorized disclosure of sensitive customer information, severely damage our reputation, expose us to the risk of litigation and liability, disrupt our operations, and have a material adverse effect on our business. ​ We also rely on the integrity and security of a variety of third-party processors and payment, clearing, and settlement systems, as well as the various participants involved in these systems, many of which have no direct relationship with us.
Any security breach 21 Table of Contents could result in the misappropriation, loss, or unauthorized disclosure of sensitive customer information, severely damage our reputation, expose us to the risk of litigation and liability, disrupt our operations, and have a material adverse effect on our business. ​ We also rely on the integrity and security of a variety of third-party processors and payment, clearing, and settlement systems, as well as the various participants involved in these systems, many of which have no direct relationship with us.
Large scale identity theft could result in customers’ accounts being compromised and fraudulent activities being performed in their name, which could negatively affect our reputation or result in litigation and, consequently, negatively affect our results of operation. ​ 20 Table of Contents The occurrence of cybersecurity incidents across a range of industries has resulted in increased legislative and regulatory scrutiny over cybersecurity and calls for additional data privacy laws and regulations.
Large scale identity theft could result in customers’ accounts being compromised and fraudulent activities being performed in their name, which could negatively affect our reputation or result in litigation and, consequently, negatively affect our results of operation. ​ The occurrence of cybersecurity incidents across a range of industries has resulted in increased legislative and regulatory scrutiny over cybersecurity and calls for additional data privacy laws and regulations.
The Corporation’s financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services that the Corporation offers, is highly dependent upon the business environment in the markets where the Corporation operates and in the U.S. as a whole.
The Corporation’s financial performance generally, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services that the Corporation offers, is highly dependent upon the business environment in the markets where the Corporation operates and in the U.S. 16 Table of Contents as a whole.
This regulatory framework affects our lending practices, capital structure, investment practices, and growth, among other things. ​ If, as a result of an examination, a banking regulatory were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate.
This regulatory framework affects our lending practices, capital structure, investment practices, and growth, among other things. ​ 25 Table of Contents If, as a result of an examination, a banking regulator were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate.
The duration and severity of the current inflationary period, and the governmental responses thereto, are unknown and cannot be estimated with precision. ​ Changes in interest rates could adversely affect the Corporation’s results of operations and financial condition. ​ 16 Table of Contents The Corporation’s earnings and cash flows are largely dependent upon the Corporation’s net interest income.
The duration and severity of the current inflationary period, and the governmental responses thereto, are unknown and cannot be estimated with precision. ​ Changes in interest rates could adversely affect the Corporation’s results of operations and financial condition. ​ The Corporation’s earnings and cash flows are largely dependent upon the Corporation’s net interest income.
Any of these results could have a material adverse effect on our business, financial condition, results of operations, and future prospects. ​ 25 Table of Contents Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition. ​ FDIC insurance premiums we pay may change and be significantly higher in the future.
Any of these results could have a material adverse effect on our business, financial condition, results of operations, and future prospects. ​ Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition. ​ FDIC insurance premiums we pay may change and be significantly higher in the future.
Subject to certain limitations, our board of directors generally has authority, without action or vote of our shareholders, to issue all or part of the remaining authorized but unissued shares and to establish the rights, preferences, and 26 Table of Contents privileges of any class or series of preferred stock.
Subject to certain limitations, our board of directors generally has authority, without action or vote of our shareholders, to issue all or part of the remaining authorized but unissued shares and to establish the rights, preferences, and privileges of any class or series of preferred stock.
Our board of directors may determine from time to time there is a need to or, if our or the Bank’s regulatory capital ratios fall below the required minimums, we could be forced to raise additional capital through the issuance of additional shares of stock or other securities, including debt securities and senior or subordinated notes.
The Corporation’s Board of Directors may determine from time to time there is a need to or, if our or the Bank’s regulatory capital ratios fall below the required minimums, we could be forced to raise additional capital through the issuance of additional shares of 27 Table of Contents stock or other securities, including debt securities and senior or subordinated notes.
This process, which is critical to our financial results and condition, requires difficult, subjective, and complex judgments, including reviews of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans.
This process, which is critical to our financial results and condition, requires difficult, subjective, and complex judgments, including 19 Table of Contents reviews of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans.
The Corporation may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of depositors sought to withdraw their deposits, 21 Table of Contents regardless of the reason.
The Corporation may not be able to replace maturing deposits and advances as necessary in the future, especially if a large number of depositors sought to withdraw their deposits, regardless of the reason.
We could also incur increased costs and expenses to improve our anti-money laundering procedures and systems to comply with any regulatory requirements or actions. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us.
We could also incur increased costs and expenses to improve our anti-money laundering procedures and systems to comply with any regulatory requirements or actions. Failure to maintain and implement adequate programs to combat money laundering and terrorist 26 Table of Contents financing could also have serious reputational consequences for us.
These restrictions could negatively impact the Corporation’s ability to operate or further expand its operations through acquisitions or the establishment of additional branches and may result in increases in operating expenses and reductions in revenues that could have a material adverse effect on its financial condition and results of operations. ​ The value of the Corporation’s goodwill and other intangible assets may decline in the future. ​ As of December 31, 2022, the Corporation had $93.7 million of goodwill and other intangible assets.
These restrictions could negatively impact the Corporation’s ability to operate or further expand its operations through acquisitions or the establishment of additional branches and may result in increases in operating expenses and reductions in revenues that could have a material adverse effect on its financial condition and results of operations. ​ The value of the Corporation’s goodwill and other intangible assets may decline in the future. ​ As of December 31, 2023, the Corporation had $92.6 million of goodwill and other intangible assets.
The Corporation may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. Further, many of our competitors have substantially greater resources to invest in technological improvements.
The Corporation may not be able to effectively implement new technology-driven products and services, be successful in marketing these products and services to its customers, or incur significant costs in implementing new technology-driven products and services. Further, many of our competitors have substantially greater resources to invest in technological improvements.
In addition, natural disasters, global climate change, pandemics, other catastrophic events, trade policies, domestic civil unrest, protest, and other global or domestic conflicts may impact our operations as well.
In addition, natural 18 Table of Contents disasters, global climate change, pandemics, other catastrophic events, trade policies, domestic civil unrest, protest, and other global or domestic conflicts may impact our operations or the operations of some of our customers as well.
As a result, if you acquire the Corporation’s common stock, you could lose some or all of your investment. ​ ​ ITEM 1B. UNRESOLVED STAFF COMMENTS None.
As a result, if you acquire the Corporation’s common stock, you could lose some or all of your investment. ​ ​
We are currently authorized to issue up to 40 million shares of common stock, of which 12,051,964 shares were outstanding as of December 31, 2022, and up to 10 million shares of preferred stock, of which no shares are outstanding.
We are currently authorized to issue up to 40 million shares of common stock, of which 11,795,024 shares were outstanding as of December 31, 2023, and up to 10 million shares of preferred stock, of which no shares are outstanding.
In particular, the Dodd-Frank Act drastically revised the laws and regulations under which we operate. Financial institutions generally have also been subjected to increased scrutiny from regulatory authorities.
In particular, the Dodd-Frank Act drastically revised the laws and regulations under which we operate. Financial institutions generally have also been subjected to increased scrutiny from regulatory authorities which has been further exacerbated by the depository institution failures that occurred in 2023.
Competition for qualified personnel in the financial services industry can be intense and we may not be able to hire or retain the key personnel that we depend upon for success. Frequently, we compete in the market for talent with entities that are not subject to comprehensive regulation.
Competition for qualified personnel in the financial services industry can be intense and we may not be able to hire or retain the key personnel that we depend upon for success.
Unlike larger banking organizations that are more geographically diversified, the Corporation’s operations are currently concentrated in west central Indiana, east central Illinois, western Kentucky, and middle and western Tennessee, and most of our customers are located in these markets.
Unlike larger banking organizations that are more geographically diversified, the Corporation’s operations are currently concentrated in west central Indiana, east central Illinois, western Kentucky, and middle and western Tennessee, and most of our customers are located in these markets. Additionally, we will expand further into eastern Tennessee and northern Georgia provided we successfully consummate the Merger.
Any failure in the Corporation’s analytical or forecasting models could have a material adverse effect on the Corporation’s business, financial condition, and results of operations. ​ We are a community bank and our ability to maintain our reputation is critical to the success of our business. ​ The Corporation’s banking subsidiaries are community banks and their reputation is one of the most valuable components of our business.
Any increase in our allowance for loan losses or expenses incurred to determine the appropriate level of the allowance for loan losses may have a material adverse effect on our business, financial condition, and results of operations. ​ We are a community bank and our ability to maintain our reputation is critical to the success of our business. ​ The Corporation’s banking subsidiaries are community banks and their reputation is one of the most valuable components of our business.
Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. Competitors of the Corporation’s vendors, or other individuals or companies, may claim to hold intellectual property sold or licensed to the Corporation by its vendors.
Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained.
Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report. Risks Related to Economic and Market Conditions Economic conditions have affected and could adversely affect our revenue and profits.
Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this report.
The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Corporation’s future success depends, in part, upon its ability to address customer needs by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Corporation’s operations.
The Corporation’s future success depends, in part, upon its ability to address customer needs by using 22 Table of Contents technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Corporation’s operations.
Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Corporation can. ​ The Corporation’s ability to compete successfully depends on a number of factors, including, among other things: ​ • the ability to develop, maintain and build upon long-term customer relationships based on top quality service, and safe, sound assets; • the ability to expand the Corporation's market position; • the scope, relevance and pricing of products and services offered to meet customer needs and demands; • the rate at which the Corporation introduces new products and services relative to its competitors; • customer satisfaction with the Corporation's level of service; and • industry and general economic trends. ​ Failure to perform in any of these areas could significantly weaken the Corporation's competitive position, which could adversely affect the Corporation's growth and profitability, which, in turn, could have a material adverse effect on the Corporation's financial condition and results of operations. ​ The Corporation has significant exposure to risks associated with commercial and commercial real estate loans. ​ As of December 31, 2022, approximately 58.8% of the Corporation’s loan portfolio consisted of commercial and commercial real estate loans.
Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Corporation can. ​ The Corporation’s ability to compete successfully depends on a number of factors, including, among other things: ​ • the ability to develop, maintain and build upon long-term customer relationships based on top quality service, and safe, sound assets; • the ability to expand the Corporation's market position; • the scope, relevance and pricing of products and services offered to meet customer needs and demands; 20 Table of Contents • the rate at which the Corporation introduces new products and services relative to its competitors; • customer satisfaction with the Corporation's level of service; and • industry and general economic trends. ​ Failure to perform in any of these areas could significantly weaken the Corporation's competitive position, which could adversely affect the Corporation's growth and profitability, which, in turn, could have a material adverse effect on the Corporation's financial condition and results of operations. ​ The Corporation’s accounting estimates and risk management processes rely on analytical and forecasting models, which, if inadequate, may result in a material adverse effect on our business, financial condition, or results of operation. ​ The processes the Corporation uses to estimate its allowance for credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on the Corporation’s financial condition and results of operations, depend upon the use of analytical and forecasting models.
Deterioration in economic conditions in the Corporation’s markets could result in one or more of the following, which may adversely affect our business: • an increase in loan delinquencies; • an increase in problem assets and foreclosures; • an increase in our allowance for credit losses; • a decrease in the demand for our products and services; • a decrease in the value of collateral for loans, especially real estate, in turn reducing customers’ borrowing power, the value of assets associated with problem loans and collateral coverage; • a decrease in net worth and liquidity of loan guarantors, which may impair their ability to honor guarantees made to us; and • a decrease in deposits balances. ​ Changes to the London Inter-Bank Offered Rate (“LIBOR”) may adversely impact the value of, and the return on, our financial instruments that are indexed to LIBOR. ​ The Corporation is continuing to evaluate the impacts of the phase out of LIBOR.
Deterioration in economic conditions in the Corporation’s markets could result in one or more of the following, which may adversely affect our business: ​ • an increase in loan delinquencies; • an increase in problem assets and foreclosures; • an increase in our allowance for credit losses; • a decrease in the demand for our products and services; • a decrease in the value of collateral for loans, especially real estate, in turn reducing customers’ borrowing power, the value of assets associated with problem loans and collateral coverage; • a decrease in net worth and liquidity of loan guarantors, which may impair their ability to honor guarantees made to us; and • a decrease in deposits balances. ​ ​ Risks Related to Our Business A lack of liquidity could affect our operations and jeopardize our financial condition. ​ The Corporation requires liquidity to meet our deposit and other obligations as they come due.
A failure to maintain adequate liquidity could have a material adverse effect on the Corporation’s business, financial condition, and result of operations. ​ The Corporation’s controls and procedures may fail or be circumvented, and the Corporation’s methods of reducing risk exposure may not be effective. ​ The Corporation’s internal operations are subject to risks, including, but not limited to, data processing system failures and errors, customer or employee fraud, and catastrophic failures resulting from terrorist acts or natural disasters.
Failure to successfully keep pace with technological change affecting the financial services industry could negatively affect the Corporation’s growth, revenue, and profit. ​ The Corporation’s controls and procedures may fail or be circumvented, and the Corporation’s methods of reducing risk exposure may not be effective. ​ The Corporation’s internal operations are subject to risks, including, but not limited to, data processing system failures and errors, customer or employee fraud, and catastrophic failures resulting from terrorist acts or natural disasters.
In addition, large loans, letters of credit, and contracts with individual counterparties in our portfolio magnify the credit risk that we face, as the impact of large borrowers and counterparties not repaying their loans or performing according to the terms of their contracts has a disproportionately significant impact on our credit losses and reserves. ​ 18 Table of Contents ​ The information that we use in managing our credit risk may be inaccurate or incomplete, which may result in an increased risk of default and otherwise have an adverse effect on our business, results of operations, and financial condition. ​ In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information.
An increase in nonperforming loans could result in an increase in the provision for loan losses and an increase in loan charge-offs, both of which could have a material adverse effect on the Corporation’s business, financial condition, and results of operations. ​ The information that we use in managing our credit risk may be inaccurate or incomplete, which may result in an increased risk of default and otherwise have an adverse effect on our business, results of operations, and financial condition. ​ In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information.
Intellectual property claims may increase in the future as the financial services sector becomes more reliant on information technology vendors.
Competitors of the Corporation’s vendors, or other individuals or companies, may claim to hold intellectual property rights in technology products or services sold or licensed to the Corporation by its vendors. Intellectual property claims may increase in the future as the financial services sector becomes more reliant on information technology vendors.
If the Corporation is found to infringe upon one or more patents or other intellectual property rights, it may be required to pay substantial damages or royalties to a third-party. The Corporation may also consider entering into licensing agreements for disputed intellectual property, however, these license agreements may also significantly increase the Corporation’s operating expenses.
If the Corporation is found to infringe upon one or more patents or other intellectual property rights, it may be required to pay substantial damages or royalties to a third-party and/or incur costs to replace or find an alternative for such technology products or services.
Additionally, if interest rates continue to rise, we could see consumer sentiment shift and demand for loans may decrease which would impact our results of operations. Continued elevated levels of inflation could also increase volatility and uncertainty in the business environment, which could adversely affect loan demand and our clients’ ability to repay indebtedness.
Additionally, if interest rates stay at their current level or continue to rise, we could see consumer sentiment shift and demand for loans may decrease which would impact our results of operations.
Also, the commercial loan balance per borrower is typically larger than that of residential mortgage loans and consumer loans, indicating higher potential losses on an individual loan basis. The deterioration of one or a few of these loans could cause a significant increase in nonperforming loans and a reduction in interest income.
Weak conditions in the local market, the regional economy, the general economy, or industry specific factors may also adversely affect the value of the underlying collateral securing the loan. Also, the commercial loan balance per borrower is typically larger than that of residential mortgage loans and consumer loans, indicating higher potential losses on an individual loan basis.
Interest rates may continue to rise or otherwise stagnate at heightened levels in 2023 in an effort to account for continued levels of inflation. Continued levels of inflation could have complex effects on our business and results of operations, some of which could be materially adverse.
While the Federal Reserve has taken steps to combat the heightened levels of inflation that began in 2021, continued levels of inflation and monetary policy adopted by the Federal Reserve to combat such inflation, could have complex effects on our business and results of operations, some of which could be materially adverse.
Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, any market-wide transition away from LIBOR could have an adverse effect on our business, financial condition and results of operations. ​ Risks Related to Our Business When we loan money, commit to loan money, or enter into a letter of credit or other contract with a counterparty, we incur credit risk, or the risk of loss if our borrowers do not repay their loans or our counterparties fail to perform according to the terms of their contracts.
A failure to maintain adequate liquidity could have a material adverse effect on the Corporation’s business, financial condition, and result of operations. ​ The bank failures in 2023 as discussed in the Risk Factor titled “ Unrelated bank failures, other issues of unrelated banks, and decreased depositor confidence in depository institutions could negatively impact our stock price and we may experience a material adverse effect on our financial condition and results of operations. ” exemplifies the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institution’s ability to satisfy its obligations to depositors. ​ When we loan money, commit to loan money, or enter into a letter of credit or other contract with a counterparty, we incur credit risk, or the risk of loss if our borrowers do not repay their loans or our counterparties fail to perform according to the terms of their contracts.
Any of these occurrences could have an adverse impact on our operating results, revenues, and costs and may result in the volatility of the market price for our common stock and on the future price of our common stock. ​ Our participation in the SBA Paycheck Protection Program (“PPP”) exposes us to credit risk and regulatory enforcement risk, which could have a material adverse impact on our business, financial condition, and results of operations. ​ The Corporation was a participating lender in the PPP, a loan program administered through the SBA, which was created to help eligible businesses, organizations and self-employed persons fund their operational costs during the COVID-19 pandemic.
Any of these occurrences could have an adverse impact on our operating results, revenues, and costs and may result in the volatility of the market price for our common stock and on the future price of our common stock. ​ Geographic concentration of the Corporation’s markets makes our business highly susceptible to local economic conditions and a downturn in local economic conditions may adversely affect our business.
Removed
An economic recession or a downturn in various markets could have the following adverse effects on our business: • A decrease in net interest income derived from our lending and deposit gathering activities; • A decrease in the demand of our loans and other products we offer; • A decrease in our deposit balances due to overall reductions in the number or value in client accounts; • A decrease in the value of collateral securing our loans • An increase in the level of nonperforming and classified loans; • An increase in provisions for credit losses and loan charge-offs; and • An increase in our operating expenses associated with attending to the effects of certain circumstances listed above. ​ As a result of these potential economic conditions, our operating results could be negatively impacted. ​ Continued elevated levels of inflation could adversely impact our business and results of operations.
Added
Risks Related to the Acquisition of SimplyBank ​ Our proposed transaction with SimplyBank may create incremental business, regulatory and reputational risks. ​ As previously disclosed on November 13, 2023, we entered into a merger agreement (the “Merger Agreement”) with SimplyBank., a Tennessee-chartered commercial bank (“SimplyBank”) which sets forth the terms of our proposed transaction (the “Merger”).
Removed
The United States has recently experienced elevated levels of inflation, with the consumer price index reaching approximately 6.5% in December 2022. In connection with elevated levels of inflation, the Federal Reserve Board raised the Effective Federal Funds Rate seven times in 2022, ultimately targeting an Effective Federal Funds Rate between 4.25% and 4.50% in December, 2022.
Added
The Merger with SimplyBank comes with important risks, including, but not limited to: the expected timing and likelihood of completion of the Merger, including the timing, receipt, and terms and conditions of any required governmental, regulatory, or stockholder approvals or clearance of the Merger; the occurrence of any event, change, or other circumstances that could give rise to the termination of the Merger Agreement; the initiation or outcome of any legal proceedings that may in the future be initiated against the parties and others following the announcement of the Merger; the risks of expanding the Corporation’s business into new territories; the inability to consummate the Merger due to the failure to satisfy other conditions to complete the Merger; the risks that the Merger disrupts our current plans and operations; the potential effect of the announcement and or consummation of the Merger on relationships, including with associates, competitors, employees, and customers; the risk that management’s attention is diverted from other matters of the business to focus on the Merger; the risk that the transaction and/or integration costs are greater than expected; the risks that personnel, business, operational, regulatory, or other issues arise during the integration of the SimplyBank; the occurrence of any event, change, or other circumstances that could give rise to the termination of the Merger Agreement; and other risks described in our filings with the SEC. ​ We may be unable to retain personnel successfully as a result of the acquisition. ​ The success of the Merger will depend in part on the Corporation’s ability to retain the talents and dedication of key employees from SimplyBank.
Removed
Under this program, the SBA guaranteed 100% of the amounts loaned under the PPP The Corporation made total loans under the PPP program in the amount of $275.1 million, of which all has been forgiven by the SBA.
Added
It is possible that these employees may decide not to remain with the Corporation.
Removed
The Corporation may be exposed to credit risk on a PPP loan (even if such loan has been forgiven) if a determination is made by the SBA that there is a deficiency in the manner in which these loans were originated, funded, or serviced.
Added
If the Corporation is unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company, the Corporation could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how and incur unanticipated recruitment costs.
Removed
If a deficiency is identified, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Corporation. ​ 17 Table of Contents Geographic concentration of the Corporation’s markets makes our business highly susceptible to local economic conditions and a downturn in local economic conditions may adversely affect our business.
Added
If key employees terminate their employment, the Corporation’s business activities may be adversely affected and the Corporation will incur costs to locate or retain suitable replacements, or may be unable to locate or retain suitable replacements at all. ​ We may be unable to retain customers as a result of the acquisition. ​ The success of the Merger will depend in part on the Corporation’s ability to retain some of its and SimplyBank’s customers.
Removed
Management has determined to initially replace LIBOR as an index for any new adjustable-rate loans with the Secured Overnight Finance Rate (“SOFR”). However, the transition from LIBOR could create considerable costs and additional risk for us. Since SOFR is calculated differently, payments under contracts indexed to new rates will differ from those indexed to LIBOR.
Added
It is possible that current customers of SimplyBank or the Corporation may decide to move their banking activities as a result of the Merger.
Removed
The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design, and hedging strategies. Further, our failure to adequately manage this transition process with our customers could impact our reputation and may subject us to disputes or litigation with our customers over the appropriateness or comparability to LIBOR of the substitute indices.
Added
If the Corporation is unable to retain its or SimplyBank’s key customers, loses a large number of customers, or otherwise does not realize all of the anticipated benefits of the Merger, it could have a material adverse effect on the Corporation’s business, financial condition, and result of operations.
Removed
An increase in nonperforming loans could result in an increase in the provision for loan 19 Table of Contents losses and an increase in loan charge-offs, both of which could have a material adverse effect on the Corporation’s business, financial condition, and results of operations. ​ The Corporation’s accounting estimates and risk management processes rely on analytical and forecasting models, which, if inadequate, may result in a material adverse effect on our business, financial condition, or results of operation. ​ The processes the Corporation uses to estimate its allowance for credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on the Corporation’s financial condition and results of operations, depend upon the use of analytical and forecasting models.
Added
Risks Related to Economic and Market Conditions Economic conditions have affected and could adversely affect our revenue and profits.
Removed
Failure to successfully keep pace with technological change affecting the financial services industry could negatively affect the Corporation’s growth, revenue, and profit. ​ A lack of liquidity could affect our operations and jeopardize our financial condition. ​ The Corporation requires liquidity to meet our deposit and other obligations as they come due.
Added
On March 8, 2023, Silvergate Bank announced its decision to voluntarily liquidate its assets and wind down its operations. On March 10, 2023, the California Department of Financial Protection and Innovation (the “DFPI”) took possession of Silicon Valley Bank, citing inadequate liquidity and solvency.
Added
On March 12, 2023, Signature Bank was closed by the New York State Department of Financial Services. On May 1, 2023, the DFPI took possession of First Republic Bank citing that it was conducting its business in an unsafe or unsound manner and being in a condition that is unsafe or unsound to transact banking business.
Added
In each instance the FDIC was appointed as a receiver for the failed institution.
Added
There were a number of reasons for the failure of these institutions including, but not limited to, elevated levels of uninsured deposits, liquidity concerns, and losses in the financial institution’s long-term securities holdings. ​ These events impacted the confidence of investors and customers in financial institutions as a whole.
Added
It led regulators, investors, and institutions to focus on the on-balance sheet liquidity, customer deposit base, including level of deposits uninsured by the FDIC, the amount of accumulated other comprehensive loss, capital levels, interest rate risk management, and securities holdings of financial institutions.
Added
If any additional financial institutions fail in a similar manner as those financial institutions that failed in 2022, our stock price and deposit base could be negatively impacted. ​ As a result of these failures, enhanced scrutiny from regulators and potential new legislation may impact our ability to operate.
Added
Depending upon any adopted change in legislation or directives from regulators, we may need to adjust our strategy and operations to comply with such changing laws or regulatory directives and it could materially impact our operating results. ​ Continued elevated levels of inflation could adversely impact our business and results of operations.
Added
The continued effects from elevated levels of inflation recently experienced could also increase volatility and uncertainty in the business environment, which 17 Table of Contents could adversely affect loan demand and our clients’ ability to repay indebtedness.
Added
Such an interest rate environment may also result in a decrease in our deposit base, potentially leading to an impact on our liquidity.
Added
While the lower payment amounts we would pay on deposits and other interest-bearing liabilities in a declining rate environment may increase our interest income, some depositors may use cash in other manners in an attempt earn greater returns than those interest rates paid on deposits, which could lead to a decline in our liquidity.
Added
Declining rates also may reduce the demand for new deposits and other interest-bearing liabilities.
Added
Accordingly, changes in interest rates could adversely affect our results of operations and financial condition. ​ Conversely, if the interest rates paid on deposits and other interest-bearing liabilities increase at a faster rate than the interest rates received on loans and other interest-earning assets, our net interest income, and, therefore, our earnings, could be adversely affected.
Added
In addition, we face additional risks of loss of key personnel from our acquisition of SimplyBank, as discussed in the Risk Factor titled “ We may be unable to retain personnel successfully as a result of the acquisition. ” Frequently, we compete in the market for talent with entities that are not subject to comprehensive regulation.
Added
If the Corporation is unable to sufficiently maintain or grow its deposits to meet liquidity objectives, it may be subject to paying higher funding costs to achieve those liquidity objectives.
Added
In addition, large loans, letters of credit, and contracts with individual counterparties in our portfolio magnify the credit risk that we face, as the impact of large borrowers and counterparties not repaying their loans or performing according to the terms of their contracts would have a disproportionately significant impact on our credit losses and reserves. ​ The Corporation has significant exposure to risks associated with commercial and commercial real estate loans. ​ As of December 31, 2023, approximately 57.5% of the Corporation’s loan portfolio consisted of commercial and commercial real estate loans.
Added
The deterioration of one or a few of these loans could cause a significant increase in nonperforming loans and a reduction in interest income.
Added
Any failure in the Corporation’s analytical or forecasting models could have a material adverse effect on the Corporation’s business, financial condition, and results of operations. ​ The Financial Accounts Standards Board adopted a new accounting standard, effective January 1, 2020, that represents a comprehensive change in estimating the allowance for credit losses from the previous “incurred loss” model of losses inherent in the loan portfolio to a current “expected loss” model (“CECL”), which encompasses losses expected to be incurred over the life of the portfolio.
Added
CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses. The Corporation implemented the CECL for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.
Added
This change in methodology may require us to increase our allowance for loan losses.
Added
The effective use of technology can increase efficiency and enable financial institutions to better serve customers and to reduce costs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOne of the buildings in Danville is leased and the lease expires on December 31, 2023 and the other five buildings are held in fee. Facilities of the Corporation’s banking center in Wayne County includes an office in Fairfield, Illinois. This building is held in fee.
Biggest changeThis building is held in fee. Facilities of the Corporation’s banking center in Vermilion County include four offices in Danville, Illinois, and an office in Westville, Illinois. One of the buildings in Danville is leased and the lease expires on December 31, 2028 and the other four buildings are held in fee.
Facilities of the Corporation’s loan production offices, include an office in Bloomington, Indiana, an office in Carmel, Indiana, an office in Evansville, Indiana, an office in Murfreesboro, Tennessee, and an office in Brentwood, Tennessee. The loan production offices are leased by the Bank.
Facilities of the Corporation’s loan production offices, include an office in Bloomington, Indiana, an office in Carmel, Indiana, an office in Evansville, Indiana, an office in Fort Wayne, Indiana, an office in Murfreesboro, Tennessee, and an office in Brentwood, Tennessee. The loan production offices are leased by the Bank.
Facilities of the Corporation’s banking center in Todd County include an office in Elkton, Kentucky. The building is held in fee. Facilities of the Corporation’s banking center in Trigg County include an office in Cadiz, Kentucky. The building is held in fee. Facilities of the Corporation’s banking center in Warren County include two offices in Bowling Green, Kentucky.
Facilities of the Corporation’s banking center in Trigg County include an office in Cadiz, Kentucky. The building is held in fee. Facilities of the Corporation’s banking center in Warren County include an office in Bowling Green, Kentucky. The building is held in fee.
Facilities of the Corporation’s banking center in Franklin County include an office in Benton, Illinois. This building is held in fee. Facilities of the Corporation’s banking center in Jasper County include an office in Newton, Illinois. This building is held in fee. Facilities of the Corporation’s banking centers in Jefferson County include an office and a drive-up facility in Mt.
Facilities of the Corporation’s banking center in Jasper County include an office in Newton, Illinois. This building is held in fee. Facilities of the Corporation’s banking centers in Jefferson County include an office and a drive-up facility in Mt. Vernon, Illinois. Both buildings are held in fee.
This building is held in fee. Facilities of the Corporation’s banking centers in Coles County include an office in Charleston, Illinois and an office in Mattoon, Illinois. These buildings are held in fee. Facilities of the Corporation’s banking centers in Crawford County include its main office and a drive-up facility in Robinson, Illinois. Both buildings are held in fee.
Facilities of the Corporation’s banking centers in Crawford County include its main office and a drive-up facility in Robinson, Illinois. Both buildings are held in fee. Facilities of the Corporation’s banking center in Franklin County include an office in Benton, Illinois. This building is held in fee.
The buildings are held in fee. Facilities of the Corporation’s banking center in Fulton County include two offices in Fulton, Kentucky. The buildings are held in fee. 28 Table of Contents Facilities of the Corporation’s banking center in Hancock County include an office in Hawesville, Kentucky, and an office in Lewisport, Kentucky. The buildings are held in fee.
Facilities of the Corporation’s banking center in Hancock County include an office in Hawesville, Kentucky, and an office in Lewisport, Kentucky. The buildings are held in fee. Facilities of the Corporation’s banking center in Hopkins County include two offices in Madisonville, Kentucky.
Vernon, Illinois. Both buildings are held in fee. Facilities of the Corporation’s banking center in Lawrence County include an office in Lawrenceville, Illinois. This building is held in fee. Facilities of the Corporation’s banking centers in Livingston include two offices in Pontiac, Illinois. Both buildings are held in fee.
Facilities of the Corporation’s banking center in Lawrence County include an office in Lawrenceville, Illinois. This building is held in fee. Facilities of the Corporation’s banking centers in Livingston include two offices in Pontiac, Illinois. Both buildings are held in fee. Facilities of the Corporation’s banking centers in Marion County include an office and a drive-up facility in Salem, Illinois.
Facilities of the Corporation’s banking centers in Sullivan County include offices in Sullivan, Dugger, and Farmersburg, Indiana. All three buildings are held in fee. Facilities of the Corporation’s banking center in Vanderburgh County include an office in Evansville, Indiana.
Facilities of the Corporation’s banking centers in Sullivan County include offices in Sullivan and Farmersburg, Indiana. Both buildings are held in fee. Facilities of the Corporation’s banking center in Vanderburgh County include an office in Evansville, Indiana. This building is held in fee.
Facilities of the Corporation’s banking centers in Marion County include an office and a drive-up facility in Salem, Illinois. Both buildings are held in fee. Facilities of the Corporation’s banking center in McLean County include two offices in Bloomington, Illinois. A banking center in Bloomington is leased and the lease expires on June 30, 2026.
Both buildings are held in fee. Facilities of the Corporation’s banking center in McLean County include two offices in Bloomington, Illinois. A banking center in Bloomington is leased and the lease expires on June 30, 2026. The other building is held in fee. Facilities of the Corporation’s banking center in Richland County includes an office in Olney, Illinois.
Facilities of the Corporation’s banking center in Breckinridge County includes an office in Cloverport, Kentucky. The building is held in fee. Facilities of the Corporation’s banking center in Calloway County include two offices in Murray, Kentucky. The buildings are held in fee. Facilities of the Corporation’s banking center in Christian County include three offices in Hopkinsville, Kentucky.
The building is held in fee. Facilities of the Corporation’s banking center in Christian County include three offices in Hopkinsville, Kentucky. The buildings are held in fee. Facilities of the Corporation’s banking center in Fulton County include two offices in Fulton, Kentucky. The buildings are held in fee.
This building is held in fee. 27 Table of Contents Facilities of the Corporation’s banking centers in Vermillion County include two offices in Clinton, Indiana and an office in Cayuga, Indiana. All three buildings are held in fee.
Facilities of the Corporation’s banking centers in Vermillion County include two offices in Clinton, Indiana and an office in Cayuga, Indiana. All three buildings are held in fee. 29 Table of Contents Facilities of the Corporation’s banking center in Champaign County include two offices in Champaign, Illinois, an office in Mahomet, Illinois, and an office in Urbana, Illinois.
In addition, the Bank holds in fee seven other branch buildings. One of the branch buildings is a single-story 36,000-square-foot building which is located in a Terre Haute suburban area. Two other branch bank buildings are leased by the Bank. The expiration dates on the leases are May 30, 2023 and May 31, 2025.
In addition, the Bank holds in fee six other branch buildings. One of the branch buildings is a single-story 36,000-square-foot building which is located in a Terre Haute suburban area. One other branch bank building is leased by the Bank. The expiration date on the lease is May 31, 2028.
Facilities of the Corporation’s banking center in Hopkins County include two offices in Madisonville, Kentucky. The buildings are held in fee. Facilities of the Corporation’s banking center in Marshall County include an office in Benton, Kentucky, and an office in Calvert City, Kentucky. The buildings are held in fee.
The buildings are held in fee. 30 Table of Contents Facilities of the Corporation’s banking center in Marshall County include an office in Benton, Kentucky, and an office in Calvert City, Kentucky. The buildings are held in fee. Facilities of the Corporation’s banking center in Todd County include an office in Elkton, Kentucky. The building is held in fee.
Facilities of the Corporation’s banking center in Houston County include an office in Erin, Tennessee. The building is held in fee. Facilities of the Corporation’s banking center in Montgomery County include three offices in Clarksville, Tennessee. The buildings are held in fee.
Facilities of the Corporation’s banking center in Cheatham County include an office in Ashland City, Tennessee, an office in Kingston Springs, Tennessee, and an office in Pleasant View, Tennessee. The buildings are held in fee. Facilities of the Corporation’s banking center in Montgomery County include three offices in Clarksville, Tennessee. The buildings are held in fee.
One of the banking centers in Champaign is leased and the lease expires on December 31, 2027. The banking center in Mahomet is leased and the lease expires on June 4, 2024. The banking center in Urbana is held in fee. Facilities of the Corporation’s banking center in Clark County include an office in Marshall, Illinois.
One of the banking centers in Champaign is held in fee while the land is leased. The land lease expires September 6, 2036. One of the banking centers in Champaign is leased and the lease expires on December 31, 2027. The banking center in Mahomet is leased and the lease expires on June 4, 2024.
The other building is held in fee. Facilities of the Corporation’s banking center in Richland County includes an office in Olney, Illinois. This building is held in fee. Facilities of the Corporation’s banking center in Vermilion County include four offices in Danville, Illinois, an office in Westville, Illinois, and an office in Ridge Farm, Illinois.
Facilities of the Corporation’s banking center in Wayne County includes an office in Fairfield, Illinois. This building is held in fee. Facilities of the Corporation’s banking center in Breckinridge County includes an office in Cloverport, Kentucky. The building is held in fee. Facilities of the Corporation’s banking center in Calloway County include an office in Murray, Kentucky.
Facilities of the Corporation’s banking center in Champaign County include two offices in Champaign, Illinois, an office in Mahomet, Illinois, and an office in Urbana, Illinois. One of the banking centers in Champaign is held in fee while the land is leased. The land lease expires September 6, 2036.
The banking center in Urbana is held in fee. Facilities of the Corporation’s banking center in Clark County include an office in Marshall, Illinois. This building is held in fee. Facilities of the Corporation’s banking centers in Coles County include an office in Charleston, Illinois. This building is held in fee.
The expiration dates on the leases are January 31, 2024, April 30, 2028, August 15, 2025, February 28, 2026, and September 30, 2026. Facilities of the Corporation’s subsidiary, FFB Risk Management Co., Inc., include an office facility in Las Vegas, Nevada. This office facility is leased.
The expiration dates on the leases are January 31, 2029, April 30, 2028, August 15, 2025, November 30, 2030, February 28, 2026, and September 30, 2026. ​
Removed
A banking center in Bowling Green is leased and the lease expires on September 30, 2023. The other building is held in fee. Facilities of the Corporation’s banking center in Cheatham County include an office in Ashland City, Tennessee, an office in Kingston Springs, Tennessee, and an office in Pleasant View, Tennessee. The buildings are held in fee.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS (a) There are no material pending legal proceedings to which the Corporation or its subsidiaries is a party or of which any of their property is the subject, other than ordinary routine litigation incidental to its business. (b) Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 29 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS (a) There are no material pending legal proceedings to which the Corporation or its subsidiaries is a party or of which any of their property is the subject, other than ordinary routine litigation incidental to its business. (b) Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. ​ 31 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures ​ 29 PART II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 30 Item 6. Selected Financial Data ​ 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 33 Item 7A.
Biggest changeItem 4. Mine Safety Disclosures ​ 31 PART II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 32 Item 6. Selected Financial Data ​ 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 35 Item 7A.
Quantitative and Qualitative Disclosures about Market Risk ​ 44 Item 8. Financial Statements and Supplementary Data ​ 45
Quantitative and Qualitative Disclosures about Market Risk ​ 47 Item 8. Financial Statements and Supplementary Data ​ 48

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table gives quarterly high and low trade prices and dividends per share during each quarter for 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ Cash ​ ​ ​ ​ ​ ​ ​ Cash ​ ​ Trade Price ​ Dividends ​ Trade Price ​ Dividends Quarter ended High Low Declared High Low Declared March 31 ​ $ 46.75 ​ $ 43.09 ​ ​ ​ ​ $ 46.31 $ 38.30 ​ ​ June 30 ​ $ 45.16 ​ $ 41.42 ​ $ 0.54 ​ $ 45.62 ​ $ 40.73 ​ $ 0.53 September 30 ​ $ 48.76 ​ $ 42.94 ​ ​ ​ ​ $ 42.21 ​ $ 38.33 ​ December 31 ​ $ 49.26 ​ $ 44.82 ​ $ 0.74 ​ $ 45.29 ​ $ 41.96 ​ $ 0.63 ​ ​ 30 Table of Contents The graph below represents the five-year total return of the Corporation’s stock.
Biggest changeThe following table gives quarterly high and low trade prices and dividends per share during each quarter for 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ ​ Cash ​ ​ ​ ​ ​ ​ ​ Cash ​ ​ Trade Price ​ Dividends ​ Trade Price ​ Dividends Quarter ended High Low Declared High Low Declared March 31 ​ $ 45.36 ​ $ 36.98 ​ ​ ​ ​ $ 46.75 ​ $ 43.09 ​ ​ ​ June 30 ​ $ 37.15 ​ $ 31.68 ​ $ 0.54 ​ $ 45.16 ​ $ 41.42 ​ $ 0.54 September 30 ​ $ 39.02 ​ $ 32.30 ​ ​ ​ ​ $ 48.76 ​ $ 42.94 ​ ​ ​ December 31 ​ $ 44.66 ​ $ 31.83 ​ $ 0.45 ​ $ 49.26 ​ $ 44.82 ​ $ 0.74 ​ ​ 32 Table of Contents The graph below represents the five-year total return of the Corporation’s stock.
Following is certain information regarding shares of common stock purchased by the Corporation during the quarter ended December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (c) ​ ​ ​ ​ ​ ​ ​ ​ Total Number Of Shares ​ (c) ​ ​ (a) ​ (b) ​ Purchased As Part Of ​ Maximum ​ ​ Total Number Of ​ Average Price ​ Publicly Announced Plans ​ Number of Shares That May Yet ​ Shares Purchased Paid Per Share ​ Or Programs * Be Purchased * October 1-31, 2022 ​ — ​ — ​ — ​ — November 1-30, 2022 — ​ — — — December 1-31, 2022 — ​ — — — Total — ​ — — 830,220 ​ ​
Following is certain information regarding shares of common stock purchased by the Corporation during the quarter ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (c) ​ ​ ​ ​ ​ ​ ​ ​ Total Number Of Shares ​ (c) ​ ​ (a) ​ (b) ​ Purchased As Part Of ​ Maximum ​ ​ Total Number Of ​ Average Price ​ Publicly Announced Plans ​ Number of Shares That May Yet ​ Shares Purchased Paid Per Share ​ Or Programs * Be Purchased * October 1-31, 2023 ​ — ​ — ​ — ​ — November 1-30, 2023 — ​ — — — December 1-31, 2023 — ​ — — — Total — ​ — — 518,860 ​ ​
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. MARKET AND DIVIDEND INFORMATION (a) As of March 1, 2023 shareholders owned 12,065,888 shares of the Corporation’s common stock. The stock is traded on the NASDAQ Global Select Market under the symbol “THFF”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. MARKET AND DIVIDEND INFORMATION (a) As of March 1, 2024 shareholders owned 11,814,093 shares of the Corporation’s common stock. The stock is traded on the NASDAQ Global Select Market under the symbol “THFF”.
The five year total return for our stock during this time was 15.20%.
The five year total return for our stock during this time was 23.83%.
There were 626,574 and 981,132 purchases of common stock by the Corporation during the years ended December 31, 2022 and December 31, 2021. The Corporation contributed 29,966 shares of treasury stock to the ESOP 31 Table of Contents in November of 2022.
There were 319,664 and 626,574 purchases of common stock by the Corporation during the years ended December 31, 2023 and December 31, 2022. The Corporation contributed 40,496 shares of treasury stock to the ESOP 33 Table of Contents in November of 2023.
On March 1, 2023, approximately 7,115 shareholders of record held our common stock. Historically, the Corporation has paid cash dividends semi-annually and currently expects that comparable cash dividends will continue to be paid in the future.
On March 1, 2024, approximately 9,635 shareholders of record held our common stock. Historically, the Corporation paid cash dividends semi-annually. Beginning with the dividend declared in the fourth quarter 2023, the Corporation will be paying cash dividends quarterly, and expects that comparable cash dividends will continue to be paid in the future.
During this same period, the return on The Russell 2000 Index was 22.41% and the SNL Index of Banks $1 - $5 Billion had a return of 14.88%. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending ​ ​ Index 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 First Financial Corporation 100.00 90.59 105.80 92.32 110.29 115.20 Russell 2000 100.00 88.99 111.70 134.00 153.85 122.41 SNL Bank $1B-$5B 100.00 81.23 103.68 96.33 134.76 114.88 ​ (b) Not applicable.
During this same period, the return on The Russell 2000 Index was 60.85% and the SNL Index of Banks $1 - $5 Billion had a return of 30.91%. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending ​ ​ Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 First Financial Corporation 100.00 116.79 101.91 121.74 127.16 123.83 Russell 2000 100.00 125.53 150.58 172.90 137.56 160.85 SNL Bank $1B-$5B 100.00 127.64 118.58 165.90 141.42 130.91 ​ (b) Not applicable.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeSELECTED FINANCIAL DATA FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollar amounts in thousands, except per share amounts) 2022 2021 2020 2019 2018 BALANCE SHEET DATA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,989,281 ​ $ 5,175,099 ​ $ 4,560,520 ​ $ 4,023,250 ​ $ 3,008,718 ​ Securities ​ 1,330,481 ​ 1,359,514 ​ 1,020,744 ​ 926,717 ​ 784,916 ​ Loans ​ 3,067,438 ​ 2,815,895 ​ 2,610,294 ​ 2,656,390 ​ 1,953,988 ​ Deposits ​ 4,368,871 ​ 4,409,569 ​ 3,755,945 ​ 3,275,357 ​ 2,436,727 ​ Borrowings ​ 80,464 ​ 109,311 ​ 121,920 ​ 111,092 ​ 69,656 ​ Shareholders’ equity ​ 475,293 ​ 582,576 ​ 596,992 ​ 557,608 ​ 442,701 ​ INCOME STATEMENT DATA ​ ​ ​ ​ ​ ​ Interest income ​ 183,301 ​ 152,198 ​ 160,485 ​ 149,121 ​ 126,224 ​ Interest expense ​ 18,259 ​ 8,797 ​ 14,139 ​ 17,469 ​ 9,645 ​ Net interest income ​ 165,042 ​ 143,401 ​ 146,346 ​ 131,652 ​ 116,579 ​ Provision for credit losses ​ (2,025) ​ 2,466 ​ 10,528 ​ 4,700 ​ 5,768 ​ Other income ​ 46,716 ​ 42,084 ​ 42,476 ​ 38,452 ​ 38,206 ​ Other expenses ​ 126,023 ​ 117,406 ​ 112,758 ​ 104,405 ​ 91,289 ​ Net income ​ 71,109 ​ 52,987 ​ 53,844 ​ 48,872 ​ 46,583 ​ PER SHARE DATA: ​ ​ ​ ​ ​ ​ Net Income ​ 5.82 ​ 4.02 ​ 3.93 ​ 3.80 ​ 3.80 ​ Cash dividends ​ 1.17 ​ 1.06 ​ 1.04 ​ 1.03 ​ 1.02 ​ PERFORMANCE RATIOS: ​ ​ ​ ​ ​ ​ Return on average assets ​ 1.41 % 1.10 % 1.25 % 1.42 % 1.57 % Return on average shareholders’ equity ​ 14.37 ​ 8.87 ​ 9.07 ​ 9.83 ​ 10.98 ​ Average total capital to average assets ​ 10.64 ​ 13.36 ​ 14.31 ​ 15.05 ​ 14.93 ​ Average shareholders’ equity to average assets ​ 9.81 ​ 12.41 ​ 13.77 ​ 14.46 ​ 14.25 ​ Dividend payout ​ 21.68 ​ 28.22 ​ 26.58 ​ 27.69 ​ 26.85 ​ ​ ​ 32 Table of Contents
Biggest changeSELECTED FINANCIAL DATA FIVE YEAR COMPARISON OF SELECTED FINANCIAL DATA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollar amounts in thousands, except per share amounts) 2023 2022 2021 2020 2019 BALANCE SHEET DATA ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 4,851,146 ​ $ 4,989,281 ​ $ 5,175,099 ​ $ 4,560,520 ​ $ 4,023,250 ​ Securities ​ 1,259,137 ​ 1,330,481 ​ 1,359,514 ​ 1,020,744 ​ 926,717 ​ Loans ​ 3,167,821 ​ 3,067,438 ​ 2,815,895 ​ 2,610,294 ​ 2,656,390 ​ Deposits ​ 4,090,068 ​ 4,368,871 ​ 4,409,569 ​ 3,755,945 ​ 3,275,357 ​ Borrowings ​ 175,798 ​ 80,464 ​ 109,311 ​ 121,920 ​ 111,092 ​ Shareholders’ equity ​ 527,976 ​ 475,293 ​ 582,576 ​ 596,992 ​ 557,608 ​ INCOME STATEMENT DATA ​ ​ ​ ​ ​ ​ Interest income ​ 228,397 ​ 183,301 ​ 152,198 ​ 160,485 ​ 149,121 ​ Interest expense ​ 61,135 ​ 18,259 ​ 8,797 ​ 14,139 ​ 17,469 ​ Net interest income ​ 167,262 ​ 165,042 ​ 143,401 ​ 146,346 ​ 131,652 ​ Provision for credit losses ​ 7,295 ​ (2,025) ​ 2,466 ​ 10,528 ​ 4,700 ​ Other income ​ 42,702 ​ 46,716 ​ 42,084 ​ 42,476 ​ 38,452 ​ Other expenses ​ 130,176 ​ 126,023 ​ 117,406 ​ 112,758 ​ 104,405 ​ Net income ​ 60,672 ​ 71,109 ​ 52,987 ​ 53,844 ​ 48,872 ​ PER SHARE DATA: ​ ​ ​ ​ ​ ​ Net Income ​ 5.08 ​ 5.82 ​ 4.02 ​ 3.93 ​ 3.80 ​ Cash dividends ​ 1.28 ​ 1.17 ​ 1.06 ​ 1.04 ​ 1.03 ​ PERFORMANCE RATIOS: ​ ​ ​ ​ ​ ​ Return on average assets ​ 1.26 % 1.41 % 1.10 % 1.25 % 1.42 % Return on average shareholders’ equity ​ 12.47 ​ 14.37 ​ 8.87 ​ 9.07 ​ 9.83 ​ Average total capital to average assets ​ 10.95 ​ 10.64 ​ 13.36 ​ 14.31 ​ 15.05 ​ Average shareholders’ equity to average assets ​ 10.13 ​ 9.81 ​ 12.41 ​ 13.77 ​ 14.46 ​ Dividend payout ​ 19.41 ​ 21.68 ​ 28.22 ​ 26.58 ​ 27.69 ​ ​ ​ 34 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLOAN PORTFOLIO Loans outstanding by major category as of December 31 for each of the last five years and the maturities at year end 2022 are set forth in the following analyses. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollar amounts in thousands) 2022 2021 2020 2019 2018 Loan Category ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 1,798,260 ​ $ 1,674,066 ​ $ 1,521,711 ​ $ 1,584,447 ​ $ 1,166,352 Residential ​ 673,464 ​ 664,509 ​ 604,652 ​ 682,077 ​ 443,670 Consumer ​ 588,539 ​ 474,026 ​ 479,750 ​ 386,006 ​ 341,041 TOTAL ​ $ 3,060,263 ​ $ 2,812,601 ​ $ 2,606,113 ​ $ 2,652,530 ​ $ 1,951,063 39 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After One ​ ​ ​ ​ ​ ​ ​ ​ Within But Within After Five (Dollar amounts in thousands) ​ One Year ​ Five Years ​ Years ​ Total MATURITY DISTRIBUTION ​ ​ ​ ​ Commercial, financial and agricultural ​ $ 642,069 ​ $ 769,205 ​ $ 386,986 ​ $ 1,798,260 TOTAL ​ ​ ​ ​ Residential ​ ​ ​ ​ ​ ​ 673,464 Consumer ​ ​ ​ ​ ​ ​ 588,539 TOTAL ​ ​ ​ ​ ​ ​ $ 3,060,263 Loans maturing after one year with: ​ ​ ​ ​ Fixed interest rates ​ ​ ​ ​ $ 387,285 ​ $ 344,771 ​ Variable interest rates ​ ​ ​ ​ 381,920 ​ 42,215 ​ TOTAL ​ ​ ​ ​ $ 769,205 ​ $ 386,986 ​ ​ ALLOWANCE FOR CREDIT LOSSES The activity in the Corporation’s allowance for credit losses is shown in the following analysis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollar amounts in thousands) 2022 2021 2020 2019 2018 Amount of loans outstanding at December 31, ​ $ 3,060,263 ​ $ 2,812,601 ​ $ 2,606,113 ​ $ 2,652,530 ​ $ 1,951,063 ​ Average amount of loans by year ​ $ 2,884,053 ​ $ 2,602,344 ​ $ 2,702,225 ​ $ 2,270,313 ​ $ 1,855,092 ​ Allowance for credit losses at beginning of year ​ $ 48,305 ​ $ 44,076 ​ $ 19,943 ​ $ 20,436 ​ $ 19,909 ​ Loans charged off: ​ ​ ​ ​ ​ ​ Commercial ​ 3,917 ​ 2,158 ​ 1,097 ​ 2,616 ​ 1,122 ​ Residential ​ 657 ​ 812 ​ 944 ​ 1,050 ​ 841 ​ Consumer ​ 11,132 ​ 5,246 ​ 6,355 ​ 7,007 ​ 6,868 ​ Total loans charged off ​ 15,706 ​ 8,216 ​ 8,396 ​ 10,673 ​ 8,831 ​ Recoveries of loans previously charged off: ​ ​ ​ ​ ​ ​ Commercial ​ 2,062 ​ 1,069 ​ 856 ​ 1,092 ​ 606 ​ Residential ​ 759 ​ 616 ​ 657 ​ 1,360 ​ 639 ​ Consumer ​ 6,384 ​ 3,884 ​ 3,404 ​ 3,028 ​ 2,345 ​ Total recoveries ​ 9,205 ​ 5,569 ​ 4,917 ​ 5,480 ​ 3,590 ​ Net loans charged off ​ 6,501 ​ 2,647 ​ 3,479 ​ 5,193 ​ 5,241 ​ Provision charged to expense ​ (2,025) ​ 2,466 ​ 10,528 ​ 4,700 ​ 5,768 ​ CECL adoption ​ — ​ — ​ 17,084 ​ — ​ — ​ PCD ACL on acquired loans ​ — ​ 4,410 ​ — ​ — ​ — ​ Balance at end of year ​ $ 39,779 ​ $ 48,305 ​ $ 44,076 ​ $ 19,943 ​ $ 20,436 ​ Ratio of net charge-offs during period to average loans outstanding ​ 0.23 % 0.10 % 0.13 % 0.23 % 0.22 % ​ The allowance is maintained at an amount management believes sufficient to absorb expected losses in the loan portfolio.
Biggest changePeriodic review of this exposure is performed to identify and monitor any potential weaknesses within a specific credit. ​ ALLOWANCE FOR CREDIT LOSSES The activity in the Corporation’s allowance for credit losses is shown in the following analysis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollar amounts in thousands) 2023 2022 2021 2020 2019 Amount of loans outstanding at December 31, ​ $ 3,160,072 ​ $ 3,060,263 ​ $ 2,812,601 ​ $ 2,606,113 ​ $ 2,652,530 ​ Average amount of loans by year ​ $ 3,111,784 ​ $ 2,884,053 ​ $ 2,602,344 ​ $ 2,702,225 ​ $ 2,270,313 ​ Allowance for credit losses at beginning of year ​ $ 39,779 ​ $ 48,305 ​ $ 44,076 ​ $ 19,943 ​ $ 20,436 ​ Loans charged off: ​ ​ ​ ​ ​ ​ Commercial ​ 966 ​ 3,917 ​ 2,158 ​ 1,097 ​ 2,616 ​ Residential ​ 216 ​ 657 ​ 812 ​ 944 ​ 1,050 ​ Consumer ​ 14,314 ​ 11,132 ​ 5,246 ​ 6,355 ​ 7,007 ​ Total loans charged off ​ 15,496 ​ 15,706 ​ 8,216 ​ 8,396 ​ 10,673 ​ Recoveries of loans previously charged off: ​ ​ ​ ​ ​ ​ Commercial ​ 1,083 ​ 2,062 ​ 1,069 ​ 856 ​ 1,092 ​ Residential ​ 292 ​ 759 ​ 616 ​ 657 ​ 1,360 ​ Consumer ​ 6,814 ​ 6,384 ​ 3,884 ​ 3,404 ​ 3,028 ​ Total recoveries ​ 8,189 ​ 9,205 ​ 5,569 ​ 4,917 ​ 5,480 ​ Net loans charged off ​ 7,307 ​ 6,501 ​ 2,647 ​ 3,479 ​ 5,193 ​ Provision charged to expense ​ 7,295 ​ (2,025) ​ 2,466 ​ 10,528 ​ 4,700 ​ CECL adoption ​ — ​ — ​ — ​ 17,084 ​ — ​ PCD ACL on acquired loans ​ — ​ — ​ 4,410 ​ — ​ — ​ Balance at end of year ​ $ 39,767 ​ $ 39,779 ​ $ 48,305 ​ $ 44,076 ​ $ 19,943 ​ Ratio of net charge-offs during period to average loans outstanding ​ 0.23 % 0.23 % 0.10 % 0.13 % 0.23 % ​ The allowance is maintained at an amount management believes sufficient to absorb expected losses in the loan portfolio.
The negative provision for the year was the result of several factors. The first was the annual model recalibration. Each year, in the first quarter, management reviews each model variable to determine if adjustments are necessary to improve the model’s predictability. In the first quarter 2022 the delay periods were shortened to pick up more recent losses.
The negative provision for the first quarter of 2022 was the result of several factors. The first was the annual model recalibration. Each year, in the first quarter, management reviews each model variable to determine if adjustments are necessary to improve the model’s predictability. In the first quarter 2022 the delay periods were shortened to pick up more recent losses.
The portfolio structure will continue to provide cash flows to be reinvested during 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 year and less 1 to 5 years 5 to 10 years Over 10 Years 2022 (Dollar amounts in thousands) Balance ​ Rate Balance Rate Balance Rate Balance Rate Total U.S. government sponsored entity mortgage-backed securities and agencies and U.S.
The portfolio structure will continue to provide cash flows to be reinvested during 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 year and less 1 to 5 years 5 to 10 years Over 10 Years 2023 (Dollar amounts in thousands) Balance ​ Rate Balance Rate Balance Rate Balance Rate Total U.S. government sponsored entity mortgage-backed securities and agencies and U.S.
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale securities was needed at December 31, 2022. Goodwill .
Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale securities was needed at December 31, 2023. Goodwill .
The net recovery on the sale of $361 thousand includes the charge-off of the seven loans of $2,145 thousand, netted by the $2,072 thousand reserve on those loans, previously charged off in the period, and the $434 thousand unamortized discount 37 Table of Contents remaining from the acquisitions.
The net recovery on the sale of $361 thousand includes the charge-off of the seven loans of $2,145 thousand, netted by the $2,072 thousand reserve on those loans, previously 39 Table of Contents charged off in the period, and the $434 thousand unamortized discount remaining from the acquisitions.
Based on management’s analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate. Net charge-offs for 2022 were $6.5 million as compared to $2.6 million for 2021 and $3.5 million for 2020.
Based on management’s analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate. Net charge-offs for 2023 were $7.3 million as compared to $6.5 million for 2022 and $2.6 million for 2021.
Liquidity Risk Liquidity is measured by the bank’s ability to raise funds to meet the obligations of its customers, including deposit withdrawals and credit needs. This is accomplished primarily by maintaining sufficient liquid assets in the form of investment securities and core deposits. The Corporation has $10.1 million of investments that mature throughout the coming 12 months.
Liquidity Risk Liquidity is measured by the bank’s ability to raise funds to meet the obligations of its customers, including deposit withdrawals and credit needs. This is accomplished primarily by maintaining sufficient liquid assets in the form of investment securities and core deposits. The Corporation has $12.4 million of investments that mature throughout the coming 12 months.
(2)Interest income includes the effect of tax equivalent adjustments using a federal tax rate of 21%. 36 Table of Contents The following table sets forth the components of net interest income due to changes in volume and rate.
(2)Interest income includes the effect of tax equivalent adjustments using a federal tax rate of 21%. 38 Table of Contents The following table sets forth the components of net interest income due to changes in volume and rate.
The change in non-interest income from 2021 to 2022 was primarily driven by a $4.0 million legal settlement received in February, 2022, and a $2.5 million bank owned life insurance mortality payment. The Corporation does not expect these items to reoccur. NON-INTEREST EXPENSES Non-interest expenses increased to $126.0 million in 2022 from $117.4 million in 2021.
The change in non-interest income from 2021 to 2022 was primarily driven by a $4.0 million legal settlement received in February 2022, and a $2.5 million bank owned life insurance mortality payment. The Corporation does not expect these items to reoccur.
Commitments: The following table details the amount and expected maturities of significant commitments as of December 31, 2022.
Commitments: The following table details the amount and expected maturities of significant commitments as of December 31, 2023.
RESULTS OF OPERATIONS - SUMMARY FOR 2022 COMPARISON OF 2022 TO 2021 Net income for 2022 was $71.1 million, or $5.82 per share versus $53.0 million, or $4.02 per share for 2021. The increase in 2022 net income is primarily due to increased interest rates and growth in earning assets.
COMPARISON OF 2022 TO 2021 Net income for 2022 was $71.1 million, or $5.82 per share versus $53.0 million, or $4.02 per share for 2021. The increase in 2022 net income is primarily due to increased interest rates and growth in earning assets . ​ Net interest income increased $21.6 million in 2022 compared to 2021.
The table below presents the allocation of the allowance to the loan portfolios at year-end. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (Dollar amounts in thousands) 2022 2021 2020 2019 2018 Commercial ​ $ 12,949 ​ $ 18,883 ​ $ 13,925 ​ $ 8,945 ​ $ 9,848 Residential ​ 14,568 ​ 18,316 ​ 19,142 ​ 1,302 ​ 1,313 Consumer ​ 12,104 ​ 10,721 ​ 11,009 ​ 8,304 ​ 7,481 Unallocated ​ 158 ​ 385 ​ — ​ 1,392 ​ 1,794 TOTAL ALLOWANCE FOR CREDIT LOSSES ​ $ 39,779 ​ $ 48,305 ​ $ 44,076 ​ $ 19,943 ​ $ 20,436 ​ NONPERFORMING LOANS Management monitors the components and status of nonperforming loans as a part of the evaluation procedures used in determining the adequacy of the allowance for loan losses.
The table below presents the allocation of the allowance to the loan portfolios at year-end. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (Dollar amounts in thousands) 2023 2022 2021 2020 2019 Commercial ​ $ 13,264 ​ $ 12,949 ​ $ 18,883 ​ $ 13,925 ​ $ 8,945 Residential ​ 14,327 ​ 14,568 ​ 18,316 ​ 19,142 ​ 1,302 Consumer ​ 11,797 ​ 12,104 ​ 10,721 ​ 11,009 ​ 8,304 Unallocated ​ 379 ​ 158 ​ 385 ​ — ​ 1,392 TOTAL ALLOWANCE FOR CREDIT LOSSES ​ $ 39,767 ​ $ 39,779 ​ $ 48,305 ​ $ 44,076 ​ $ 19,943 ​ NONPERFORMING LOANS Management monitors the components and status of nonperforming loans as a part of the evaluation procedures used in determining the adequacy of the allowance for loan losses.
In the footnotes to the financial statements the amount reported for nonperforming loans is the recorded investment 41 Table of Contents which includes accrued interest receivable.
In the footnotes to the financial statements the amount reported for nonperforming loans is the recorded investment which includes accrued interest receivable.
The primary goal of the Asset/Liability Committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors. Interest Rate Risk: Management considers interest rate risk to be the Corporation’s most significant market risk.
Responsibility for management of these functions resides with the Asset/Liability Committee. The primary goal of the Asset/Liability Committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors. Interest Rate Risk: Management considers interest rate risk to be the Corporation’s most significant market risk.
As the related charge offs were previously reserved for and related to acquired loans, the increase in net charge offs for the year does not have a significant impact on the future expected losses. NON-INTEREST INCOME Non-interest income of $46.7 million increased $4.6 million from the $42.1 million earned in 2021.
As the related charge offs were previously reserved for and related to acquired loans, the increase in net charge offs for 2022 does not have a significant impact on the future expected losses. NON-INTEREST INCOME Non-interest income of $42.7 million decreased $4.0 million from the $46.7 million earned in 2022.
Based on management’s analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate. Non-performing loans of $13.4 million at December 31, 2022 decreased from $14.9 million at December 31, 2021.
Based on management’s analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate. Non-performing loans of $24.6 million at December 31, 2023 increased from $9.6 million at December 31, 2022.
The change in interest rates assumes a parallel shift in interest rates of 100 and 200 basis points. Given a 100 basis point increase in rates, net interest income would increase 1.94% over the next 12 months and increase 4.64% over the following 12 months.
The change in interest rates assumes a parallel shift in interest rates of 100, 200, and 300 basis points. Given a 100 basis point increase in rates, net interest income would decrease 1.28% over the next 12 months and increase 1.33% over the following 12 months.
The Corporation from time to time utilizes derivatives to manage interest rate risk. Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Corporation’s risk management strategy. The table below shows the Corporation’s estimated sensitivity profile as of December 31, 2022.
Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Corporation’s risk management strategy. ​ 45 Table of Contents The table below shows the Corporation’s estimated sensitivity profile as of December 31, 2023.
Further discussion of these commitments is included in Note 15 to the consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ One year ​ Over One (Dollar amounts in thousands) Committed or less Year Commitments to extend credit: ​ ​ ​ Unused loan commitments ​ $ 820,027 ​ $ 303,554 ​ $ 516,473 Commercial letters of credit ​ 7,834 ​ 7,834 ​ — ​ Commitments to extend credit, including loan commitments, standby and commercial letters of credit do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.
Further discussion of these commitments is included in Note 15 to the consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ One year ​ Over One (Dollar amounts in thousands) Committed or less Year Commitments to extend credit: ​ ​ ​ Unused loan commitments ​ $ 729,495 ​ $ 286,858 ​ $ 442,927 Commercial letters of credit ​ 7,456 ​ 7,456 ​ — 46 Table of Contents ​ Commitments to extend credit, including loan commitments, standby and commercial letters of credit do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon. ​
Given a 100 basis point decrease in rates, net interest income would decrease 3.30% over the next 12 months and decrease 6.74% over the following 12 months.
Given a 100 basis point decrease in rates, net interest income would increase 0.74% over the next 12 months and decrease 2.08% over the following 12 months.
These include upstream correspondents, the Federal Home Loan Bank, and the Federal Reserve Bank. 43 Table of Contents CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS The Corporation has various financial obligations, including contractual obligations and commitments that may require future cash payments.
The Corporation also has additional sources of liquidity available through secured and unsecured borrowing capacity. These include upstream correspondents, the Federal Home Loan Bank, and the Federal Reserve Bank. CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS The Corporation has various financial obligations, including contractual obligations and commitments that may require future cash payments.
These estimates assume all rate changes occur overnight and management takes no action as a result of this change. ​ ​ ​ ​ ​ ​ ​ ​ ​ Basis Point Percentage Change in Net Interest Income Interest Rate Change 12 months 24 months 36 months Down 200 ​ (6.75) % (13.97) % (19.42) % Down 100 ​ (3.30) ​ (6.74) ​ (9.45) ​ Up 100 ​ 1.94 ​ 4.64 ​ 7.30 ​ Up 200 ​ 1.15 ​ 6.56 ​ 11.91 ​ ​ Typical rate shock analysis does not reflect management’s ability to react and thereby reduce the effects of rate changes, and represents a worst-case scenario.
These estimates assume all rate changes occur overnight and management takes no action as a result of this change. ​ ​ ​ ​ ​ ​ ​ ​ ​ Basis Point Percentage Change in Net Interest Income Interest Rate Change 12 months 24 months 36 months Down 300 ​ 2.45 % (6.68) % (16.82) % Down 200 ​ 1.54 ​ (4.30) ​ (11.06) ​ Down 100 ​ 0.74 ​ (2.08) ​ (5.44) ​ Up 100 ​ (1.28) ​ 1.33 ​ 4.42 ​ Up 200 ​ (5.73) ​ (0.64) ​ 5.73 ​ Up 300 ​ (8.32) ​ (0.66) ​ 9.12 ​ ​ Typical rate shock analysis does not reflect management’s ability to react and thereby reduce the effects of rate changes, and represents a worst-case scenario.
There were also 29,966 shares from the treasury with a value of $1.45 million that were contributed to the ESOP plan in 2022 compared to 31,355 shares with a value of $1.40 million in 2021. Following is an analysis of the components of the Corporation’s balance sheet.
In 2023 dividends declared by the Corporation totaled $0.99 per share. There were also 40,496 shares from the treasury with a value of $1.52 million that were contributed to the ESOP plan in 2023 compared to 29,966 shares with a value of $1.45 million in 2022. Following is an analysis of the components of the Corporation’s balance sheet.
Earning asset yields increased 53 basis points while the rate on interest-bearing liabilities increased by 25 basis points. 35 Table of Contents CONSOLIDATED BALANCE SHEET - AVERAGE BALANCES AND INTEREST RATES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ Average ​ Yield/ Average ​ Yield/ Average ​ Yield/ ​ (Dollar amounts in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate ​ ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ Loans (1) (2) ​ $ 2,884,053 ​ 147,398 5.11 % $ 2,602,344 ​ 128,978 4.96 % $ 2,702,225 ​ 138,302 5.12 % Taxable investment securities ​ 981,453 ​ 21,014 2.14 % 890,563 ​ 13,110 1.47 % 689,203 ​ 13,625 1.98 % Tax-exempt investments (2) ​ 451,228 ​ 14,216 3.15 % 387,935 ​ 13,544 3.49 % 322,121 ​ 12,731 3.95 % Cash and due from banks ​ 479,854 ​ 5,224 1.09 % 726,412 ​ 888 0.12 % — ​ — — % Federal funds sold ​ 3,893 ​ 106 2.72 % 4,487 ​ 42 0.94 % 1,245 ​ 71 5.70 % Total interest-earning assets ​ 4,800,481 ​ 187,958 3.92 % 4,611,741 ​ 156,562 3.39 % 3,714,794 ​ 164,729 4.43 % Non-interest earning assets: ​ ​ ​ ​ ​ ​ ​ Cash and due from banks ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ 370,883 ​ ​ Premises and equipment, net ​ 68,911 ​ ​ ​ ​ ​ 64,787 ​ ​ ​ ​ 63,145 ​ ​ Other assets ​ 216,592 ​ ​ ​ ​ ​ 183,589 ​ ​ ​ ​ 187,415 ​ ​ Less allowance for loan losses ​ (41,997) ​ ​ ​ ​ ​ (45,767) ​ ​ ​ ​ (23,318) ​ ​ TOTALS ​ $ 5,043,987 ​ ​ ​ ​ ​ ​ $ 4,814,350 ​ ​ ​ $ 4,312,919 ​ ​ LIABILITIES AND SHAREHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Transaction accounts ​ $ 3,034,430 ​ 13,483 ​ 0.44 % $ 2,799,227 ​ 2,751 0.10 % $ 2,282,750 ​ 4,424 0.19 % Time deposits ​ 483,038 ​ 3,260 ​ 0.67 % 520,885 ​ 5,407 1.04 % 589,975 ​ 8,377 1.42 % Short-term borrowings ​ 83,959 ​ 1,243 ​ 1.48 % 99,805 ​ 387 0.39 % 90,613 ​ 568 0.63 % Other borrowings ​ 13,175 ​ 273 ​ 2.07 % 7,562 ​ 252 3.33 % 18,335 ​ 770 4.20 % Total interest-bearing liabilities: ​ 3,614,602 ​ 18,259 ​ 0.51 % 3,427,479 ​ 8,797 0.26 % 2,981,673 ​ 14,139 0.47 % Non interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ 891,042 ​ ​ ​ ​ ​ ​ 717,764 ​ ​ ​ 660,011 ​ ​ Other ​ 43,506 ​ ​ ​ ​ ​ ​ 71,738 ​ ​ ​ 77,444 ​ ​ ​ ​ 4,549,150 ​ ​ ​ ​ ​ ​ 4,216,981 ​ ​ ​ ​ ​ ​ ​ 3,719,128 ​ ​ ​ ​ ​ ​ Shareholders' equity ​ 494,837 ​ ​ ​ ​ ​ ​ 597,369 ​ ​ ​ 593,791 ​ ​ TOTALS ​ $ 5,043,987 ​ ​ ​ ​ ​ ​ $ 4,814,350 ​ ​ ​ $ 4,312,919 ​ ​ ​ Net interest earnings ​ ​ ​ ​ $ 169,699 ​ ​ ​ ​ ​ $ 147,765 ​ ​ $ 150,590 ​ Net yield on interest- earning assets ​ ​ ​ ​ ​ 3.54 % ​ 3.20 % ​ 4.05 % (1)For purposes of these computations, non-accruing loans are included in the daily average loan amounts outstanding.
Earning asset yields increased 120 basis points while the rate on interest-bearing liabilities increased by 123 basis points. ​ 37 Table of Contents CONSOLIDATED BALANCE SHEET - AVERAGE BALANCES AND INTEREST RATES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ Average ​ Yield/ Average ​ Yield/ Average ​ Yield/ ​ (Dollar amounts in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate ​ ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: ​ ​ ​ ​ ​ ​ ​ Loans (1) (2) ​ $ 3,111,784 ​ 190,947 6.14 % $ 2,884,053 ​ 147,398 5.11 % $ 2,602,344 ​ 128,978 4.96 % Taxable investment securities ​ 895,120 ​ 24,643 2.75 % 981,453 ​ 21,014 2.14 % 890,563 ​ 13,110 1.47 % Tax-exempt investments (2) ​ 463,541 ​ 16,591 3.58 % 451,228 ​ 14,216 3.15 % 387,935 ​ 13,544 3.49 % Cash and due from banks ​ 90,582 ​ 1,546 1.71 % 479,854 ​ 5,224 1.09 % 726,412 ​ 888 0.12 % Federal funds sold ​ 3,108 ​ 124 3.99 % 3,893 ​ 106 2.72 % 4,487 ​ 42 0.94 % Total interest-earning assets ​ 4,564,135 ​ 233,851 5.12 % 4,800,481 ​ 187,958 3.92 % 4,611,741 ​ 156,562 3.39 % Non-interest earning assets: ​ ​ ​ ​ ​ ​ ​ Premises and equipment, net ​ 67,468 ​ ​ ​ ​ ​ 68,911 ​ ​ ​ ​ ​ 64,787 ​ ​ ​ Other assets ​ 210,277 ​ ​ ​ ​ ​ 216,592 ​ ​ ​ ​ ​ 183,589 ​ ​ ​ Less allowance for loan losses ​ (39,432) ​ ​ ​ ​ ​ (41,997) ​ ​ ​ ​ ​ (45,767) ​ ​ ​ TOTALS ​ $ 4,802,448 ​ ​ ​ ​ ​ ​ $ 5,043,987 ​ ​ ​ ​ ​ ​ $ 4,814,350 ​ ​ ​ LIABILITIES AND SHAREHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Transaction accounts ​ $ 2,869,873 ​ 42,594 ​ 1.48 % $ 3,034,430 ​ 13,483 ​ 0.44 % $ 2,799,227 ​ 2,751 0.10 % Time deposits ​ 434,943 ​ 9,100 ​ 2.09 % 483,038 ​ 3,260 ​ 0.67 % 520,885 ​ 5,407 1.04 % Short-term borrowings ​ 117,235 ​ 5,370 ​ 4.58 % 83,959 ​ 1,243 ​ 1.48 % 99,805 ​ 387 0.39 % Other borrowings ​ 82,316 ​ 4,071 ​ 4.95 % 13,175 ​ 273 ​ 2.07 % 7,562 ​ 252 3.33 % Total interest-bearing liabilities: ​ 3,504,367 ​ 61,135 ​ 1.74 % 3,614,602 ​ 18,259 ​ 0.51 % 3,427,479 ​ 8,797 0.26 % Non interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ 801,316 ​ ​ ​ ​ ​ ​ 891,042 ​ ​ ​ ​ ​ ​ 717,764 ​ ​ ​ Other ​ 10,193 ​ ​ ​ ​ ​ ​ 43,506 ​ ​ ​ ​ ​ ​ 71,738 ​ ​ ​ ​ ​ 4,315,876 ​ ​ ​ ​ ​ ​ 4,549,150 ​ ​ ​ ​ ​ ​ ​ 4,216,981 ​ ​ ​ ​ ​ ​ Shareholders' equity ​ 486,572 ​ ​ ​ ​ ​ ​ 494,837 ​ ​ ​ ​ ​ ​ 597,369 ​ ​ ​ TOTALS ​ $ 4,802,448 ​ ​ ​ ​ ​ ​ $ 5,043,987 ​ ​ ​ ​ ​ ​ $ 4,814,350 ​ ​ ​ Net interest earnings ​ ​ ​ ​ $ 172,716 ​ ​ ​ ​ ​ ​ $ 169,699 ​ ​ ​ ​ $ 147,765 ​ Net yield on interest- earning assets ​ ​ ​ ​ ​ 3.78 % ​ ​ ​ ​ 3.54 % ​ 3.20 % (1)For purposes of these computations, non-accruing loans are included in the daily average loan amounts outstanding.
The analysis is governed by Accounting Standards Codification (ASC 326), implemented in 2020, which uses an economic forecast that includes the impact of the COVID-19 pandemic. For the year ended December 31, 2022, the negative provision for credit losses was $2.0 million, a decrease of $4.5 million, or 182%, compared to 2021.
The analysis is governed by Accounting Standards Codification (ASC 326), implemented in 2020, which used an economic forecast that included the impact of the COVID-19 pandemic. For the year ended December 31, 2023, the provision for credit losses was $7.3 million, an increase of $9.3 million, or 460%, compared to 2022.
These components are added together and compared to the balance of our allowance at the evaluation date. The allowance for credit losses as a percentage of total loans decreased to 1.30% at year-end 2022 compared to 1.72% 40 Table of Contents at year-end 2021. The decrease was the result of several factors. The first was the annual model recalibration.
These components are added together and compared to the balance of our allowance at the evaluation date. The allowance for credit losses as a percentage of total loans decreased to 1.26% at year-end 2023 compared to 1.30% at year-end 2022.
The provision for credit losses decreased $8.0 million from $10.5 million in 2020 to $2.5 million in 2021. Non-interest expenses increased $4.6 million and non-interest income decreased $392 thousand. The increase in non-interest expenses was largely due to the acquisition of HopFed, Inc.
The provision for credit losses decreased $4.5 million from $2.5 million in 2021 to a negative provision of $2.0 million in 2022. Non-interest income increased $4.6 million and non-interest expenses increased $8.6 million.
The quantitative amount is $28.6 million at December 31, 2022, compared to $33.6 million at December 31, 2021. There was a $900 thousand decrease in the allowance for unfunded commitments. See additional discussion of ACL in the Allowance for Credit Losses section below. Based on management’s analysis of the current portfolio, management believes the allowance is adequate.
There was a $100 thousand decrease in the allowance for unfunded commitments. See additional discussion of ACL in the Allowance for Credit Losses section below. 35 Table of Contents Based on management’s analysis of the current portfolio, management believes the allowance is adequate.
The Corporation expects to continue its policy of paying regular cash dividends, subject to future earnings and regulatory restrictions and capital requirements. INTEREST RATE SENSITIVITY AND LIQUIDITY First Financial Corporation has established risk measures, limits and policy guidelines for managing interest rate risk and liquidity. Responsibility for management of these functions resides with the Asset/Liability Committee.
The Corporation’s dividend payout ratio for 2023 and 2022 was 19.4% and 21.7%, respectively. The Corporation expects to continue its policy of paying regular cash dividends, subject to future earnings and regulatory restrictions and capital requirements. INTEREST RATE SENSITIVITY AND LIQUIDITY First Financial Corporation has established risk measures, limits and policy guidelines for managing interest rate risk and liquidity.
NET INTEREST INCOME The principal source of the Corporation’s earnings is net interest income, which represents the difference between interest earned on loans and investments and the interest cost associated with deposits and other sources of funding. Net interest income increased in 2022 to $165.0 million compared to $143.4 million in 2021.
The primary components of income and expense affecting net income are discussed in the following analysis. NET INTEREST INCOME The principal source of the Corporation’s earnings is net interest income, which represents the difference between interest earned on loans and investments and the interest cost associated with deposits and other sources of funding.
The table information compares 2022 to 2021 and 2021 to 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 Compared to 2021 Increase 2021 Compared to 2020 Increase ​ ​ (Decrease) Due to ​ (Decrease) Due to ​ ​ ​ ​ ​ ​ Volume/ ​ ​ ​ ​ ​ ​ ​ Volume/ ​ ​ (Dollar amounts in thousands) Volume Rate Rate Total Volume Rate Rate Total Interest earned on interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ Loans (1) (2) ​ $ 13,962 ​ $ 4,023 ​ $ 436 ​ $ 18,421 ​ $ (5,112) ​ $ (4,374) ​ $ 162 ​ $ (9,324) Taxable investment securities ​ 1,338 ​ 5,958 ​ 608 ​ 7,904 ​ 3,981 ​ (3,479) ​ (1,017) ​ (515) Tax-exempt investment securities (2) ​ 2,210 ​ (1,322) ​ (216) ​ 672 ​ 2,600 ​ (1,484) ​ (303) ​ 813 Cash and due from banks ​ (301) ​ 7,020 ​ (2,383) ​ 4,336 ​ — ​ — ​ 888 ​ 888 Federal funds sold ​ (6) ​ 80 ​ (11) ​ 63 ​ 185 ​ (59) ​ (155) ​ (29) Total interest income ​ $ 17,203 ​ $ 15,759 ​ $ (1,566) ​ $ 31,396 ​ $ 1,654 ​ $ (9,396) ​ $ (425) ​ $ (8,167) Interest paid on interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Transaction accounts ​ 231 ​ 9,687 ​ 814 ​ 10,732 ​ 1,001 ​ (2,181) ​ (493) ​ (1,673) Time deposits ​ (393) ​ (1,892) ​ 137 ​ (2,148) ​ (981) ​ (2,253) ​ 264 ​ (2,970) Short-term borrowings ​ (61) ​ 1,091 ​ (173) ​ 857 ​ 58 ​ (217) ​ (22) ​ (181) Other borrowings ​ 187 ​ (95) ​ (71) ​ 21 ​ (452) ​ (159) ​ 93 ​ (518) Total interest expense ​ (36) ​ 8,791 ​ 707 ​ 9,462 ​ (374) ​ (4,810) ​ (158) ​ (5,342) Net interest income ​ $ 17,239 ​ $ 6,968 ​ $ (2,273) ​ $ 21,934 ​ $ 2,028 ​ $ (4,586) ​ $ (267) ​ $ (2,825) (1)For purposes of these computations, non-accruing loans are included in the daily average loan amounts outstanding.
The table information compares 2023 to 2022 and 2022 to 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 Compared to 2022 Increase 2022 Compared to 2021 Increase ​ ​ (Decrease) Due to ​ (Decrease) Due to ​ ​ ​ ​ ​ ​ Volume/ ​ ​ ​ ​ ​ ​ ​ Volume/ ​ ​ (Dollar amounts in thousands) Volume Rate Rate Total Volume Rate Rate Total Interest earned on interest-earning assets: ​ ​ ​ ​ ​ ​ ​ ​ Loans (1) (2) ​ $ 11,639 ​ $ 29,575 ​ $ 2,335 ​ $ 43,549 ​ $ 13,962 ​ $ 4,023 ​ $ 436 ​ $ 18,421 Taxable investment securities ​ (1,848) ​ 6,006 ​ (528) ​ 3,630 ​ 1,338 ​ 5,958 ​ 608 ​ 7,904 Tax-exempt investment securities (2) ​ 388 ​ 1,934 ​ 53 ​ 2,375 ​ 2,210 ​ (1,322) ​ (216) ​ 672 Cash and due from banks ​ (4,238) ​ 2,966 ​ (2,406) ​ (3,678) ​ (301) ​ 7,020 ​ (2,383) ​ 4,336 Federal funds sold ​ (21) ​ 49 ​ (10) ​ 18 ​ (6) ​ 80 ​ (11) ​ 63 Total interest income ​ $ 5,920 ​ $ 40,530 ​ $ (556) ​ $ 45,894 ​ $ 17,203 ​ $ 15,759 ​ $ (1,566) ​ $ 31,396 Interest paid on interest-bearing liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Transaction accounts ​ (731) ​ 31,553 ​ (1,711) ​ 29,111 ​ 231 ​ 9,687 ​ 814 ​ 10,732 Time deposits ​ (325) ​ 6,846 ​ (682) ​ 5,839 ​ (393) ​ (1,892) ​ 137 ​ (2,148) Short-term borrowings ​ 493 ​ 2,603 ​ 1,032 ​ 4,128 ​ (61) ​ 1,091 ​ (173) ​ 857 Other borrowings ​ 1,433 ​ 379 ​ 1,987 ​ 3,799 ​ 187 ​ (95) ​ (71) ​ 21 Total interest expense ​ 870 ​ 41,381 ​ 626 ​ 42,877 ​ (36) ​ 8,791 ​ 707 ​ 9,462 Net interest income ​ $ 5,050 ​ $ (851) ​ $ (1,182) ​ $ 3,017 ​ $ 17,239 ​ $ 6,968 ​ $ (2,273) ​ $ 21,934 (1)For purposes of these computations, non-accruing loans are included in the daily average loan amounts outstanding.
The Corporation also anticipates $114.0 million of principal payments from mortgage-backed securities. Given the current rate environment, the Corporation anticipates $11.2 million in securities to be called within the next 12 months. The Corporation also has additional sources of liquidity available through secured and unsecured borrowing capacity.
The Corporation also anticipates $109.9 million of principal payments from mortgage-backed securities. Given the current rate environment, the Corporation anticipates $13.0 million in securities to be called within the next 12 months.
The following loan categories comprise significant components of the nonperforming loans at December 31, 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Non-accrual loans ​ ​ ​ ​ Commercial loans ​ $ 4,874 42 % $ 4,991 52 % Residential loans ​ 3,715 32 % 3,049 32 % Consumer loans ​ 2,965 26 % 1,550 16 % ​ ​ $ 11,554 100 % $ 9,590 100 % Past due 90 days or more ​ ​ ​ Commercial loans ​ $ 112 10 % $ 14 3 % Residential loans ​ 1,007 90 % 410 79 % Consumer loans ​ — — % 91 18 % ​ ​ $ 1,119 100 % $ 515 100 % ​ Management considers the present allowance to be appropriate and adequate to cover expected losses inherent in the loan portfolio based on the current economic environment.
The following loan categories comprise significant components of the nonperforming loans at December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Non-accrual loans ​ ​ ​ ​ Commercial loans ​ $ 18,380 78 % $ 3,481 41 % Residential loans ​ 2,065 9 % 2,035 24 % Consumer loans ​ 3,151 13 % 2,965 35 % ​ ​ $ 23,596 100 % $ 8,481 100 % Past due 90 days or more ​ ​ ​ Commercial loans ​ $ 4 0 % $ 112 10 % Residential loans ​ 911 95 % 1,007 90 % Consumer loans ​ 45 5 % — — % ​ ​ $ 960 100 % $ 1,119 100 % ​ Management considers the present allowance to be appropriate and adequate to cover expected losses inherent in the loan portfolio based on the current economic environment.
The year-over-year changes are, in part, impacted by the acquisition of Hancock Bancorp in the fourth quarter of 2021. INCOME TAXES The Corporation’s federal income tax provision was $16.7 million in 2022 compared to $12.6 million in 2021. The overall effective tax rate in 2022 of 19.0% decreased as compared to a 2021 effective rate of 19.2%.
The year-over-year changes in non-interest expenses are, in part, impacted by the acquisition of Hancock Bancorp in the fourth quarter of 2021. The provision for income taxes increased $4.1 million from 2021 to 2022 and the effective tax rate decreased to 19.0% in 2022 from 19.2% in 2021.
SECURITIES The Corporation’s investment strategy seeks to maximize income from the investment portfolio while using it as a risk management tool and ensuring safety of principal and capital. During 2022 the portfolio’s balance decreased by 2.1%. The average life of the portfolio 38 Table of Contents increased from 5.0 years in 2021 to 6.9 years in 2022.
SECURITIES The Corporation’s investment strategy seeks to maximize income from the investment portfolio while using it as a risk management tool and ensuring safety of principal and capital. During 2023 the portfolio’s balance decreased by 5.4%. Given the performance of the 40 Table of Contents market, the Corporation shifted away from purchases to replace maturities in 2023.
If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis less any current-period loss, 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.
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 basis.
Non-accrual loans, excluding TDR’s, decreased to $8.5 million at December 31, 2022 from $9.6 million at December 31, 2021. Loans past due 90 days and still on accrual increased to $1.1 million compared to $515 thousand at December 31, 2021.
Non-accrual loans, increased to $23.6 million at December 31, 2023 from $8.5 million at December 31, 2022. The increase in non-accrual loans is due to a commercial relationship that was downgraded. Loans past due 90 days and still on accrual decreased to $960 thousand compared to $1.1 million at December 31, 2022.
The analysis of the allowance for credit losses includes the allocation of specific amounts of the allowance to individually evaluated loans, generally based on an analysis of the collateral securing those loans.
The loan quality monitoring process includes assigning loan grades and the use of a watch list to identify loans of concern. 42 Table of Contents The analysis of the allowance for credit losses includes the allocation of specific amounts of the allowance to individually evaluated loans, generally based on an analysis of the collateral securing those loans.
This analysis serves as a point in time assessment of the level of the allowance and serves as a basis for provisions for credit losses. The loan quality monitoring process includes assigning loan grades and the use of a watch list to identify loans of concern.
This analysis serves as a point in time assessment of the level of the allowance and serves as a basis for provisions for credit losses.
To warrant this confidence, the Corporation’s management maintains a capital position which they believe is sufficient to absorb unforeseen financial shocks without unnecessarily restricting dividends to its shareholders. The Corporation’s dividend payout ratio for 2022 and 2021 was 21.7% and 28.2%, respectively.
First Financial Corporation’s objective continues to be to maintain adequate capital to merit the confidence of its customers and shareholders. To warrant this confidence, the Corporation’s management maintains a capital position which they believe is sufficient to absorb unforeseen financial shocks without unnecessarily restricting dividends to its shareholders.
The average cost of these interest-bearing liabilities increased to 0.51% in 2022 from 0.26% in 2021. The net interest margin increased from 3.20% in 2021 to 3.54% in 2022.
Total average interest-bearing liabilities decreased to $3.50 billion in 2023 from $3.61 billion in 2022. The average cost of these interest-bearing liabilities increased to 1.74% in 2023 from 0.51% in 2022. 36 Table of Contents The net interest margin increased from 3.54% in 2022 to 3.78% in 2023.
Treasury (1) ​ $ 5,066 1.91 % $ 22,871 2.05 % $ 37,360 3.91 % $ 666,045 2.44 % $ 731,342 Collateralized mortgage obligations (1) ​ 11 1.66 % 6,473 2.18 % 7,727 2.70 % 189,274 2.47 % 203,485 States and political subdivisions ​ 5,018 3.58 % 31,550 2.80 % 76,442 2.70 % 279,658 2.62 % 392,668 Collateralized debt obligations ​ — — % — — % — — % 2,986 — % 2,986 TOTAL ​ $ 10,095 2.74 % $ 60,894 2.45 % $ 121,529 3.07 % $ 1,137,963 2.48 % $ 1,330,481 (1) Distribution of maturities is based on the estimated life of the asset. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 year and less 1 to 5 years 5 to 10 years Over 10 Years 2021 (Dollar amounts in thousands) Balance Rate Balance Rate Balance Rate Balance Rate Total U.S. government sponsored entity mortgage-backed securities and agencies (1) ​ $ 12,784 2.37 % $ 28,466 1.84 % $ 42,881 3.96 % $ 678,295 2.15 % $ 762,426 Collateralized mortgage obligations (1) ​ 3,449 2.17 % 688 3.79 % 7,516 2.15 % 163,352 2.32 % 175,005 States and political subdivisions ​ 5,358 3.27 % 34,438 2.97 % 75,506 2.68 % 303,422 2.57 % 418,724 Collateralized debt obligations ​ — — % — — % — — % 3,359 — % 3,359 TOTAL ​ 21,591 2.56 % 63,592 2.47 % 125,903 3.08 % 1,148,428 2.28 % 1,359,514 (1) Distribution of maturities is based on the estimated life of the asset.
Treasury (1) ​ $ 7,654 3.02 % $ 27,010 3.34 % $ 25,843 3.38 % $ 609,701 2.50 % $ 670,208 Collateralized mortgage obligations (1) ​ — — % 6,291 1.83 % 8,637 2.78 % 165,902 2.43 % 180,830 States and political subdivisions ​ 4,766 3.28 % 30,812 2.84 % 95,840 2.75 % 273,679 2.62 % 405,097 Collateralized debt obligations ​ — — % — — % 3,002 — % — — % 3,002 TOTAL ​ $ 12,420 3.12 % $ 64,113 2.95 % $ 133,322 2.81 % $ 1,049,282 2.52 % $ 1,259,137 (1) Distribution of maturities is based on the estimated life of the asset. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1 year and less 1 to 5 years 5 to 10 years Over 10 Years 2022 (Dollar amounts in thousands) Balance Rate Balance Rate Balance Rate Balance Rate Total U.S. government sponsored entity mortgage-backed securities and agencies (1) ​ $ 5,066 1.91 % $ 22,871 2.05 % $ 37,360 3.91 % $ 666,045 2.44 % $ 731,342 Collateralized mortgage obligations (1) ​ 11 1.66 % 6,473 2.18 % 7,727 2.70 % 189,274 2.47 % 203,485 States and political subdivisions ​ 5,018 3.58 % 31,550 2.80 % 76,442 2.70 % 279,658 2.62 % 392,668 Collateralized debt obligations ​ — — % — — % — — % 2,986 — % 2,986 TOTAL ​ 10,095 2.74 % $ 60,894 2.45 % $ 121,529 3.07 % $ 1,137,963 2.48 % 1,330,481 (1) Distribution of maturities is based on the estimated life of the asset.
DEPOSITS The information below presents the average amount of deposits and rates paid on those deposits for 2022, 2021 and 2020. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 (Dollar amounts in thousands) Amount Rate Amount Rate Amount Rate Non-interest-bearing demand deposits ​ $ 891,042 ​ ​ ​ $ 717,764 ​ ​ ​ $ 660,011 ​ Interest-bearing demand deposits ​ 1,511,232 ​ 0.65 % 1,309,682 ​ 0.15 % 1,061,745 0.27 % Savings deposits ​ 1,523,198 ​ 0.24 % 1,489,545 ​ 0.05 % 1,221,005 0.12 % Time deposits: $100,000 or more ​ 172,916 ​ 1.15 % 214,976 ​ 1.36 % 260,314 1.88 % Other time deposits ​ 310,122 ​ 0.41 % 305,909 ​ 0.81 % 329,661 1.05 % TOTAL ​ $ 4,408,510 ​ ​ ​ $ 4,037,876 $ 3,532,736 ​ ​ The maturities of certificates of deposit of more than $100 thousand outstanding at December 31, 2022, are summarized as follows: ​ ​ ​ ​ ​ (Dollar amounts in thousands) ​ ​ 3 months or less ​ $ 28,290 Over 3 through 6 months ​ 30,310 Over 6 through 12 months ​ 56,504 Over 12 months ​ 48,446 TOTAL ​ $ 163,550 ​ OTHER BORROWINGS Advances from the Federal Home Loan Bank decreased to $9.6 million in 2022 compared to $15.9 million in 2021.
DEPOSITS The information below presents the average amount of deposits and rates paid on those deposits for 2023, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 (Dollar amounts in thousands) Amount Rate Amount Rate Amount Rate Non-interest-bearing demand deposits ​ $ 801,316 ​ ​ ​ $ 891,042 ​ ​ ​ $ 717,764 ​ ​ ​ Interest-bearing demand deposits ​ 1,440,411 ​ 2.15 % 1,511,232 ​ 0.65 % 1,309,682 ​ 0.15 % Savings deposits ​ 1,429,462 ​ 0.82 % 1,523,198 ​ 0.24 % 1,489,545 ​ 0.05 % Time deposits: $100,000 or more ​ 176,453 ​ 2.89 % 172,916 ​ 1.15 % 214,976 ​ 1.36 % Other time deposits ​ 258,490 ​ 1.54 % 310,122 ​ 0.41 % 305,909 ​ 0.81 % TOTAL ​ $ 4,106,132 ​ ​ ​ $ 4,408,510 $ 4,037,876 ​ ​ Deposits decreased 6.86% to $4.1 billion at September 30, 2023 compared to December 31, 2022.
COMPARISON AND DISCUSSION OF 2022 BALANCE SHEET TO 2021 The Corporation’s total assets decreased 3.6% or $185.8 million at December 31, 2022, from a year earlier. Available-for-sale securities decreased $29.0 million at December 31, 2022, from the previous year. Loans, net increased by $260.1 million to $3.03 billion. Deposits decreased $40.7 million while borrowings decreased by $28.8 million.
The increase in income tax expense is primarily due to the overall increase in net income before income taxes. COMPARISON AND DISCUSSION OF 2023 BALANCE SHEET TO 2022 The Corporation’s total assets decreased 2.8% or $138.1 million at December 31, 2023, from a year earlier. Available-for-sale securities decreased $71.3 million at December 31, 2023, from the previous year.
Total average interest earning assets increased to $4.80 billion in 2022 from $4.61 billion in 2021. The tax-equivalent yield on these assets increased to 3.92% in 2022 from 3.39% in 2021. Total average interest- 34 Table of Contents bearing liabilities increased to $3.61 billion in 2022 from $3.43 billion in 2021.
Net interest income increased in 2023 to $167.3 million compared to $165.0 million in 2022. Total average interest earning assets decreased to $4.56 billion in 2023 from $4.80 billion in 2022. The tax-equivalent yield on these assets increased to 5.12% in 2023 from 3.92% in 2022.
As shown in the footnote to the consolidated financial statements (“Regulatory Matters”), the Corporation’s subsidiary banking institutions capital exceeds the requirements to be considered well capitalized at December 31, 2022. 42 Table of Contents First Financial Corporation’s objective continues to be to maintain adequate capital to merit the confidence of its customers and shareholders.
These standards relate capital to level of risk by assigning different weightings to assets and certain off-balance-sheet activity. As shown in the footnote to the consolidated financial statements (“Regulatory Matters”), the Corporation’s subsidiary banking institutions capital exceeds the requirements to be considered well capitalized at December 31, 2023.
The ACL and allowance for unfunded commitments were $39.8 million and $2.1 million, respectively at December 31, 2022, compared to $48.3 million and $3.0 million, respectively at December 31, 2021. The $8.5 million decrease in the ACL was the result of several factors. The first was the annual model recalibration.
The ACL and allowance for unfunded commitments were $39.8 million and $2.0 million, respectively at December 31, 2023, compared to $39.8 million and $2.1 million, respectively at December 31, 2022. The qualitative amount of the reserve decreased $44 thousand to $11.0 million. The quantitative amount is $28.4 million at December 31, 2023, compared to $28.6 million at December 31, 2022.
The Corporation does not expect realized losses, as there is no intent to sell at a loss.
Net unrealized gain/loss on available for sale securities increased $14.8 million from a net unrealized loss of $168.2 million in 2022 to a net unrealized loss of $153.4 million in 2023. The Corporation does not expect realized losses, as there is no intent to sell at a loss.
Total shareholders’ equity decreased $107.3 million to $475.3 million at December 31, 2022. Accumulated other comprehensive income decreased $137.6 million primarily due to the market value of the securities portfolio, which reflected the large decrease in securities pricing. In 2022 dividends paid by the Corporation totaled $1.17 per share.
Loans, net increased by $100.4 million to $3.13 billion. Deposits decreased $278.8 million while borrowings increased by $95.3 million. Total shareholders’ equity increased $52.7 million to $528.0 million at December 31, 2023. Accumulated other comprehensive income increased $12.9 million primarily due to the market value of the securities portfolio, which reflected a slight increase in securities pricing.
Additional information regarding restructured loans is available in the footnotes to the financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 2019 2018 Non-accrual loans ​ $ 11,554 ​ $ 9,590 ​ $ 15,367 ​ $ 9,535 ​ $ 10,974 ​ Accruing restructured loans ​ 3,390 ​ 3,897 ​ 3,052 ​ 3,318 ​ 3,702 ​ Nonaccrual restructured loans ​ 413 ​ 902 ​ 1,154 ​ 876 ​ 1,104 ​ Accruing loans past due over 90 days ​ 1,119 ​ 515 ​ 2,324 ​ 1,610 ​ 798 ​ ​ ​ $ 16,476 ​ $ 14,904 ​ $ 21,897 ​ $ 15,339 ​ $ 16,578 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of the allowance for credit losses as a percentage of non-performing loans ​ ​ 296.8 % ​ 324.1 % ​ 226.8 % ​ 130.0 % ​ 123.0 % ​ The ratio of the allowance for loan losses as a percentage of nonperforming loans was 296.79% at December 31, 2022, compared to 324.11% in 2021.
The amounts shown below represent non-accrual loans and those loans which are past due more than 90 days where the Corporation continues to accrue interest. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 2021 2020 2019 Non-accrual loans ​ $ 23,596 ​ $ 8,481 ​ $ 9,590 ​ $ 14,213 ​ $ 9,535 ​ Accruing loans past due over 90 days ​ 960 ​ 1,119 ​ 515 ​ 2,324 ​ 1,610 ​ ​ ​ $ 24,556 ​ $ 9,600 ​ $ 10,105 ​ $ 16,537 ​ $ 11,145 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ratio of the allowance for credit losses as a percentage of non-performing loans ​ ​ 161.9 % ​ 414.4 % ​ 478.0 % ​ 284.5 % ​ 178.9 % ​ ​ 43 Table of Contents The ratio of the allowance for loan losses as a percentage of nonperforming loans was 161.9% at December 31, 2023, compared to 414.4% in 2022.
Return on average assets at December 31, 2022 increased 28.18% to 1.41% compared to 1.10% at December 31, 2021. The primary components of income and expense affecting net income are discussed in the following analysis.
The decrease in 2023 net income is primarily due to increased provision for credit losses, as well as decreased non-interest income and increased non-interest expenses, as described in those respective sections in the following pages. Return on average assets at December 31, 2023 decreased 10.64% to 1.26% compared to 1.41% at December 31, 2022.
Removed
Each year, in the first quarter, management reviews each model variable to determine if adjustments are necessary to improve the model’s predictability. In the first quarter 2022 the delay periods were shortened to pick up more recent losses. Also, the qualitative factor maximum scorecard ranges for certain cohorts were reduced, which reduced 33 Table of Contents the reserve.
Added
If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, then the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors.
Removed
Additionally, the qualitative factors for uncertainty were lowered due to the seasoning of the acquired loans, and as well as lower qualitative factors, due to the sale of non farm non residential commercial loans in the third quarter. Finally, the reserve was impacted by improved portfolio performance. The qualitative amount of the reserve decreased $3.3 million to $11.0 million.
Added
If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.
Removed
COMPARISON OF 2021 TO 2020 Net income for 2021 was $53.0 million, or $4.02 per share versus $53.8 million, or $3.93 per share for 2020. The decrease in 2021 net income is due to increased expenses from the Hancock acquisition, as well as declining interest rates. Net interest income decreased $2.9 million in 2021 compared to 2020.
Added
RESULTS OF OPERATIONS - SUMMARY FOR 2023 COMPARISON OF 2023 TO 2022 Net income for 2023 was $60.7 million, or $5.08 per share versus $71.1 million, or $5.82 per share for 2022.
Removed
The provision for income taxes increased $934 thousand from 2020 to 2021 and the effective tax rate increased to 19.2% in 2021 from 17.8% in 2020. The increase is primarily due to increase of general business tax credits benefits earned in 2020.
Added
The change in non-interest income from 2022 to 2023 was primarily driven by a $4.0 million legal settlement received in February, 2022. The Corporation does not expect this item to reoccur. NON-INTEREST EXPENSES Non-interest expenses increased to $130.2 million in 2023 from $126.0 million in 2022.
Removed
Net unrealized gain/loss on available for sale securities decreased $188.1 million from a net unrealized gain of $19.9 million in 2021 to a net unrealized loss of $168.2 million in 2022. This decrease was primarily due to the significant decline in the markets in 2022. The decrease is not related to credit, but due to interest rates.
Added
The increase in non-interest expenses is consistent with the rate of increases in prior years and considered normal with the growth of our business. INCOME TAXES The Corporation’s federal income tax provision was $11.8 million in 2023 compared to $16.7 million in 2022.
Removed
Each year, in the first quarter, management reviews each model variable to determine if adjustments are necessary to improve the model’s predictability. In the first quarter 2022 the delay periods were shortened to pick up more recent losses. Also, the qualitative factor maximum scorecard ranges for certain cohorts were reduced, which reduced the reserve.
Added
The overall effective tax rate in 2023 of 16.3% decreased as compared to a 2022 effective rate of 19.0%. The decrease in effective tax rate is due to a $1 million increase in tax credit investments, as well as an increase in tax exempt interest income.
Removed
Secondly, management removed two qualitative factors that were deemed no longer applicable. The first was related to acquisition uncertainty, which management believes to have seasoned adequately that it was no longer warranted. The second was related to the CECL model and the related uncertainty. The uncertainty surrounded the newness of the model and potential regulatory scrutiny.
Added
The average life of the portfolio decreased from 6.9 years in 2022 to 6.5 years in 2023.
Removed
Following two exam cycles, management elected to remove the factor. Also, during the quarter, historical loss rates continued to decline, which lowers the required reserve. The historical loss rate declined in most segments.
Added
LOAN PORTFOLIO Loans outstanding by major category as of December 31 for each of the last five years and the maturities at year end 2023 are set forth in the following analyses. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollar amounts in thousands) 2023 2022 2021 2020 2019 Loan Category ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 1,817,526 ​ $ 1,798,260 ​ $ 1,674,066 ​ $ 1,521,711 ​ $ 1,584,447 Residential ​ 695,788 ​ 673,464 ​ 664,509 ​ 604,652 ​ 682,077 Consumer ​ 646,758 ​ 588,539 ​ 474,026 ​ 479,750 ​ 386,006 TOTAL ​ $ 3,160,072 ​ $ 3,060,263 ​ $ 2,812,601 ​ $ 2,606,113 ​ $ 2,652,530 41 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ After One ​ ​ ​ ​ ​ ​ ​ ​ Within But Within After Five (Dollar amounts in thousands) ​ One Year ​ Five Years ​ Years ​ Total MATURITY DISTRIBUTION ​ ​ ​ ​ Commercial, financial and agricultural ​ $ 703,017 ​ $ 825,507 ​ $ 289,002 ​ $ 1,817,526 TOTAL ​ ​ ​ ​ Residential ​ ​ ​ ​ ​ ​ 695,788 Consumer ​ ​ ​ ​ ​ ​ 646,758 TOTAL ​ ​ ​ ​ ​ ​ $ 3,160,072 Loans maturing after one year with: ​ ​ ​ ​ Fixed interest rates ​ ​ ​ ​ $ 389,958 ​ $ 256,312 ​ Variable interest rates ​ ​ ​ ​ 435,549 ​ 32,690 ​ TOTAL ​ ​ ​ ​ $ 825,507 ​ $ 289,002 ​ ​ Commercial Real Estate represents $1.3 million of total exposure as of December 31, 2023, and is within regulatory guidance.
Removed
The declines in historical loss rates were offset by increased qualitative factors due to the concerns of continuing inflation and overall economic conditions during the year, exclusive of the recalibration items noted above.
Added
This exposure is well diversified by geography, real estate type, and industry designation. During the underwriting process, Commercial Real Estate is stressed using a combination of several risk variables, such as interest rate change, cap rate changes, revenue and expense variances, and term changes.
Removed
The amounts shown below represent non-accrual loans, loans which have been restructured to provide for a reduction or deferral of interest or principal because of deterioration in the financial condition of the borrower and those loans which are past due more than 90 days where the Corporation continues to accrue interest.
Added
The increase in nonperforming loans is due to a commercial relationship that was downgraded.
Removed
Restructured loans decreased in 2022 and increased in 2021 due to the decreased number and balance of loans added combined with the continued receipt of payments in accordance with the restructuring terms.
Added
The decline was in part driven by a decline in interest bearing public funds checking, and a decline in institutional deposits as a result of a pricing decision.
Removed
These standards relate capital to level of risk by assigning different weightings to assets and certain off-balance-sheet activity.
Added
Brokered time deposits decreased to $747 thousand at December 31, 2023, from $8.5 million at December 31, 2022. ​ The Corporation estimates that uninsured deposits (1) totaled $938.9 million, or 23% of total deposits, at December 31, 2023, compared to $1.27 billion, or 29%, at December 31, 2022.
Added
The maturities of certificates of deposit of more than $100 thousand outstanding at December 31, 2023, are summarized as follows: ​ ​ ​ ​ ​ (Dollar amounts in thousands) ​ ​ 3 months or less ​ $ 49,370 Over 3 through 6 months ​ 78,788 Over 6 through 12 months ​ 101,309 Over 12 months ​ 15,678 TOTAL ​ $ 245,145 ​ (1) Uninsured deposits include the Call Report estimate of uninsured deposits less affiliate deposits, estimated insured portion of servicing deposits, additional structured FDIC coverage and collateral deposits. 44 Table of Contents OTHER BORROWINGS Advances from the Federal Home Loan Bank increased to $108.6 million in 2023 compared to $9.6 million in 2022.
Added
The Corporation from time to time utilizes derivatives to manage interest rate risk.
Added
The Corporation also has $197.7 million of unused borrowing capacity available with the Federal Home Loan Bank of Indianapolis, $237.5 million available with the Federal Reserve Bank, and $125 million of available fed funds lines with correspondent banks. With these sources of funds, the Corporation currently anticipates adequate liquidity to meet the expected obligations of its customers.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the preceding pages of this Form 10-K is incorporated herein by reference in response to this item. ​ 44 Table of Contents
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the preceding pages of this Form 10-K is incorporated herein by reference in response to this item. ​ 47 Table of Contents

Other THFF 10-K year-over-year comparisons