# EDGAR Filing Document

**Accession Number:** 0000708955
**File Stem:** 0000708955-23-000016
**Filing Date:** 2023-2
**Character Count:** 614607
**Document Hash:** a80a874d756fc7ea312dbbefa8835b7d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000708955-23-000016.hdr.sgml**: 20230224

**ACCESSION NUMBER**: 0000708955-23-000016

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 146

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230224

**DATE AS OF CHANGE**: 20230224

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** FIRST FINANCIAL BANCORP /OH/
- **CENTRAL INDEX KEY:** 0000708955
- **STANDARD INDUSTRIAL CLASSIFICATION:** NATIONAL COMMERCIAL BANKS [6021]
- **IRS NUMBER:** 311042001
- **STATE OF INCORPORATION:** OH
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-34762
- **FILM NUMBER:** 23666301

**BUSINESS ADDRESS:**
- **STREET 1:** 255 EAST FIFTH STREET
- **STREET 2:** SUITE 800
- **CITY:** CINCINNATI
- **STATE:** OH
- **ZIP:** 45202
- **BUSINESS PHONE:** 8773229530

**MAIL ADDRESS:**
- **STREET 1:** 255 EAST FIFTH STREET
- **STREET 2:** SUITE 800
- **CITY:** CINCINNATI
- **STATE:** OH
- **ZIP:** 45202

?xml version="1.0" ? ffbc-20221231

<u>[**TABLE OF CONTENTS**](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K** 

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934

Commission File Number 001-34762

**FIRST FINANCIAL BANCORP.** 

(Exact name of registrant as specified in its charter)

---

| | | | |
|:---|:---|:---|:---|
| **Ohio** | **Ohio** | **Ohio** | **31-1042001** |
| (State of incorporation) | (State of incorporation) | (State of incorporation) | (I.R.S. Employer<br>Identification No.) |
| **255 East Fifth Street, Suite 800** | **Cincinnati** | **Ohio** | **45202** |
| (Address of principal executive offices) | (Address of principal executive offices) | (Address of principal executive offices) | (Zip Code) |

---

Registrant's telephone number, including area code: (877) 322-9530

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading symbol** | **Name of each exchange on which registered** |
| **Common stock, No par value** | **FFBC** | **The NASDAQ Stock Market LLC** |

---

Securities registered pursuant to Section 12(g) of the Act:

**None** 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☒ Yes&nbsp;&nbsp;&nbsp;&nbsp; ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

☐ Yes&nbsp;&nbsp;&nbsp;&nbsp; ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes&nbsp;&nbsp;&nbsp;&nbsp; ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes&nbsp;&nbsp;&nbsp;&nbsp; ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes&nbsp;&nbsp;&nbsp;&nbsp;☒ No

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the sales price of the last trade of such stock as of June 30, 2022, was $1,793,610,000. (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

As of February 23, 2023, there were issued and outstanding 94,873,629 common shares of the registrant.

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<u>[**TABLE OF CONTENTS**](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>

**Documents Incorporated by Reference:**

Portions of the registrant's Annual Report to Shareholders for the year ended December 31, 2022 (Exhibit 13) are incorporated by reference into Parts I, II and III. Portions of the registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 23, 2023 are incorporated by reference into Part III.

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<u>[**TABLE OF CONTENTS**](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>

**<u>[FORM 10-K CROSS REFERENCE INDEX](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>**

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| | | | |
|:---|:---|:---|:---|
| | | | Page |
| **<u>[Part I](#ie454cd170e0945ec85b7c43fa18faaf9_13)</u>** | <u>[Item 1](#ie454cd170e0945ec85b7c43fa18faaf9_16)</u> | <u>[Business](#ie454cd170e0945ec85b7c43fa18faaf9_16)</u> | <u>[1](#ie454cd170e0945ec85b7c43fa18faaf9_16)</u> |
| | <u>[Item 1A](#ie454cd170e0945ec85b7c43fa18faaf9_19)</u> | <u>[Risk Factors](#ie454cd170e0945ec85b7c43fa18faaf9_19)</u> | <u>[12](#ie454cd170e0945ec85b7c43fa18faaf9_19)</u> |
| | <u>[Item 1B](#ie454cd170e0945ec85b7c43fa18faaf9_22)</u> | <u>[Unresolved Staff Comments](#ie454cd170e0945ec85b7c43fa18faaf9_22)</u> | <u>[23](#ie454cd170e0945ec85b7c43fa18faaf9_22)</u> |
| | <u>[Item 2](#ie454cd170e0945ec85b7c43fa18faaf9_25)</u> | <u>[Properties](#ie454cd170e0945ec85b7c43fa18faaf9_25)</u> | <u>[23](#ie454cd170e0945ec85b7c43fa18faaf9_25)</u> |
| | <u>[Item 3](#ie454cd170e0945ec85b7c43fa18faaf9_28)</u> | <u>[Legal Proceedings](#ie454cd170e0945ec85b7c43fa18faaf9_28)</u> | <u>[23](#ie454cd170e0945ec85b7c43fa18faaf9_28)</u> |
| | <u>[Item 4](#ie454cd170e0945ec85b7c43fa18faaf9_31)</u> | <u>[Mine Safety Disclosures](#ie454cd170e0945ec85b7c43fa18faaf9_31)</u> | <u>[24](#ie454cd170e0945ec85b7c43fa18faaf9_31)</u> |
| | | <u>[Supplemental Item - Executive Officers of the Registrant](#ie454cd170e0945ec85b7c43fa18faaf9_34)</u> | <u>[25](#ie454cd170e0945ec85b7c43fa18faaf9_34)</u> |
| **<u>[Part II](#ie454cd170e0945ec85b7c43fa18faaf9_37)</u>** | <u>[Item 5](#ie454cd170e0945ec85b7c43fa18faaf9_40)</u> | <u>[Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ie454cd170e0945ec85b7c43fa18faaf9_40)</u> | <u>[27](#ie454cd170e0945ec85b7c43fa18faaf9_40)</u> |
| | <u>[Item 6](#ie454cd170e0945ec85b7c43fa18faaf9_43)</u> | <u>[Selected Financial Data](#ie454cd170e0945ec85b7c43fa18faaf9_43)</u> | <u>[27](#ie454cd170e0945ec85b7c43fa18faaf9_43)</u> |
| | <u>[Item 7](#ie454cd170e0945ec85b7c43fa18faaf9_46)</u> | <u>[Management's Discussion and Analysis of Financial Condition and Results of Operations](#ie454cd170e0945ec85b7c43fa18faaf9_46)</u> | <u>[27](#ie454cd170e0945ec85b7c43fa18faaf9_46)</u> |
| | <u>[Item 7A](#ie454cd170e0945ec85b7c43fa18faaf9_49)</u> | <u>[Quantitative and Qualitative Disclosures about Market Risk](#ie454cd170e0945ec85b7c43fa18faaf9_49)</u> | <u>[27](#ie454cd170e0945ec85b7c43fa18faaf9_49)</u> |
| | <u>[Item 8](#ie454cd170e0945ec85b7c43fa18faaf9_52)</u> | <u>[Financial Statements and Supplementary Data](#ie454cd170e0945ec85b7c43fa18faaf9_52)</u> | <u>[28](#ie454cd170e0945ec85b7c43fa18faaf9_52)</u> |
| | <u>[Item 9](#ie454cd170e0945ec85b7c43fa18faaf9_55)</u> | <u>[Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ie454cd170e0945ec85b7c43fa18faaf9_55)</u> | <u>[28](#ie454cd170e0945ec85b7c43fa18faaf9_55)</u> |
| | <u>[Item 9A](#ie454cd170e0945ec85b7c43fa18faaf9_58)</u> | <u>[Controls and Procedures](#ie454cd170e0945ec85b7c43fa18faaf9_58)</u> | <u>[28](#ie454cd170e0945ec85b7c43fa18faaf9_58)</u> |
| | <u>[Item 9B](#ie454cd170e0945ec85b7c43fa18faaf9_64)</u> | <u>[Other Information](#ie454cd170e0945ec85b7c43fa18faaf9_64)</u> | <u>[28](#ie454cd170e0945ec85b7c43fa18faaf9_64)</u> |
| **<u>[Part III](#ie454cd170e0945ec85b7c43fa18faaf9_70)</u>** | <u>[Item 10](#ie454cd170e0945ec85b7c43fa18faaf9_73)</u> | <u>[Directors, Executive Officers, and Corporate Governance](#ie454cd170e0945ec85b7c43fa18faaf9_73)</u> | <u>[29](#ie454cd170e0945ec85b7c43fa18faaf9_73)</u> |
| | <u>[Item 11](#ie454cd170e0945ec85b7c43fa18faaf9_76)</u> | <u>[Executive Compensation](#ie454cd170e0945ec85b7c43fa18faaf9_76)</u> | <u>[29](#ie454cd170e0945ec85b7c43fa18faaf9_76)</u> |
| | <u>[Item 12](#ie454cd170e0945ec85b7c43fa18faaf9_79)</u> | <u>[Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ie454cd170e0945ec85b7c43fa18faaf9_79)</u> | <u>[29](#ie454cd170e0945ec85b7c43fa18faaf9_79)</u> |
| | <u>[Item 13](#ie454cd170e0945ec85b7c43fa18faaf9_82)</u> | <u>[Certain Relationships and Related Transactions and Director Independence](#ie454cd170e0945ec85b7c43fa18faaf9_82)</u> | <u>[29](#ie454cd170e0945ec85b7c43fa18faaf9_82)</u> |
| | <u>[Item 14](#ie454cd170e0945ec85b7c43fa18faaf9_85)</u> | <u>[Principal Accounting Fees and Services](#ie454cd170e0945ec85b7c43fa18faaf9_85)</u> | <u>[29](#ie454cd170e0945ec85b7c43fa18faaf9_85)</u> |
| **<u>[Part IV](#ie454cd170e0945ec85b7c43fa18faaf9_88)</u>** | <u>[Item 15](#ie454cd170e0945ec85b7c43fa18faaf9_91)</u> | <u>[Exhibits, Financial Statement Schedules](#ie454cd170e0945ec85b7c43fa18faaf9_91)</u> | <u>[30](#ie454cd170e0945ec85b7c43fa18faaf9_91)</u> |
| | <u>[Item 16](#ie454cd170e0945ec85b7c43fa18faaf9_97)</u> | <u>[Form 10-K Summary](#ie454cd170e0945ec85b7c43fa18faaf9_97)</u> | <u>[34](#ie454cd170e0945ec85b7c43fa18faaf9_97)</u> |
| **<u>[Signatures](#ie454cd170e0945ec85b7c43fa18faaf9_100)</u>** | | | <u>[35](#ie454cd170e0945ec85b7c43fa18faaf9_100)</u> |

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<u>[**TABLE OF CONTENTS**](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>

**FORWARD-LOOKING STATEMENTS**

Certain statements contained in this Annual Report on Form 10-K and the documents incorporated by reference that are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, the statements specifically identified as forward-looking statements within this Annual Report on Form 10-K. In addition, certain statements in future filings by us with the SEC, in press releases, and in oral and written statements made by or with our approval, which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include: (i) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other financial items; (ii) statements of our plans and objectives of our management or Board of Directors, including those relating to products or services or potential acquisition activity; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes," "anticipates," "expects," "intends," "targeted" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements. We desire to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including those factors and events identified (i) in "Item 1A. Risk Factors" of this Annual Report on Form 10-K and (ii) in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of First Financial's 2022 Annual Report to Shareholders (included within Exhibit 13 to this Annual Report on Form 10-K and incorporated by reference into Item 7 of this Annual Report on Form 10-K).

Forward-looking statements speak only as of the date on which they are made, and, except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified in their entirety by the foregoing cautionary statements.

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**PART I**

**Item 1. Business.**

<u>First Financial Bancorp.</u>

First Financial Bancorp., an Ohio corporation (First Financial or the Company), was formed in 1982. First Financial is a mid-sized, regional bank holding company headquartered in Cincinnati, Ohio, which has elected to become a financial holding company. References in this Form 10-K to "we," "us" or "our" refer, as the context requires, to First Financial and its subsidiaries, collectively or to First Financial as the holding company.

First Financial engages in the business of commercial banking and other banking and banking-related activities through its wholly-owned subsidiary, First Financial Bank (the Bank), which was founded in 1863. Effective December 30, 2016, the Bank converted its charter to an Ohio state chartered bank from a nationally chartered bank.

The range of banking services provided by First Financial to individuals and businesses includes commercial lending, real estate lending and consumer financing. Real estate loans are loans secured by a mortgage lien on the real property of the borrower, which may either be residential property (one to four family residential housing units) or commercial property (owner-occupied and/or investor income producing real estate, such as apartments, shopping centers, or office buildings). Risk of loss related to lending activities is managed by adherence to standard loan policies that establish certain levels of performance prior to the extension of a loan to the borrower. In addition, First Financial offers deposit products that include interest-bearing and noninterest-bearing accounts, time deposits and cash management services for commercial customers. A full range of trust and wealth management services is also provided through First Financial's Wealth Management line of business.

Commercial and industrial loans are made to all types of businesses for a variety of purposes including, but not limited to, inventory, receivables and equipment. First Financial works with businesses to meet their shorter-term working capital needs while also providing long-term financing for their business plans. First Financial also offers lease and equipment financing through two wholly-owned subsidiaries of the Bank, First Financial Equipment Finance LLC (First Equipment Finance) and Summit Funding Group, Inc. (Summit) (discussed below). Credit risk for lending activities is managed through standardized loan policies, established and authorized credit limits, centralized portfolio management and the diversification of market area and industries. The overall strength of the borrower is evaluated through the credit underwriting process and includes a variety of analytical activities, including the review of historical and projected cash flows, financial performance, financial strength of the principals and guarantors and collateral values, where applicable.

Commercial and industrial lending activities also include equipment and leasehold improvement financing for franchisees throughout the U.S., principally in the quick service and casual dining sector. The underwriting of these loans incorporates basic credit proficiencies combined with knowledge of select franchise concepts to measure the creditworthiness of proposed multi-unit borrowers. The focus is on a limited number of concepts that we believe have sound economics, lower closure rates, and higher brand awareness within specified local, regional or national markets. Loan terms for equipment are generally up to 84 months fully amortizing and up to 180 months on real estate-related requests.

First Financial also offers secured commercial financing throughout the U.S. through two wholly-owned subsidiaries of the Bank, Oak Street Funding LLC (Oak Street) and First Franchise Capital Corporation (First Franchise). Oak Street lends to the insurance industry, registered investment advisors, certified public accountants and indirect auto finance companies, while First Franchise lends to restaurant franchisees. Together, these niche lending activities are driven by acquisitions, ownership transitions and financing general working capital needs. The underwriting of Oak Street's loans involves analyses of collateral (through use of Oak Street's proprietary system) that consists of revenue, which is then continuously monitored by Oak Street throughout the life of the loans.

Commercial real estate loans are secured by a mortgage lien on the real property. The credit underwriting for both owner-occupied and investor income producing real estate loans includes detailed market analysis, historical and projected cash flow analysis, appropriate equity margins, assessment of lessees and lessors, type of real estate and other analyses. Market diversification within First Financial's service area and industry diversification are other means by which First Financial manages the risk. First Financial does not have a significant exposure to residential builders and developers.

Certain residential real estate loans originated by the Bank conform to secondary market underwriting standards and are sold within a short timeframe to unaffiliated third parties. The Bank sells these loans with both servicing retained and servicing released, depending on pricing and other market conditions. The credit underwriting standards adhere to a required level of

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documentation, verifications, valuation and overall credit performance of the borrower. The underwriting of these loans includes an evaluation of these and other pertinent factors prior to the extension of credit. These underwriting standards increase the marketability and address the credit risk associated with the loans.

Consumer loans are primarily loans made to individuals. These types of loans include new and used vehicle loans, second mortgages on residential real estate and unsecured loans. Risk elements in the consumer loan portfolio are primarily focused on the borrower's cash flow and credit history, which are key indicators of the ability to repay. A level of security is provided through liens on automobile titles and second mortgage liens, where applicable. Consumer loans are generally smaller dollar amounts than other types of lending and are made to a large number of customers, increasing diversification within the portfolio. Economic conditions that affect consumers in First Financial's markets have a direct impact on the credit quality of these loans. Higher levels of unemployment, lower levels of income growth and weaker economic growth are factors that may impact consumer loan credit quality.

Home equity lines of credit consist mainly of revolving lines of credit secured by residential real estate. Home equity lines of credit are generally governed by the same lending policies and subject to the same credit risks as described previously for residential real estate loans.

Bannockburn Global Forex (Bannockburn), a division of the Bank, is an industry-leading capital markets firm based in Cincinnati, Ohio, that provides transactional currency payments, foreign exchange hedging and other advisory products to closely held enterprises, financial sponsors and downstream financial institutions across the United States. Their primary focus is on small- and middle-market clients that have a need for tailored foreign exchange solutions. Bannockburn has a nationwide presence with offices in 10 locations throughout the U.S.

Information regarding statistical disclosure required by the Securities and Exchange Commission's Industry Guide 3 is included in "Table 4 - Statistical Information" of First Financial's 2022 Annual Report to Shareholders for the year ended December 31, 2022, and is incorporated herein by reference.

First Financial's executive office is located at 255 East Fifth Street, Suite 800, Cincinnati, Ohio 45202, and the telephone number is (877) 322-9530. We maintain a website with the address <u>www.bankatfirst.com</u>. The information contained on our website is not included, a part of or incorporated by reference into this Annual Report on Form 10-K. First Financial makes available its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, free of charge, as soon as reasonably practicable after filing with the Securities and Exchange Commission (SEC), through its website, www.bankatfirst.com under the "Investor Relations" link, under "Financial Reporting." Copies of such reports also can be found on the SEC's website at <u>www.sec.gov</u>.

<u>COVID-19</u>

The Company's operations and financial results in 2022 continued to be influenced by the COVID-19 pandemic. The pandemic negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, increased unemployment levels and decreased consumer confidence generally. Some of these issues persisted in 2022, particularly with respect to global supply chains and the effects of a shrinking workforce, resulting in higher wages and more employee resignations across a number of industries.

The Company's response to the Paycheck Protection Program (the PPP) succeeded in providing relief to our customers, although the program and assistance had substantially wound down by the end of 2021. The Company had outstanding PPP loans totaling $3.0 million in balances, net of $0.1 million of unearned fees, as of December 31, 2022, compared to $55.6 million of PPP loans, net of $2.6 million of unearned fees, as of December 31, 2021.

Additionally, in 2022, the Company had no loans that were still in a payment deferral to provide relief to borrowers adversely impacted by the pandemic, compared to $16.5 million as of December 31, 2021.

<u>Human Capital</u>

At December 31, 2022, First Financial had approximately 2,108 full-time employees located primarily in the states of Ohio, Indiana, Kentucky, and Illinois.

*Employee Wellbeing*. A key component of the Company's strategic intent is "Investing in our People." The company firmly believes that wellbeing is directly linked to engagement and engagement is a key pillar to the overall bank success. First

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Financial "invests' in associates and their families through various programs. One such program is the "Wellbeing Program", designed to support employees and their families in a holistic way, focusing on the five core areas of wellbeing: physical, financial, social, community and purpose. The program provides employees with incentives (such as health savings account contributions, paid time off and reimbursements) in exchange for voluntary participation in a range of activities, including an annual physical, health-risk assessment, webinar participation and enrollment in Company sponsored fitness activities. In 2022, 54% of eligible employees qualified for benefits under the Wellbeing Program. Additionally, First Financial partners with an independent primary care clinic that offers no or low cost preventive and routine care to associates and families.

*Compensation and Benefits.* First Financial offers employees competitive short-term and long-term compensation, a comprehensive set of benefits including health, dental and vision insurance, free or low-cost access to an independent provider of primary care clinics, life and disability programs, parental leave, product discounts and various expense reimbursement programs. First Financial also provides all eligible employees with an annual allocation to the First Financial Pension Plan of 5% of eligible annual pay. The pension allocation is 100% company-paid, fully-vested and portable. We regularly review our compensation practices to ensure we are paying employees equitably, taking into consideration such factors as experience, education, and performance.

*Employee Engagement.* First Financial launched its engagement strategy in 2020, partnering with a third party to create a culture of highly engaged associates by providing managerial training and coaching, measuring associate engagement and developing action plans to deepen engagement. In July 2022 First Financial launched its third all-associate engagement survey, which reflected the Company's success in increasing engagement through coaching and training, intentional action plans, sharing success stories, and highlighting engagement champions. The 2022 survey results showed a marked increase in engagement from the survey conducted in 2021. As in prior years, teams throughout the Bank continue to engage in team huddles, manager training, town halls, mentoring, career and leadership development programs, and updated action plans to continue to increase engagement across the company. In 2022, we hosted virtual town hall meetings for all associates, sharing business updates, opening the lines of communications and answering associate questions. In conjunction with senior management and town hall meetings, several additional pulse surveys were completed which provided insight into our associates' needs, which will shape future engagement strategies.

*Diversity, Equity and Inclusion.* First Financial prioritizes diversity, equity and inclusion (DEI) as an employer, a financial institution and as a member of the communities in which we operate. The DEI Committee of the Board provides guidance and oversight to First Financial's executive committee, the Manager of Diversity, Equity and Inclusion, and the First Financial Diversity Council, which is comprised of 10 associates from across our footprint. First Financial supports several associate-led business resource groups designed to facilitate networking and leadership development. First Financial continues to develop our DEI strategy, which includes goals and action plans designed to increase associate and management diversity.

<u>Subsidiaries</u>

A listing of each of First Financial's subsidiaries can be found in Exhibit 21 to this Form 10-K.

<u>Business Combinations</u>

In December 2021, the Company completed its acquisition of Summit Funding Group, Inc. and its subsidiaries. Summit was a privately held, full service, equipment financing company that originates, purchases, sells and services equipment leases to commercial businesses in the United States and Canada. Upon completion of the transaction, Summit became a subsidiary of the Bank and continues to operate as Summit Funding Group, taking advantage of its existing brand recognition within the equipment financing industry. Pursuant to the purchase agreement, First Financial agreed to acquire all of the issued and outstanding equity securities of Summit for aggregate consideration of approximately $127.1 million consisting of $113.5 million in cash and $10.0 million of First Financial common stock, and a $3.6 million earn-out payment.

<u>Market and Competitive Information</u>

First Financial utilizes a community banking business model and serves a combination of metropolitan and non-metropolitan markets through its full-service banking centers primarily in Indiana, Ohio, Kentucky and Illinois. Market selection is based upon a number of factors, but markets are primarily chosen for their potential for growth, long-term profitability and customer reach. First Financial's goal is to develop a competitive advantage through a local market focus, building long-term relationships with clients to help them reach greater levels of financial success.

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We also compete on a nationwide basis through Oak Street, which lends to the insurance industry, registered investment advisors, certified public accountants and indirect auto finance companies, First Franchise, which lends to restaurant franchisees, Bannockburn, which provides foreign exchange services to customers throughout the United States, and Summit, which provides equipment financing to commercial businesses to the United States and Canada.

The Company's markets support many different types of business activities, such as manufacturing, agriculture, education, healthcare and professional services. Within these markets, growth is projected to continue in key demographic groups and populations. First Financial's market evaluation includes demographic measures such as income levels, median household income and population growth. The Midwestern markets that First Financial serves have historically not experienced the level of economic volatility experienced in other areas of the country, although material fluctuations may occur.

First Financial believes that it is well positioned to compete in its markets. Smaller than super-regional and multi-national bank holding companies, First Financial believes that it can meet the needs of its markets through a local decision-making process and that it is better positioned to compete than smaller community banks that may have size or geographic limitations. First Financial's targeted customers include individuals and small to medium sized businesses within the Bank's geographic footprint. Through its diversified delivery systems of banking centers, ATMs, internet banking and telephone-based transactions, First Financial is able to meet the needs of its customers in an ever-changing marketplace.

First Financial faces strong competition from financial institutions and other non-financial organizations. Its competitors include local and regional financial institutions, savings and loans and bank holding companies, as well as some of the largest banking organizations in the United States. In addition, other types of financial institutions, such as credit unions, offer a wide range of loan and deposit services that are competitive with those offered by First Financial. The consumer is also served by brokerage firms and mutual funds that provide checking services, credit cards, margin loans and other services similar to those offered by First Financial. Online lenders also create additional competition, particularly in the mortgage and consumer lending areas. Major consumer retail stores compete for loans by offering credit cards and retail installment contracts. It is anticipated that competition from other financial and non-financial services entities will continue and, for certain products and services, intensify.

**Supervision and Regulation**

First Financial and its subsidiaries are subject to an extensive system of laws and regulations that are intended primarily for the protection of consumers, depositors, borrowers, the Deposit Insurance Fund (DIF) of the Federal Deposit Insurance Corporation (FDIC), and the banking system in general and not for the protection of shareholders. These laws and regulations govern areas such as capital, permissible activities, allowance for credit losses, loans and investments, interest rates that can be charged on loans and consumer protection communications and disclosures. Certain elements of selected laws and regulations are described in more detail in the sections that follow. These descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described.

<u>Bank Holding Company Regulation</u>

As a bank holding company that has elected to become a financial holding company, First Financial is subject to the provisions of the Bank Holding Company Act of 1956, as amended (the BHCA), and is subject to supervision and examination by the Federal Reserve Board. The BHCA requires prior approval by the Federal Reserve Board in any case where a financial holding company proposes to: (i) acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank that is not already majority-owned by the financial holding company; (ii) acquire all or substantially all of the assets of another bank or another financial or bank holding company; or (iii) merge or consolidate with any other financial or bank holding company. In addition, First Financial's acquisition of a savings and loan association requires prior Federal Reserve Board approval.

A qualifying bank holding company that has elected to become a financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature and not otherwise permissible for a bank holding company, if: (i) the holding company is "well managed" and "well capitalized" and (ii) each of its subsidiary banks (a) is well capitalized under the Federal Deposit Insurance Corporation Act of 1991 prompt corrective action provisions, (b) is well managed, and (c) has at least a "satisfactory" rating under the Community Reinvestment Act (CRA). No regulatory approval is required under the BHCA for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board.

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The Financial Services Modernization Act defines "financial in nature" to include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• securities underwriting, dealing and market making;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• sponsoring mutual funds and investment companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• insurance underwriting and agency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• merchant banking; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• activities that the Federal Reserve Board has determined to be closely related to banking.

If a financial holding company or a subsidiary bank fails to maintain all requirements for the holding company to maintain financial holding company status, material restrictions may be placed on the activities of the holding company and its subsidiaries and on the ability of the holding company to enter into certain transactions and obtain regulatory approvals for new activities and transactions. The holding company could also be required to divest itself of subsidiaries that engage in activities that are not permitted for bank holding companies that are not financial holding companies. If restrictions are imposed on the activities of a financial holding company, the existence of such restrictions may not be made publicly available pursuant to confidentiality regulations of the bank regulatory agencies.

Each subsidiary bank of a financial holding company is subject to certain restrictions on the maintenance of reserves against deposits, extensions of credit to the financial holding company and its subsidiaries, investments in the stock and other securities of the financial holding company and its subsidiaries and the taking of such stock and securities as collateral for loans to borrowers. Further, a financial holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property or furnishing of any services. Various consumer laws and regulations also affect the operations of these subsidiaries.

In April 2020, the Federal Reserve Board adopted a final rule to revise its regulations related to determinations of whether a company has the ability to exercise control over another company for purposes of the Bank Holding Company Act. The final rule expands and codifies the presumptions for use in such determinations. By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the Federal Reserve Board generally views as supporting a facts-and-circumstances determination that one company controls another company.

The Federal Reserve Board also has extensive enforcement authority over bank holding companies, including the ability to assess civil monetary penalties, issue cease and desist or removal orders, and require that a bank holding company divest subsidiaries (including a subsidiary bank). In general, the Federal Reserve Board may initiate enforcement actions for violations of laws and regulations and unsafe or unsound practices. A bank holding company is required by law and Federal Reserve Board policy to act as a source of financial strength to each subsidiary bank and to commit resources to support such subsidiary bank. The Federal Reserve Board may require a bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to its shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice.

**Economic Growth, Regulatory Relief and Consumer Protection Act**

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended (the Dodd-Frank Act), imposes significant regulatory and compliance requirements, including the imposition of increased capital, leverage, and liquidity requirements, and numerous other provisions designed to improve supervision and oversight of, and strengthen safety and soundness within, the financial services sector.

On May 25, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the Regulatory Relief Act) was enacted to modify or remove certain financial reform rules and regulations, including some of those implemented under the Dodd-Frank Act. Bank holding companies with consolidated assets of less than $100 billion, including First Financial, are no longer subject to the enhanced prudential standards established under the Dodd-Frank Act. The Regulatory Relief Act also relieves bank holding companies and banks with consolidated assets of less than $100 billion, including First Financial, from certain record-keeping, reporting and disclosure requirements.

<u>Depository Institution Regulation</u>

The Bank, as a bank chartered under the laws of the State of Ohio and a member of the Federal Reserve Bank of Cleveland (Federal Reserve Bank), is subject to supervision and examination by the Federal Reserve Board and the Ohio Division of

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Financial Institutions (ODFI). The Bank's deposits are insured up to applicable legal limits by the DIF, which is administered by the FDIC and is subject to the provisions of the Federal Deposit Insurance Act, as amended (FDIA). The Bank is also subject to regulations of the Consumer Financial Protection Bureau (CFPB), which was established by the Dodd-Frank Act and has broad powers to adopt and enforce consumer protection regulations.

<u>Regulatory Capital</u>

Financial institutions and their holding companies are required to maintain capital as a way of absorbing losses. The Federal Reserve Board has adopted risk-based capital guidelines for bank holding companies as well as state banks that are members of a Federal Reserve Bank. The guidelines provide a systematic analytical framework that makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy and incentivizes to holding liquid, low-risk assets. Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.

In July 2013, the United States banking regulators approved final rules (the Basel III Capital Rules) implementing the Basel III framework set forth by the Basel Committee on Banking Supervision, as well as certain provisions of the Dodd-Frank Act. Community banking organizations, including First Financial and the Bank, began transitioning to the new rules when the new minimum capital requirements became effective on January 1, 2015. A capital conservation buffer (i.e. common equity) and additional deductions from common equity capital were phased in through January 1, 2019.

The Basel III capital rules include (i) a minimum common equity tier 1 capital ratio of 4.5%, (ii) a minimum tier 1 capital ratio of 6.0%, (iii) a minimum total capital ratio of 8.0% and (iv) a minimum leverage ratio of 4.0%.

Common equity for the common equity tier 1 capital ratio generally consists of common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution elects to exclude such income from regulatory capital) and limited amounts of minority interests in the form of common stock, subject to applicable regulatory adjustments and deductions.

Tier 1 capital generally consists of common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but which are not otherwise permitted), and limited amounts of minority interests in the form of additional tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred capital and subordinated debt meeting certain conditions plus limited amounts of the allowance for credit losses, subject to specified eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization's own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels).

Under the guidelines, capital is compared to the relative risk included in the balance sheet. To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends and stock repurchases, and certain discretionary bonus payments to executive officers if the Company does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital compared to its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter.

Federal banking regulators have established regulations governing prompt corrective action to resolve capital deficient banks. Under these regulations, institutions that become under-capitalized are subject to mandatory regulatory scrutiny and limitations, which increase as capital continues to decrease. Each such institution is also required to file a capital plan with its primary federal regulator, and its holding company must guarantee the capital shortfall up to 5% of the assets of the capital deficient institution at the time it becomes under-capitalized.

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In accordance with the Basel III Capital Rules, in order to be "well-capitalized" under the prompt corrective action guidelines, a bank must have a common equity tier 1 capital ratio of at least 6.5%, a total risk-based capital ratio of at least 10.0%, a tier 1 risk-based capital ratio of at least 8.0% and a leverage ratio of at least 5.0%, and the bank must not be subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level or any capital measure. At December 31, 2022, the Bank met the capital ratio requirements to be deemed "well-capitalized."

A bank with a capital level that might qualify for well capitalized or adequately capitalized status may nevertheless be treated as though the bank is in the next lower capital category if the bank's primary federal banking supervisory authority determines that an unsafe or unsound condition or practice warrants that treatment. A bank's operations can be significantly affected by its capital classification under the prompt corrective action rules. For example, a bank that is not well capitalized generally is prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market without advance regulatory approval. These deposit-funding limitations can have an effect on the bank's liquidity. At each successively lower capital category, an insured depository institution is subject to additional restrictions. Under-capitalized banks are required to take specified actions to increase their capital or otherwise decrease the risks to the DIF. Bank regulatory agencies generally are required to appoint a receiver or conservator within 90 days after a bank becomes critically under-capitalized with a leverage ratio of less than 2.0%. The FDIA provides that a federal bank regulatory authority may require a bank holding company to divest itself of an under-capitalized bank subsidiary if the agency determines that divestiture will improve the bank's financial condition and prospects.

In December 2018, the federal banking agencies issued a final rule to address regulatory treatment of credit loss allowances under the current expected credit loss (CECL) model (accounting standard). The rule revised the federal banking agencies' regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day-one adverse effects on regulatory capital that may result from the adoption of the CECL model. Concurrent with the enactment of the Coronavirus Aid, Relief, and Economic Recovery Act (CARES Act) in March 2020, federal banking agencies issued an interim final rule that delayed the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provided banking organizations that implemented CECL prior to the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. First Financial adopted the capital transition relief over the five year permissible period.

<u>Debit Card Interchange Fees</u>

The "Durbin Amendment" to the Dodd-Frank Act, also known as Regulation II, was enacted into law in July 2010. The Durbin Amendment limits the amount of interchange fees that banks with assets of $10 billion or more may charge to process electronic debit transactions. Under the Durbin Amendment and the Federal Reserve Board's implementing regulations, bank issuers which are not exempt may only receive an interchange fee from merchants that is reasonable and proportional to the cost of clearing the transaction. The maximum permissible interchange fee is equal to no more than $0.21 plus 5 basis points of the transaction value for many types of debit interchange transactions. A debit card issuer may also recover $0.01 per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements established by the Federal Reserve Board. In addition, the Federal Reserve Board has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product.

<u>Limitations on Dividends and Other Payments</u>

There are various legal limitations on the extent to which a subsidiary bank may finance or otherwise supply funds to its parent holding company. Under applicable federal and state laws, the Bank may not, subject to certain limited exceptions, make loans or extensions of credit to, or investments in the securities of, First Financial. A subsidiary bank is also subject to collateral security requirements for any loan or extension of credit permitted by such exceptions.

The Bank may not pay dividends out of its surplus if, after paying these dividends, it would fail to meet the required minimum capital levels established by the Federal Reserve Board. The amount of dividends payable by the Bank is also restricted if the Bank does not hold a capital conservation buffer as described above. In addition, the Bank must have the approval of the Federal Reserve Board and the ODFI if a dividend in any year would cause the total dividends for that year to exceed the sum of the Bank's net income for the current year and the retained net income for the preceding two years, less required transfers to surplus or to fund the retirement of preferred stock. Under Ohio law, the Bank may pay a dividend from surplus only with the approval of First Financial (as the sole shareholder of the Bank) and the approval of the ODFI. Payment of dividends by the Bank may be restricted at any time at the discretion of its regulatory authorities, if such regulatory authorities deem such dividends to constitute unsafe and/or unsound banking practices or if necessary to maintain adequate capital.

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The ability of First Financial to obtain funds for the payment of dividends, for the servicing of indebtedness and for other cash requirements is largely dependent on the amount of dividends that may be declared by the Bank. However, because the Federal Reserve Board expects First Financial to serve as a source of strength to the Bank, as discussed above, payment of dividends by the Bank may be restricted at any time at the discretion of the Federal Reserve Board if the Federal Reserve Board deems such dividends to constitute an unsafe and/or unsound banking practice.

The Federal Reserve Board has also issued a policy statement with regard to the payment of cash dividends by financial holding companies and other bank holding companies. The policy statement provides that, as a matter of prudent banking, a bank holding company should not maintain a rate of cash dividends unless its net income available to common shareholders over the past year has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears to be consistent with the bank holding company's capital needs, asset quality, and overall financial condition. Accordingly, a bank holding company generally should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the bank holding company's financial health, such as by borrowing. Under certain circumstances, a bank holding company must provide notice to the Federal Reserve Board of an intended dividend payment, to which the Federal Reserve Board might object if it determines the payment would be an unsafe or unsound practice.

<u>Insurance of Accounts</u>

The FDIC maintains the DIF, which insures the deposit accounts of the Bank to the maximum amount provided by law. The general insurance limit is $250,000 per separately insured depositor. This insurance is backed by the full faith and credit of the United States government.

The FDIC assesses deposit insurance premiums on each insured institution quarterly based on risk characteristics of the institution. As a bank with assets of more than $10 billion, First Financial is subject to a deposit assessment based on a scorecard issued by the FDIC. This scorecard considers, among other things, the Bank's CAMELS rating, results of asset-related stress testing and funding-related stress, as well as its use of core deposits, among other things. Depending on the results of the Bank's performance under that scorecard, the total base assessment rate is between 1.5 and 40 basis points. The FDIC may also impose a special assessment in an emergency situation.

The FDIA requires the FDIC's Board of Directors to set a target or Designated Reserve Ratio (DRR) for the DIF annually. The DRR is the total of the DIF divided by the total estimated insured deposits of the industry. Under the long-range plan, the FDIC set the DRR at 2.0% and set a schedule of assessment rates that would progressively decrease when the DRR reached 2.0% and 2.5%. The FDIC views the 2.0% DRR as a long-term goal and the minimum level needed to withstand future crises of the magnitude of past crises. Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DRR to decline below the statutory minimum of 1.35% as of June 30, 2020. In September 2020, the FDIC Board of Directors adopted a restoration plan to restore the DRR to at least 1.35% by 2028, absent extraordinary circumstances, as required by the FDIC. The restoration plan maintained the assessment rate schedules in place at the time and required the FDIC to update its analysis and projections for the DIF balance and DRR at least semiannually.

In the semiannual update for the restoration plan in June 2022, the FDIC projected that the DRR was at risk of not reaching the statutory minimum of 1.35% by September 30, 2028, the statutory deadline to restore the DRR. Based on this update, the FDIC Board approved an amended restoration plan, and concurrently proposed an increase in initial base deposit insurance assessment rate schedules uniformly by two basis points, applicable to all insured depository institutions. In October 2022, the FDIC Board finalized the increase with an effective date of January 1, 2023, applicable to the first quarterly assessment period of 2023. The revised assessment rate schedules are intended to increase the likelihood that the DRR reaches the statutory minimum level of 1.35% by September 30, 2028.

As insurer, the FDIC is authorized to conduct examinations of and to require reporting by DIF-insured institutions. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or written agreement entered into with the FDIC.

<u>Consumer Protection Laws and Regulations</u>

Banks are subject to regular examination to ensure compliance with federal statutes and regulations applicable to their business, including consumer protection statutes and implementing regulations. The Dodd-Frank Act established the CFPB, which has extensive regulatory and enforcement powers over consumer financial products and services. As a bank with total assets in

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excess of $10 billion, the Bank is primarily examined by the CFPB with respect to consumer protection laws and regulations. The CFPB has adopted numerous rules with respect to consumer protection laws and has commenced related enforcement actions. The following are just a few of the consumer protection laws applicable to the Bank:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The CRA: imposes a continuing and affirmative obligation to fulfill the credit needs of its entire community, including low- and moderate-income neighborhoods.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Equal Credit Opportunity Act: prohibits discrimination in any credit transaction on the basis of any of various criteria.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Truth in Lending Act: requires that credit terms are disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Fair Housing Act: makes it unlawful for a lender to discriminate in its housing-related lending activities against any person on the basis of any of certain criteria.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Home Mortgage Disclosure Act: requires financial institutions to collect data that enables regulatory agencies to determine whether the financial institutions are serving the housing credit needs of the communities in which they are located.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Real Estate Settlement Procedures Act: requires that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers' costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Privacy provisions of the Gramm-Leach-Bliley Act: requires financial institutions to establish policies and procedures to restrict the sharing of non-public customer data with non-affiliated parties and to protect customer information from unauthorized access.

The banking regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of specific banking or consumer finance law.

On July 22, 2020, the CFPB issued a final small dollar loan rule related to payday, vehicle title and certain high cost installment loans (the Small Dollar Rule) that modified a former rule that was issued in November 2013. Lenders were required to comply with the Small Dollar Rule by June 13, 2022. Specifically, the Small Dollar Rule revokes provisions contained in the 2013 rule that: (i) provide that it is an unfair and abusive practice for a lender to make a covered short-term or longer-term balloon-payment loan, including payday and vehicle title loans, without reasonably determining that consumers have the ability to repay those loans according to their terms; (ii) prescribe mandatory underwriting requirements for making the ability-to-repay determination; (iii) exempt certain loans from mandatory underwriting requirements; and (iv) establish related definitions, reporting, and recordkeeping requirements.

Separately, in May 2018, the OCC published guidance that encourages national banks and federal savings associations to offer responsible short-term, small-dollar installment loans with terms between two and twelve months and equal amortizing payments. Pursuant to the OCC's guidance on this issue, banks are encouraged to offer these products in a manner that is consistent with sound risk management principles and clear, documented underwriting guidelines. Further, the federal bank regulatory agencies issued interagency guidance on May 20, 2020, to encourage banks, savings associations, and credit unions to offer responsible small-dollar loans to customers for consumer and small business purposes. The Small Dollar Rule did not have a material effect on First Financial's financial condition or results of operations on a consolidated basis in 2021 or 2022.

<u>Community Reinvestment Act</u>

Under the CRA, every FDIC-insured institution is obligated, consistent with safe and sound banking practices, to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA requires the appropriate federal banking regulator, in connection with the examination of an insured institution, to assess the institution's record of meeting the credit needs of its community and to consider this record in its evaluation of certain applications to banking regulators, such as an application for approval of a merger or the establishment of a branch. An unsatisfactory rating may be used as the basis for the denial of an application and will prevent a bank holding company from making an election to become a financial holding company. As of its most recent examination, the Bank received a CRA rating of "outstanding."

<u>Privacy Rules</u>

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Federal banking regulators, as required under the Gramm-Leach-Bliley Act, as amended (the GLBA), have adopted rules limiting the ability of banks and other financial institutions to disclose nonpublic information about consumers to non-affiliated third parties. The rules require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to non-affiliated third parties. The privacy provisions of the GLBA affect how consumer information is transmitted through diversified financial services companies and conveyed to outside vendors.

<u>Fiscal and Monetary Policies</u>

The earnings of banks, and, therefore, the earnings of First Financial (and its subsidiaries), are affected by the fiscal and monetary policies of the United States government and its agencies, including the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the national supply of bank credit in an effort to prevent recession and to restrain inflation. Among the procedures used to implement these objectives are open market operations in United States government securities, changes in the discount rate on member bank borrowings, and changes in reserve requirements on member bank deposits. These policies are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits.

<u>Volcker Rule</u>

In December 2013, five federal agencies adopted a final regulation implementing the so-called Volcker Rule provision of the Dodd-Frank Act (the Volcker Rule). The Volcker Rule placed limits on the trading activity of insured depository institutions and entities affiliated with depository institutions, subject to certain exceptions. Such trading activity included the purchase or sale as principal of a security derivative, commodity future, option, or similar instrument in order to benefit from short-term price movements or to realize short-term profits. The Volcker Rule exempted trading in specified United States government, agency, state and/or municipal obligations. The Volcker Rule also excluded: (i) trading conducted in certain capacities, including as a broker or other agent, through a deferred compensation or pension plan, as a fiduciary on behalf of customers; (ii) trading to satisfy a debt previously contracted; (iii) trading under certain repurchase and securities lending agreements; and (iv) trading in connection with risk-mitigating hedging activities. Further, the Volcker Rule prohibited a banking entity from having an ownership interest in, or certain relationships with, a hedge fund or private equity fund, also known as "covered funds," subject to a number of exceptions.

On June 25, 2020, the federal bank regulatory agencies finalized a rule modifying the Volcker Rule's prohibition on banking entities investing in or sponsoring covered funds. The new rule permits certain banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was originally intended to address. To the extent First Financial engages in any of the trading activities or has any ownership interests in or relationship with any of the types of funds regulated by the Volcker Rule, First Financial believes that its activities and relationships comply with such rule, as modified through rule-making.

<u>Office of Foreign Assets Control Regulation</u>

The United States Treasury Department's Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries. First Financial is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.

<u>Cybersecurity</u>

In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution. The other statement indicates that a financial institution's management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution's operations after a cyber-attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business

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operations and address rebuilding network capabilities and restoring data if the financial institution or its critical service providers fall victim to this type of cybersecurity-attack. If First Financial fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

In February 2018, the SEC published interpretive guidance to assist public companies in preparing disclosures about cybersecurity risks and incidents. These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

In November 2021, the FDIC, the OCC and the Federal Reserve Board issued a final rule that became effective in May 2022 requiring banking organizations that experience a computer-security incident to notify certain entities. A computer-security incident occurs when there is a violation or imminent threat of a violation to banking security policies and procedures, or when actual or potential harm to the confidentiality, integrity, or availability of an information system or the information occurs. The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determines a computer-security incident that rises to the level of a notification incident has occurred. These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into larger incidents. This rule also requires bank service providers to notify their customers of a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. First Financial expects this trend of new state-level activity to continue and is actively monitoring developments in the states in which we conduct business.

In the ordinary course of business, First Financial relies on electronic communications and information systems to conduct its operations and to store sensitive data. First Financial employs an in-depth, layered, defensive approach that leverages people, processes, encryption and multi-factor authentication technology to manage and maintain cybersecurity controls. First Financial utilizes a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as report on any suspected advanced persistent threats. Notwithstanding the strength of First Financial's defensive measures, the threat from cybersecurity-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. First Financial's systems and those of its customers and third-party service providers are under constant threat and it is possible that First Financial could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, in addition to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

<u>Patriot Act</u>

A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. In response to the terrorist events of September 11, 2001, the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the Patriot Act) substantially broadened the scope of United States anti-money laundering laws and regulations by imposing significant new compliance and due diligence obligations, creating new crimes and penalties, and expanding the extra-territorial jurisdiction of the United States. The Patriot Act gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the Patriot Act encourage information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions. Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity. The Bank has established policies and procedures that it considers to be in compliance with the requirements of the Patriot Act.

<u>State Law</u>

As an Ohio-chartered bank, the Bank is subject to regular examination by the ODFI. State banking regulation affects the Bank's internal organization and corporate governance, capital distributions, activities, acquisitions of other institutions and branching. State banking regulation may contain limitations on an institution's activities that are in addition to limitations

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imposed under federal banking law. The ODFI may initiate supervisory measures or formal enforcement actions, and under certain circumstances, it may take control of an Ohio-chartered bank.

**Item 1A. Risk Factors.**

*The risks listed here are not the only risks we face. Additional risks that are not presently known, or that we presently deem to be immaterial, also could have a material effect on our financial condition, results of operations, business and prospects. (See also "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for certain forward looking statements.)*

**Risks Related to Economic and Market Conditions**

<u>Weakness in the economy and in the real estate market, including specific weakness within our geographic footprint, may affect us, including requiring us to record additional loan loss provision or to charge off loans.</u>

First Financial's success depends, in part, on economic and political conditions, local and national, as well as governmental fiscal and monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy and other factors beyond First Financial's control may affect its deposit levels and composition, demand for loans, the ability of borrowers to repay their loans and the value of the collateral securing the loans it makes. Economic turmoil in different regions of the world affect the economy and stock prices in the United States, which can affect First Financial's earnings and capital and the ability of its customers to repay loans. For example, on February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region have occurred and remain likely. Although the length, impact, and outcome of the ongoing war in Ukraine is highly unpredictable, this conflict has resulted, and could continue to result, in market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences, as well as increases in cyberattacks and espionage. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.

Due to First Financial's volume of real estate loans, declining real estate values, especially in light of rising interest rates, could affect the value of property used as collateral as well as First Financial's ability to sell the collateral upon foreclosure.

If the strength of the United States economy in general and the strength of the local economies in which we conduct operations decline, this could result in, among other things, a deterioration of credit quality or a reduced demand for credit, including a resultant effect on our loan portfolio and allowance for credit losses. These factors could also result in higher delinquencies and greater charge-offs in future periods, which could materially affect our financial condition and results of operations.

There is no assurance that our non-impaired loans will not become impaired or that our impaired loans will not suffer further deterioration in value. The fluctuations in national, regional and local economic conditions, including those related to local residential, commercial real estate and construction markets, may result in increased charge-offs and, consequently, reduce our net income. These fluctuations are not predictable, cannot be controlled and may have a material impact on our operations and financial condition even if other favorable events occur.

<u>Weakness in the real estate market, including the secondary market for residential mortgage loans, could affect us.</u>

Disruptions in the secondary market for residential mortgage loans limit the market for and liquidity of many mortgage loans. The effects of mortgage market challenges, combined with reductions in residential real estate market prices and reduced levels of home sales, could affect the value of collateral securing mortgage loans that we hold, mortgage loan originations and profits on sales of mortgage loans. Such conditions could result in higher losses or charge-offs in our mortgage loan portfolio and other lines of business. Declines in real estate values, home sale volumes, financial stress on borrowers as a result of job losses, interest rate resets on adjustable rate mortgage loans or other factors could have further effects on borrowers that could result in higher delinquencies and greater charge-offs in future periods, which would affect our financial condition or results of operations. Additionally, declines in real estate values might affect the creditworthiness of state and local governments, resulting in decreased profitability or credit losses from loans made to such governments. A decline in home values or overall economic weakness could also have an impact upon the value of real estate or other assets which we own upon foreclosing a loan and our ability to realize value on such assets.

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<u>Changes in market interest rates or capital markets could affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital or liquidity.</u>

Given the nature of our business, and the fact that most of our assets and liabilities are financial in nature, we tend to be sensitive to market interest rate movements and the performance of the financial markets. Our primary source of income is net interest income, which is the difference between the interest income generated by our interest-earning assets (consisting primarily of loans and, to a lesser extent, securities) and the interest expense generated by our interest-bearing liabilities. Prevailing economic conditions, fiscal and monetary policies and the policies of various regulatory agencies all affect market rates of interest and the availability and cost of credit, which, in turn, significantly affect financial institutions' net interest income. If the interest we pay on deposits and other borrowings increases at a faster rate than increases in the interest we receive on loans and investments, net interest income, and, therefore, our earnings, could be affected. Earnings and capital levels could also be affected if the interest we receive on loans and other investments falls more quickly than the interest we pay on deposits and other borrowings.

In addition to the general impact of the economy, changes in interest rates or in valuations in the debt or equity markets could directly impact us in one or more of the following ways:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the yield on earning assets and rates paid on interest bearing liabilities may change in disproportionate ways;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the value of certain balance sheet and off-balance sheet financial instruments or the value of equity investments that we hold could decline;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the value of assets for which we provide processing services could decline;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the demand for loans and refinancings may decline, which could negatively impact income related to loan originations; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• to the extent we access capital markets to raise funds to support our business, such changes could affect the cost of such funds or the ability to raise such funds.

Although we have implemented procedures we believe will reduce the potential effects of changes in interest rates on our results of operations, these procedures may not always be successful. In addition, any substantial or prolonged change in market interest rates could affect our financial condition, results of operations and liquidity. During 2022, the target fed funds rate increased by 425 basis points. Because the First Financial balance sheet is asset sensitive, these interest rate increases resulted in $67.0 million of incremental net income in 2022. Additional increases are projected for 2023, although it is not clear how much longer, or by how much, rates will rise.

<u>We may be impacted by the transition from LIBOR as a reference rate.</u>

The London Interbank Offered Rate (LIBOR) has been used extensively in the United States and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps and other derivative financial instruments. LIBOR is set based on interest rate information reported by certain banks, which are set to stop reporting such information after June 30, 2023. In the United States, the Alternative Reference Rate Committee (ARRC) has endorsed the use of a Secured Overnight Funding Rate (SOFR) as the set of alternative United States dollar reference interest rates. SOFR is different from LIBOR in that it is a backward looking secured rate rather than a forward looking unsecured rate.

These differences could lead to a greater disconnect between our costs to raise funds for SOFR as compared to LIBOR. For cash products and loans, ARRC has also recognized Term SOFR, which is a forward looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR. There are operational issues which may create a delay in the transition to SOFR or other substitute indices, leading to uncertainty across the industry.

First Financial has established a working group to manage the LIBOR transition process. The working group has identified all LIBOR-related contracts and determined which will require amended language to incorporate a substitute reference rate. The working group has also developed and implemented flexible language regarding reference rates for all new loan products and agreements. First Financial ceased originating any loans that reference LIBOR at the beginning of 2022 and is in the process of amending all existing loan documents that reference LIBOR as the index rate to allow for the substitution of Term SOFR or another reference rate and does not anticipate any material issues with transitioning away from LIBOR by June 30, 2023.

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<u>Declining values of real estate, increases in unemployment, insurance market disruptions and the related effects on local economies may increase our credit losses, which could negatively affect our financial results.</u>

We offer a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, home equity, consumer and other loans. Many of our loans are secured by real estate (both residential and commercial) within our market area. A major change in the real estate market, such as deterioration in the value of collateral, or in the local or national economy, could affect our customers' ability to pay these loans, which in turn could impact our results of operations and financial condition. Additionally, increases in unemployment also may affect the ability of certain clients to repay loans and the financial results of commercial clients in localities with higher unemployment, may result in loan defaults and foreclosures and may impair the value of our collateral. This is especially relevant in light of the sustained inflation and rising interest rates experienced in 2022. Loan defaults and foreclosures are unavoidable in the banking industry, and we try to limit our exposure to this risk by monitoring carefully our extensions of credit. Additionally, a concentration of natural disasters or a significant disruption in the insurance market could impact the risk relating to our insurance lending business. We cannot fully eliminate credit risk, and as a result, credit losses may increase in the future.

<u>Our financial instruments carried at fair value expose us to certain market risks.</u>

We maintain an available-for-sale investment securities portfolio, which includes assets with various types of instruments and maturities. At times, we also maintain certain assets that are classified and accounted for as trading assets. The changes in fair value of available-for-sale securities are recognized in shareholders' equity as a component of other comprehensive income. The changes in fair value of financial instruments classified as trading assets are carried at fair value with changes in fair value recognized in earnings. The fair value of financial instruments carried at fair value is exposed to market risks related to changes in interest rates and market liquidity. We manage the market risks associated with these instruments through broad asset/liability management strategies. Changes in the market values of these financial instruments could have a material impact on our financial condition or results of operations. We may classify additional financial assets or financial liabilities at fair value in the future.

<u>The economic impact of COVID-19 or any other pandemic could adversely affect our business, financial condition, liquidity, and results of operations</u>.

COVID-19 has negatively impacted global, national and local economies, disrupted global supply chains, created significant volatility and disruption in financial markets. The extent to which COVID-19 will continue to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted. As of December 31, 2022, we hold and service PPP loans. In the event there was a deficiency in the manner in which we originated, funded or serviced PPP loans, the SBA may deny its liability under the guaranty for the PPP Loans, reduce the amount of the guaranty, or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency.

**Risks Related to Our Business**

<u>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.</u>

Since lending is one of our primary business activities, the credit quality of our portfolio can have a significant impact on our earnings. We estimate and establish reserves for credit risks we reasonably expect to occur over the expected life of our loan portfolio. 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. As is the case with any such assessments, there is always the chance that we will fail to identify the proper factors or that we will fail to accurately estimate the impacts of factors that we identify. 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.

<u>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 effect on our business, results of operations and financial condition.</u>

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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. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Although we regularly review our credit exposure to specific clients and counterparties and to specific industries that we believe may present credit concerns, default risk may arise from events or circumstances that are difficult to detect, such as fraud. Moreover, such circumstances, including fraud, may become more likely to occur or be detected in periods of general economic uncertainty. We may also fail to receive full information with respect to the risks of a counterparty. In addition, in cases where we have extended credit against collateral, we may find that we are under-secured, for example, as a result of sudden declines in market values that reduce the value of collateral or due to fraud with respect to such collateral. If such events or circumstances were to occur, it could result in a potential loss of revenue and have an effect on our business, results of operations and financial condition.

<u>Our allowance for credit losses may prove to be insufficient to absorb losses in our loan portfolio.</u>

We maintain an allowance for credit losses that we believe is a reasonable estimate of the expected losses over the expected life of the loan portfolio based on a CECL model. We believe that our allowance for credit losses is maintained at a level adequate to absorb expected losses over the life of the loans in the loan portfolio as of the corresponding balance sheet date. However, our allowance for credit losses may not be sufficient to cover actual credit losses, and future provision for credit losses could materially affect our operating results. The accounting measurements related to the allowance for credit losses require significant estimates which are subject to uncertainty and change related to new information and changing circumstances. Management estimates the allowance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions not already considered by such model. Our estimates of the risk of loss and amount of loss on any loan are complicated by the significant uncertainties surrounding our borrowers' abilities to successfully execute their business models through changing economic environments, competitive challenges and other factors. Because of the degree of uncertainty and susceptibility of these factors to change, our actual losses may vary from our current estimates.

In addition, bank regulators periodically review our allowance for credit losses and may require us to increase our provision for credit losses or recognize further loan charge-offs. Moreover, the Financial Accounting Standards Board (FASB) has changed its requirements for establishing the allowance for credit losses. The new accounting guidance requires banks to record, at the time of origination, credit losses expected throughout the life of the asset on loans, leases and held-to-maturity debt securities, as opposed to the previous practice of recording losses when it was probable that a loss event had occurred. Under the CECL model, we are required to use historical information, current conditions and reasonable and supportable forecasts to estimate the expected credit losses. If the methodologies and assumptions we use in the CECL model prove to be incorrect, or inadequate, the allowance for credit losses may not be sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on our financial condition and results of operations. We adopted the CECL accounting guidance in 2020 and recognized a one-time cumulative effect adjustment to our allowance for credit losses and retained earnings as of January 1, 2020. Concurrent with the enactment of the CARES Act, federal bank regulatory agencies issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provided banking organizations that implemented CECL prior to the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay.

We adopted CECL in the first quarter of 2020, including the regulatory phase-in. CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to errors, financial misstatements or operational losses. As a result of CECL, our financial results may be negatively affected as soon as weak or deteriorating economic conditions are forecasted and alter our expectations for credit losses. In 2021, we were able to reverse previous provision expense of $19.0 million as the credit conditions related to COVID-19 were not as significant as originally anticipated. In 2022, we recorded $6.7 million of provision expense as our loan portfolio grew and the overall duration of the portfolio extended due to rising interest rates. Depending upon future COVID-19 variants and circumstances, as well as broader macroeconomic shifts, we may incur significant provision expense for credit losses in future periods.

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<u>Projections for new business initiatives and strategies may prove inaccurate.</u>

The introduction, implementation, withdrawal, success and timing of business initiatives and strategies, including, but not limited to, the opening of new banking centers or entering into new product lines, may be less successful or may be different than anticipated, which could affect our business. The Bank makes certain projections and develops plans and strategies for its banking and financial products. If we do not accurately determine demand for our banking and financial products, it could result in us incurring significant expenses without the anticipated increases in revenue, which could result in a material effect on the Bank's business and/or capital.

<u>We may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud, or certain borrower defaults, which could harm our liquidity, results of operations and financial condition.</u>

When we sell mortgage loans, whether as whole loans or pursuant to a securitization, we are required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated. Our whole loan sale agreements require us to repurchase or substitute mortgage loans in the event we breach any of these representations or warranties. In addition, we may be required to repurchase mortgage loans as a result of borrower fraud. While we have taken steps to enhance our underwriting policies and procedures, there can be no assurance that these steps will be effective or reduce risk associated with loans sold in the past. If the level of repurchase and indemnity activity becomes material, our liquidity, results of operations and financial condition may be affected.

<u>Competition in the financial services industry is intense and could result in our losing business and/or key personnel or experiencing reduced margins.</u>

We operate in a highly competitive industry that could become even more competitive as a result of legislative, regulatory and technological changes, and continued consolidation. We face aggressive competition from other domestic and foreign lending institutions as well as from numerous other providers of financial services. The ability of non-banking financial institutions to provide services previously limited to commercial banks has intensified competition. Because non-banking financial institutions are not subject to the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. Securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. These developments may significantly change the competitive environment in which we conduct business. Some of our competitors have greater financial resources and/or face fewer regulatory constraints, such as Financial Technology Companies, or FinTechs. Credit unions that compete with us have regulatory and other advantages that allow them to price products and services more competitively. As a result of these various sources of competition, we could lose loan, deposit, or other types of business to competitors or be forced to price products and services on less advantageous terms to retain or attract clients, either of which could affect our profitability.

The principal bases for competition are pricing (including the interest rates charged on loans or paid on interest bearing deposits), product structure, the range of products and services offered, and the quality of customer service (including convenience and responsiveness to customer needs and concerns). The ability to access and use technology is an increasingly important competitive factor in the financial services industry, and it is a critically important component to customer satisfaction as it affects our ability to deliver the right products and services. For example, digital or cryptocurrencies, blockchain, and other FinTech technologies that are designed to enhance transactional security have the potential to disrupt the financial industry, change the way banks do business, and reduce the need for banks as financial deposit-keepers and intermediaries.

Another increasingly competitive factor in the financial services industry is the competition to attract and retain talented employees across many of our business and support areas, many of whom are key to executing our strategic plan and to maintaining relationships with the customers and communities they serve. This competition could lead to adverse effects on our business, financial condition, or operating results and could also cause us to not pursue certain business opportunities.

Failure to adequately address the competitive pressures we face could make it harder for us to attract and retain customers across our businesses. Similarly, meeting these competitive pressures could require us to incur significant additional expense, to reevaluate the number of branches through which we serve our customers, or to accept risk beyond what we would otherwise view as desirable under the circumstances. In addition, in our interest rate sensitive business, pressure to increase rates on deposits or decrease rates on loans could reduce our net interest margin with a resulting negative impact on our net interest income.

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<u>Clients could pursue alternatives to bank deposits, causing us to lose a relatively inexpensive source of funding.</u>

Checking and savings account balances and other forms of client deposits could decrease if clients perceive alternative investments as providing superior expected returns. Consumers may move money out of bank deposits in favor of other investments, including digital or cryptocurrency. When clients move money out of bank deposits in favor of alternative investments, we can lose a relatively inexpensive source of funds, increasing our funding costs.

<u>Consumers may decide not to use banks to complete their financial transactions, or deposit funds electronically with banks having no branches within our market area, which could affect net income.</u>

Technology and other changes allow parties to complete financial transactions without banks. For example, consumers can pay bills and transfer funds directly without banks. Consumers can also shop for higher deposit interest rates at banks across the country, which may offer higher rates because they have few or no physical branches and open deposit accounts electronically. This process could result in the loss of fee income and client deposits and could increase our funding costs.

<u>Our wealth management business subjects us to a variety of investment and market risks.</u>

At December 31, 2022, we had $3.2 billion in assets under management. A sharp decline or heightened volatility in the stock market could negatively impact the value of investments held by the bank's wealth management clients, which in turn impacts the amount of assets under management and subjects our earnings to additional risks and uncertainties. As our wealth management business grows, we may also face operational risk resulting from inadequate or failed internal processes, systems or errors, and regulatory risk, which could result in penalties or restrictions due to non-compliance with laws and regulations.

<u>Our foreign exchange business is largely dependent upon a small number of large clients and market volatility.</u>

In August 2019, First Financial acquired Bannockburn, which is engaged in various foreign exchange market activities. Bannockburn's business model relies, to some extent, upon a small number of large clients engaged in foreign currency transactions. The loss of one or more of these large clients would adversely affect the revenue derived from Bannockburn. Additionally, foreign currency transactions historically increase as market volatility increases. Sustained periods of stability in global financial markets could adversely affect Bannockburn's revenue. Other risks and uncertainties related to our foreign exchange business include the risk that foreign exchange rates may move in an unfavorable direction, leading to losses for the bank; the risk that a client may default on its payment obligations, resulting in losses for the bank; the risk that our systems for managing foreign exchange market activities could be inadequate or fail as a result of processes, systems or human error; and the risk of regulatory penalties or restrictions due to non-compliance with laws and regulations related to foreign exchange transactions. Our foreign exchange business is also susceptible to the risk that political events or changes in government policies could negatively impact the bank's matched book business.

<u>Negative public opinion could damage our reputation and impact business operations and revenues.</u>

As a financial institution, our earnings and capital are subject to risks associated with negative public opinion. Negative public opinion could result from our actual or alleged conduct in any number of activities, including lending practices, the failure of any of our products or services to meet our clients' expectations or applicable regulatory requirements, corporate governance and acquisitions, social media and other marketing activities, and the implementation of environmental, social and governance practices or actions taken by government regulators and community organizations in response to any of the foregoing. Negative public opinion could affect our ability to attract and/or retain clients, could expose us to litigation and regulatory action, and could have a material adverse effect on our stock price or result in heightened volatility. Negative public opinion could also affect our ability to borrow funds in the unsecured wholesale debt markets.

<u>We rely on other companies to provide key components of our business infrastructure, creating risks of failures by such companies and cybersecurity incidents involving our customers' information.</u>

Third parties provide key components of our business infrastructure, such as processing and Internet connections and network access. These vendors also provide services that support our operations, including the storage and processing of sensitive consumer and business customer data, as well as our sales efforts. Any disruption in such services provided by these third parties or any failure of these third parties to handle current or higher volumes could affect our ability to deliver products and services to clients and to efficiently and effectively conduct our business. Technological or financial difficulties of a third-party

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service provider could affect our business to the extent such difficulties result in the interruption or discontinuation of services provided by that party.

A cybersecurity breach of a vendor's system may result in theft of our data or disruption of business processes. A material breach of customer data security at a service provider's site may negatively impact our business reputation and cause a loss of customers, result in increased expense to contain the event and/or require that we provide credit monitoring services for affected customers, result in regulatory fines and sanctions, and may result in litigation. We may experience liability to our customers for losses arising from a breach of a vendor's data security system. We rely on our outsourced service providers to implement and maintain prudent cybersecurity controls. Furthermore, we may not be insured against all types of losses as a result of third-party failures, and our insurance coverage may be inadequate to cover all losses resulting from system failures or other disruptions. Failures in our business infrastructure could interrupt the operations or increase the costs of doing business.

<u>We rely on our systems, employees and certain counterparties, and certain failures could affect our operations.</u>

We are exposed to many types of operational risk, including the risk of fraud by employees and outsiders, clerical and record-keeping errors, and computer/telecommunications systems malfunctions. Our business is dependent on our ability to process a large number of increasingly complex transactions. If any of our financial, accounting or other data processing systems fail or have other significant shortcomings, we could be affected. We depend on internal systems and outsourced technology to support these data storage and processing operations. Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations. In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank's website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions.

Additionally, we could be affected if one of our employees or a third-party service provider causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. We are also at risk of an impact on our systems and operations from natural disasters, terrorism, and international hostilities. Such events can also impact power or communications systems operated by others on which we rely.

Misconduct by employees could include fraudulent, improper, or unauthorized activities on behalf of clients or improper use of confidential information. We may not be able to prevent employee or third-party errors or misconduct, and the precautions we take to detect this type of activity might not be effective in all cases. Employee errors or misconduct could subject us to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on our business.

In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. Although we have policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers. Such activity can result in financial liability and harm to our reputation.

<u>Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, or other breaches in the security of our systems could harm our business.</u> 

As part of our business, we collect, process, and retain sensitive and confidential client and customer information on behalf of our subsidiaries and other third parties. Despite the security measures we have in place, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, malware, ransomware, theft of information, misplaced or lost data, programming and/or human errors, or other similar events. If information security is breached, information can be lost or misappropriated, resulting in financial loss or costs to us or damages to others. Our systems can be rendered inoperable, resulting in our inability to provide service to our customers. Any security breach involving the misappropriation, loss, destruction or unauthorized disclosure of confidential customer information, whether by us or by our vendors, could severely damage our reputation, expose us to the risk of litigation and liability, disrupt our operations and have a material effect on our business.

Cybersecurity risk management programs are expensive to maintain and will not protect us from all risks associated with maintaining the security of customer data and our proprietary data from external and internal intrusions, disaster recovery and failures in the controls used by our vendors. Employee error or misconduct may result in failure to implement policies and procedures designed to avoid risks. Moreover, as technology and cyberattacks change over time, we must continually monitor and change systems to guard against new threats. We may not know of and be able to guard against a new threat until after an attack has occurred. Congress and the legislatures of states in which we operate regularly consider legislation that would impose more stringent data privacy requirements.

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Any of these occurrences could result in our diminished ability to operate one or more of our businesses, potential liability to clients, reputational damage and regulatory intervention in the form of requirements, restrictions and penalties, which could affect us our business and results of operations.

<u>We may not pay dividends on our common shares.</u>

Holders of our common shares are only entitled to receive such dividends as our Board of Directors may declare out of funds legally available for such payments. Although we have historically declared cash dividends on our common shares, we are not required to do so and may reduce or eliminate our common share dividend in the future. Additionally, our funds to pay dividends on common shares are dependent upon dividends paid to us by the Bank, which are subject to regulatory restrictions. A reduction in our dividend rate could affect the market price of our common shares.

<u>Our liquidity is dependent upon our ability to receive dividends from our subsidiaries, which accounts for most of our revenue and could affect our ability to pay dividends, and we may be unable to provide liquidity from other sources.</u>

We are a separate and distinct legal entity from our subsidiaries, notably the Bank. We receive substantially all of our revenue from dividends from our subsidiaries. These dividends are the principal source of funds to pay dividends on our common shares and interest and principal on outstanding debt. Various federal and/or state laws and regulations limit or restrict the amount of dividends that the Bank and certain of our non-bank subsidiaries may pay us. Additionally, if our subsidiaries' earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels, we may not be able to make dividend payments to our common shareholders. As of December 31, 2022, the Bank had $219.3 million available to pay dividends to First Financial without prior regulatory approval.

To enhance liquidity, we may borrow under credit facilities or from other sources. Turbulence in the capital and credit markets may cause many lenders and institutional investors to reduce or cease to provide funding to borrowers and, as a result, we may not be able to further increase liquidity through additional borrowings.

Limitations on our ability to receive dividends from our subsidiaries or an inability to increase liquidity through additional borrowings, or inability to maintain, renew or replace existing credit facilities, could have a material effect on our liquidity and on our ability to pay dividends on our common shares and interest and principal on our debt.

As of December 31, 2022, we had indebtedness of $1.6 billion.

<u>Disruptions in our ability to access capital markets on desirable terms may affect our capital resources, liquidity and business.</u>

We depend on wholesale capital markets to provide us with sufficient capital resources and liquidity to meet our commitments and business needs, and to accommodate the transaction and cash management needs of our clients. Other sources of funding available to us, and upon which we rely as regular components of our liquidity risk management strategy, include inter-bank borrowings, repurchase agreements, and borrowings from the Federal Home Loan Bank system. Any occurrence that may limit our access to these sources on acceptable or desirable terms, such as a decline in the confidence of debt purchasers, a downgrade in our credit rating, or a downgrade in the credit rating of our depositors or counterparties participating in the capital markets, may affect our capital costs and our ability to raise capital and, in turn, our liquidity.

In addition, prior debt offerings could potentially have important consequences to us and our debt and equity investors, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• requiring a substantial portion of our cash flow from operations to make interest payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• making it more difficult to satisfy debt service and other obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• increasing our vulnerability to general adverse economic and industry conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limiting our flexibility in planning for, or reacting to, changes in our business and the industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase securities.

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We continue to evaluate these risks on an ongoing basis.

<u>Significant or sustained declines in our current market capitalization could impact the carrying value of our goodwill.</u>

Numerous facts and circumstances are considered when evaluating the carrying value of our goodwill. One of those considerations is our market capitalization, which is evaluated over a reasonable period of time and compared to the aggregate estimated fair value of the reporting unit. While this comparison provides some relative market information regarding the estimated fair value of our reporting unit, it is not determinative and needs to be evaluated in the context of the current economic and political environment. However, significant and/or sustained declines in First Financial's market capitalization, especially in relation to First Financial's book value, could be an indication of potential impairment of goodwill.

Other considerations include forecasts of revenues and expenses derived from internal management projections for a period of five years, changes in working capital estimates, company specific discount rate derived from a rate build up approach, externally sourced bank peer group market multiples and externally sourced bank peer group change in control premium, all of which are highly subjective and require significant management judgment. Changes in these key assumptions could materially affect our estimate of the reporting unit fair value and could affect our conclusion regarding the existence of potential impairment.

<u>A reduction in our credit rating could affect us or the holders of our securities.</u>

The credit rating agencies assessing our creditworthiness regularly evaluate the Company, and credit ratings are based on a number of factors, including our financial strength and ability to generate earnings, as well as factors not entirely within our control, including changes in rating methodologies and conditions affecting the financial services industry and the economy. There can be no assurance that we will maintain our current credit rating. A downgrade of the credit rating of the Company could affect our access to liquidity and capital, and could significantly increase our cost of funds, trigger additional collateral or funding requirements and decrease the number of investors and counterparties willing to lend to us or purchase our securities. This could affect our growth, profitability and financial condition, including liquidity.

<u>Potential acquisitions may disrupt our business and dilute shareholder value, and we may not be able to successfully consummate or integrate such acquisitions.</u>

We may acquire other financial institutions, or branches or assets of other financial institutions, in the future. We may also open new branches and enter into new lines of business or offer new products or services. Any such expansion of our business will involve a number of expenses and risks, which may include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the time and expense associated with identifying and evaluating potential expansions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to the target company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential exposure to unknown or contingent liabilities of the target company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• exposure to potential asset quality issues of the target company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• difficulty and expense of integrating the operations and personnel of the target company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• difficulty or added costs in the wind-down of non-strategic operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential disruption to our business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential diversion of our management's time and attention;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the possible loss of key employees and customers of the target company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• difficulty in estimating the value (including goodwill) of the target company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• difficulty in receiving appropriate regulatory approval for any proposed transaction; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential changes in banking, or tax laws or regulations or accounting rules that may affect the target company.

We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. Acquisitions could involve the payment of a premium over book and market values, and, therefore, dilution of our tangible book value and net income per common share may occur in connection with any such transaction. Furthermore, any difficulty integrating businesses acquired as a result of a merger or acquisition and the failure to realize the expected revenue increases, cost savings, increases in geographic or product presence,

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and/or other projected benefits from an acquisition could have an impact on our liquidity, results of operations and financial condition and any such integration could divert management's time and attention from managing our company in an effective manner.

Any merger or acquisition opportunity that we decide to pursue will ultimately be subject to regulatory approval or other closing conditions. We may expend substantial time and resources pursuing potential acquisitions which may not be consummated because regulatory approval or other closing requirements are not satisfied. Additionally, the banking regulators and applicable laws and regulations may restrict our ability to engage in acquisitions under certain circumstances.

<u>Our accounting policies and processes are critical to how we report our financial condition and results of operations.</u> <u>They require management to make estimates about matters that are uncertain.</u>

Accounting policies and processes are fundamental to how we record and report our financial condition and results of operations. Management must exercise judgment in selecting and applying many of these accounting policies and processes so they comply with GAAP in the United States.

Management has identified certain accounting policies as being critical because they require management's judgment to ascertain the valuations of assets, liabilities, commitments and contingencies. A variety of factors could affect the ultimate valuation that is made when recording income, recognizing an expense, recovering an asset, valuing an asset or liability, or reducing a liability. We have established detailed policies and control procedures that are intended to ensure these critical accounting estimates and judgments are well controlled and applied consistently. In addition, our policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. Because of the uncertainty surrounding our judgments and the estimates pertaining to these matters, we cannot guarantee that we will not be required to adjust accounting policies or re-state prior period financial statements.

See the "Critical Accounting Estimates" in the Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1- Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements, in our 2022 Annual Report to Shareholders (included within Exhibit 13 to this Form 10-K) for more information.

<u>Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.</u>

From time to time, the FASB, SEC and other regulatory agencies change the financial accounting and reporting guidance that governs the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in us restating prior period financial statements.

In June 2016, FASB issued CECL. CECL was expected to result in earlier recognition of credit losses and required consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability. The Bank became subject to the new standard in the first quarter of 2020. Concurrent with the enactment of the CARES Act, federal banking agencies issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL. The interim final rule provided banking organizations that implemented CECL prior to the end of 2020 the option to delay for two years the estimated impact of CECL on regulatory capital relative to regulatory capital determined under the prior incurred loss methodology, followed by a three-year transition period to phase out the aggregate amount of capital benefit provided during the initial two-year delay. The CECL standard requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses. See Note 2 - Accounting Standards Recently Adopted or Issued and Note 6 - Allowance for Credit Losses in the Company's Form 10-K for further information regarding the Company's adoption of CECL and the corresponding allowance for credit losses.

<u>Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.</u>

Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934 (Exchange Act) is accurately accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of management's system of controls are met.

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These inherent limitations include the realities that judgments in decision making can be faulty, that alternative reasoned judgments can be drawn, or that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in management's system of controls, misstatements due to error or fraud may occur and not be detected.

<u>Our revenues derived from investment securities may be volatile and subject to a variety of risks.</u>

We generally maintain investment securities and trading positions in the fixed income markets. Unrealized gains and losses associated with our investment portfolio and mark to market gains and losses associated with our investment portfolio are affected by many factors, including our credit position, interest rate volatility and volatility in capital markets, among other economic factors. Our return on such investments could experience volatility, and such volatility may affect our financial condition and results of operations. Additionally, accounting regulations may require us to record a charge prior to the actual realization of a loss when market valuations of such securities are impaired and such impairment is considered to be other than temporary.

**Risks Related to the Legal and Regulatory Environment**

<u>Regulatory actions could impact our ability to compete for new business, constrain our ability to fund our liquidity needs and increase the cost of our services.</u>

First Financial and its subsidiaries are subject to the supervision and regulation of various state and federal regulators, including the Federal Reserve Board, the FDIC, the SEC, the CFPB, the Financial Industry Regulatory Authority, and the ODFI. As such, we are subject to a wide variety of laws and regulations. As part of their supervisory process, which includes periodic examinations and continuous monitoring, the regulators have the authority to impose restrictions or conditions on our activities and the manner in which we operate our business. These actions could impact the Company and the Bank in a variety of ways, including subjecting us to fines, restricting our ability to pay dividends, precluding mergers or acquisitions, limiting our ability to offer certain products or services, or imposing additional capital, operating, or oversight requirements. Additionally, actions by regulatory agencies against us could cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our shareholders. Even the reduction of regulatory restrictions could have an adverse effect on us and our shareholders if such lessening of restrictions increases competition within our industry or our market area.

<u>Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.</u>

Financial institutions are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (ESG) practices and disclosure. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights. Increased ESG-related compliance costs for us as well as among our third-party suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and the price of our common shares.

**General Risk Factors**

<u>Weaknesses of other financial institutions could affect us.</u>

Our ability to engage in routine funding transactions could be affected by the actions and lack of commercial soundness of other financial institutions. Financial services institutions are interrelated as a result of trading, clearing, and counterparty relationships, among others. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry in general, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions in the future. A default, or threatened default, of a large institution could negatively impact the entire financial system, and could expose us to credit risk in the event of default of our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized upon or is liquidated at prices not

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sufficient to recover the full amount of the financial instrument exposure due us. There is no assurance that any such losses would not affect our financial condition or results of operations.

<u>Maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services.</u>

Our success depends, in part, on our ability to adapt products and services to evolving industry standards. There is increasing pressure to provide products and services at lower prices, which can reduce net interest income and noninterest income from fee-based products and services. In addition, the widespread adoption of new technologies, including digital or cryptocurrencies, blockchain, and other "fintech" technologies, could require us to make substantial capital expenditures to modify or adapt existing products and services or develop new products and services. We may not be successful in introducing new products and services in response to industry trends or developments in technology or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients or be subject to increased costs.

<u>The fiscal and monetary policies of the United States government and its agencies could have an effect on our earnings.</u>

The Federal Reserve Board regulates the supply of money and credit in the United States. Its policies determine in large part the cost of funds for lending and investing and the returns earned on those loans and investments, both of which affect the net interest margin. The resultant changes in interest rates can also materially affect the value of certain financial assets we hold, such as debt securities. For example, in 2022, the Federal Reserve Open Markets Committee increased the target fed funds rate by 425 basis points resulting in the Bank's net interest margin on a fully tax equivalent basis increasing from 3.31% to 3.77% comprised of a 71 basis point increase in earning asset yields and a 36 basis point increase in total cost of interest-bearing liabilities. At the same time, accumulated other comprehensive loss increased from $0.4 million in 2021 to $358.7 million in 2022, driven by a decline in the valuation of available for sale securities. The policies of the Federal Reserve Board can adversely affect borrowers, and increase default risk on their loans. Changes in Federal Reserve Board policies are beyond our control and difficult to predict; consequently, the impact of these changes on our activities and results of operations is difficult to predict.

<u>Changes in tax laws could affect our performance.</u>

We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, property, franchise, withholding and ad valorem taxes. Changes to our tax liability could have a material effect on our results of operations. In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers may affect their ability to purchase homes or consumer products, which could affect their demand for our loans and deposit products. In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested.

**Item 1B. Unresolved Staff Comments.**

None.

**Item 2. Properties.**

At December 31, 2022, the Company operated 132 full service banking centers, 29 of which are leased facilities. Our core banking operating markets are located within the four state region of Ohio, Indiana, Kentucky and Illinois. First Financial's executive office is a leased facility located in Cincinnati, Ohio and we operate 59 banking centers in Ohio, three banking centers in Illinois, 58 banking centers in Indiana and 12 banking centers in Kentucky. In addition, we operate our Commercial Finance division, responsible for our insurance lending business and franchise lending business, from a non-banking center location in Indiana.

**Item 3. Legal Proceedings.**

We are from time to time engaged in various litigation matters including the defense of claims of improper or fraudulent loan practices or lending violations, and other matters, and we have a number of unresolved claims pending. In addition, as part of the ordinary course of business, we are parties to litigation involving claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral, and foreclosure interests, that are incidental to our regular business activities. While the ultimate liability with respect to these other litigation matters and claims cannot be determined at this time, we believe that damages, if any, and other amounts relating to pending matters are not likely to be material to our consolidated financial position or results of operations. Reserves are established for these various matters of litigation, when appropriate under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel.

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**Item 4. Mine Safety Disclosures.**

Not applicable.

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**Supplemental Item. Information About Our Executive Officers.**

The following table sets forth information concerning the executive officers of First Financial as of February 23, 2023. The executive officers perform policy-making functions for First Financial. The officers are elected annually at the organizational meeting of the board of directors and serve until the next organizational meeting, or until their successors are elected and duly qualified.

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| | | |
|:---|:---|:---|
| | **Position with<br>First Financial Bancorp** | Age |
| Archie M. Brown | President and Chief Executive Officer | 62 |
| James M. Anderson | EVP, Chief Financial Officer | 51 |
| Richard S. Dennen | EVP, Chief Corporate Banking Officer | 56 |
| John M. Gavigan | EVP, Chief Operating Officer | 44 |
| Karen B. Woods | EVP, General Counsel and Chief Administrative Officer | 54 |
| William R. Harrod | EVP, Chief Credit Officer | 55 |
| Amanda N. Neeley | EVP, Chief Consumer Banking and Strategy Officer | 42 |
| Gregory A. Harris | President, Yellow Cardinal Advisory Group | 54 |

---

The following is a brief description of the business experience over the past five years of the individuals named above.

**Archie M. Brown** - Archie Brown is the President, Chief Executive Officer and a director of First Financial and the Bank, having been appointed to these positions on April 1, 2018 following First Financial's acquisition of MainSource Financial Group, Inc. Previously, he served as the President and Chief Executive Officer of MainSource from August 2008 until April 2018 and chairman of the board of MainSource from April 2011 until April 2018.

**James M. Anderson** - Jamie Anderson became the Chief Financial Officer of First Financial and the Bank on April 1, 2018 following the merger of First Financial and MainSource. Previously Mr. Anderson served as the Chief Financial Officer of MainSource from January 2006 to April 2018. Prior to that role, he served in the following roles at MainSource: Administrative Vice President and Principal Accounting Officer from March 2005 to January 2006, Controller and Principal Accounting Officer from March 2002 to March 2005, and Controller from September 2000 to March 2002. Mr. Anderson is a certified public accountant (inactive).

**Richard S. Dennen** - Rick Dennen became the Chief Corporate Banking Officer of First Financial in 2021, responsible for all commercial aspects of the Bank including business capital, investment real estate, treasury management and foreign exchange business. Mr. Dennen remains the CEO of First Commercial Finance, a division of First Financial Bank, which operates under two subsidiaries of the Bank, Oak Street Funding and First Franchise Capital Corporation, a role he has held since 2015. Oak Street Funding is a specialty finance company engaged in lending to insurance agencies, registered investment advisors, certified public accountants, energy and indirect auto financing companies. First Franchise Capital Corporation lends to restaurant franchises. Mr. Dennen is a certified public accountant.

**John M. Gavigan** - John Gavigan is the Executive Vice President, Chief Operating Officer for First Financial where he leads the Advanced Solutions and Digital Banking group, which includes Technology, Data Management, Operations, Customer Support, Program Management and Corporate Facilities. Mr. Gavigan was appointed to his current role in late 2018, having previously served as Chief Administrative Officer for the majority of 2018 and Chief Financial Officer from 2014 through early 2018. He joined the Company in 2008 as Assistant Controller and also served as Corporate Controller from 2011 into 2014. Mr. Gavigan is a certified public accountant (inactive).

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**Karen B. Woods** - Karen Woods serves as General Counsel and Chief Administrative Officer of First Financial. She joined First Financial in April 2018 following the merger of First Financial and MainSource and served as General Counsel and Chief Risk Officer from 201-2022. She previously served as Corporate Counsel and Chief Risk Officer of MainSource from January 2016 to April 2018. Prior to joining MainSource, Ms. Woods was a partner at Krieg DeVault LLP in Indianapolis, Indiana. Ms. Woods previously served as a judicial law clerk to the Honorable John G. Baker, Indiana Court of Appeals.

**William R. Harrod** - Bill Harrod is the Chief Credit Officer of First Financial, a role he has held since October 2017. He is responsible for managing and monitoring the loan portfolio and other related credit functions in a risk appropriate manner including underwriting, approval, and collections. Mr. Harrod first joined First Financial in 2015 and has held various credit and management positions since then in specialty banking, corporate banking, commercial and industrial lending and commercial finance.

**Amanda N. Neeley** - Mandy Neeley is the Chief Consumer Banking and Strategy Officer of First Financial. Ms. Neeley is responsible for the launch and evolution of the First Financial brand, the introduction of the Premier Business Bank acquisition strategy, the advancement of sales and enterprise customer relationship management processes, and development of a formalized strategic planning program. Ms. Neeley has spent her entire career in banking with First Financial, beginning as a part-time teller during college and, after graduating in 2003, Marketing Coordinator. She has held the role of Chief Strategy Officer since 2016 and added the role of Chief Consumer Banking Officer in 2021.

**Gregory A. Harris** - Greg Harris serves as the president of Affluent Banking and Yellow Cardinal Advisory Group, a division of First Financial Bank. He is responsible for all aspects of the business line including sales, client experience, investment management, administration, compliance, and operations. Greg joined First Financial in 2009 and has over 32 years of experience in the financial services industry. Prior to joining First Financial, Greg served in various leadership capacities at Touchstone Investments, an institutional mutual fund management company and Fund Project Services, Inc., a financial services M&A integration firm he co-founded in 1998. He began his career at Fifth Third Bank as a product manager within the bank's Trust and Investment business.

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**PART II**

**Item 5**. **Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Market information, holders, dividends**

First Financial's common shares are listed on The NASDAQ Global Select Stock Market® under the symbol "FFBC." As of February 23, 2023, our common shares were held by approximately 3,810 shareholders of record, a number that does not include beneficial owners who hold shares in "street name," or shareholders from previously acquired companies that have not exchanged their stock. At December 31, 2022, a total of 4,855 stock options and 1,229,346 shares of restricted stock were outstanding. Additional information about stock options, restricted stock and restricted stock units is included in Note 21 - Stock Options and Awards in the Notes to Consolidated Financial Statements in First Financial's 2022 Annual Report to Shareholders and in Item 12 below.

The payment of future cash dividends is at the discretion of our Board of Directors and subject to a number of factors, including results of operations, general business conditions, growth, financial condition, regulatory limitation and other factors deemed relevant by the Board. Further, our ability to pay future cash dividends is subject to certain regulatory requirements and restrictions discussed in the Supervision and Regulation section in Item 1 above. For further information see Note 3 - Restrictions on Cash and Dividends in the Notes to Consolidated Financial Statements of First Financial's 2022 Annual Report to Shareholders (included as Exhibit 13 of this report), which is incorporated by reference in response to this item.

**Stock Performance Graph**

The stock performance graph contained in "Total Return to Shareholders" of First Financial's 2022 Annual Report to Shareholders (included as Exhibit 13 of this report), is incorporated herein by reference in response to this item.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)Unregistered Sales of Equity Securities and Use of Proceeds

None.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)Issuer Purchases of Equity Securities

In December 2018 the Board approved a stock repurchase plan pursuant to which the Company was authorized to repurchase up to 5,000,000 shares of common stock through December 31, 2020 (the 2018 Stock Repurchase Plan). On December 22, 2020, the Board announced that it had authorized a new, two-year stock repurchase plan (the 2020 Stock Repurchase Plan) that provided for the purchase of up to 5,000,000 additional shares of common stock of the Company. The 2020 Stock Repurchase Plan became effective January 1, 2021, upon the expiration of the 2018 Stock Repurchase Plan. The Board announced on January 27, 2022, that the 2020 Stock Repurchase Plan was terminated effective December 31, 2021, and replaced with a new plan effective January 1, 2022 (the 2022 Stock Repurchase Plan). The 2022 Stock Repurchase Plan authorizes the purchase of up to 5,000,000 shares of common stock and expires on December 31, 2023. The Company did not purchase any shares under the 2022 Stock Repurchase Plan in the fourth quarter of 2022.

**Item 6. [Reserved]**

**Item 7. Management's Discussion and Analysis of Financial Condition and Results Of Operations.**

The information contained in the Management's Discussion and Analysis section (including certain forward looking statements) of First Financial's 2022 Annual Report to Shareholders (included as Exhibit 13 of this report) is incorporated herein by reference in response to this item.

**Item 7A. Quantitative and Qualitative Disclosure About Market Risk.**

The information contained in the Market Risk section and in Table 18 - Market Risk Disclosure of the Management's Discussion and Analysis section in First Financial's 2022 Annual Report to Shareholders (included as Exhibit 13 of this report), is incorporated herein by reference in response to this item.

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**Item 8. Financial Statements and Supplementary Data.**

The consolidated financial statements and the reports of our independent registered public accounting firm included in the Consolidated Financial Statements and the Notes to Consolidated Financial Statements in First Financial's 2022 Annual Report to Shareholders (included as Exhibit 13 of this report), are incorporated herein by reference.

**Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**

None.

**Item 9A. Controls and Procedures.**

**Disclosure Controls and Procedures**

Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under

Rule 13a-15 of the Securities Exchange Act of 1934, that are designed to cause the material information required to be disclosed by First Financial in the reports it files or submits under the Securities Exchange Act of 1934 to be recorded, processed, summarized, and reported to the extent applicable within the time periods required by the Securities and Exchange Commission's rules and forms. In designing and evaluating the disclosure controls and procedures, management recognized that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

As of the end of the period covered by this report, First Financial performed an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective at the reasonable assurance level.

**Changes in Internal Control over Financial Reporting**

There were no changes in First Financial's internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, First Financial's internal control over financial reporting.

**Item 9B. Other Information.**

None.

**Item 9. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.** 

Not applicable.

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**PART III**

**Item 10. Directors, Executive Officers and Corporate Governance.**

Certain information concerning executive officers of First Financial has been supplied in the "Supplemental Item. Executive Officers of the Registrant" of this Form 10-K. Information appearing under "Election of Directors," "Corporate Governance - Board Committees," "Shareholder Nominations for Election to the Board" and "Delinquent Section 16(a) Reports" of First Financial's Definitive Proxy Statement with respect to the Annual Meeting of Shareholders to be held on May 23, 2023, and which is expected to be filed with the SEC, pursuant to Regulation 14A of the Exchange Act (First Financial's Proxy Statement) within 120 days of the close of our fiscal year, is incorporated herein by reference in response to this item.

**Item 11. Executive Compensation.**

The information appearing under the headings "Meetings of the Board of Directors and Committees of the Board," "Compensation Discussion and Analysis," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation," and "Compensation Committee Report" in First Financial's Proxy Statement is incorporated herein by reference in response to this item.

**Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**

The information appearing under the heading "Shareholdings of Directors, Executive Officers, and Nominees for Director" of First Financial's Proxy Statement is incorporated herein by reference in response to this item.

**Equity Compensation Plan Information** 

The following table sets forth information as of December 31, 2022 with respect to compensation plans under which our common shares may be issued:

**Securities authorized for issuance under equity compensation plans**

---

| | | | |
|:---|:---|:---|:---|
| | Number of securities to be issued<br>upon exercise of<br> outstanding options, <br>warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities<br> remaining available for<br> future issuance under <br>equity compensation plans <br>(excluding securities<br>reflected in column (a)) |
| Plan category | (a) | (b) | (c) (1) |
| Equity compensation plans approved by security holders | 4855 | $9.86 | 2956475 |
| Equity compensation plans not approved by security holders | N/A | N/A | N/A |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The securities included in this column are available for issuance under the First Financial Bancorp. 2020 Stock Plan, which was approved by the shareholders at the 2020 Annual Meeting.

**Item 13. Certain Relationships and Related Transactions.**

The information appearing in Note 15 - Related Parties Transactions in the Notes to Consolidated Financial Statements included in First Financial's 2022 Annual Report to Shareholders (included as Exhibit 13 of this report) is incorporated herein by reference in response to this item. The information appearing under the heading "Corporate Governance-Transactions with Related Parties" in First Financial's Proxy Statement is incorporated herein by reference in response to this item.

**Item 14. Principal Accounting Fees and Services.**

Information appearing under the heading "Independent Registered Public Accounting Firm Fees" in First Financial's Proxy Statement is incorporated herein by reference in response to this item.

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**PART IV**

**Item 15. Exhibits, Financial Statement Schedules.**

(a)&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements (and report thereon) listed below are incorporated herein by reference from First Financial's 2022 Annual Report to Shareholders (included as Exhibit 13 of this report) as noted:

Reports of Independent Registered Public Accounting Firm (PCAOB ID 173) - Incorporated by reference from First Financial's 2022 Annual Report

Consolidated Balance Sheets as of December 31, 2022 and 2021 - Incorporated by reference from First Financial's 2022 Annual Report

Consolidated Statements of Income for years ended December 31, 2022, 2021 and 2020 - Incorporated by reference from First Financial's 2022 Annual Report

Consolidated Statements of Comprehensive Income for years ended December 31, 2022, 2021 and 2020 - Incorporated by reference from First Financial's 2022 Annual Report

Consolidated Statements of Changes in Shareholders' Equity for years ended December 31, 2022, 2021 and 2020 - Incorporated by reference from First Financial's 2022 Annual Report

Consolidated Statements of Cash Flows for years ended December 31, 2022, 2021 and 2020 - Incorporated by reference from First Financial's 2022 Annual Report

Notes to Consolidated Financial Statements - Incorporated by reference from First Financial's 2022 Annual Report

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;&nbsp;Financial Statement Schedules: Schedules to the consolidated financial statements required by Regulation S-X are not required under the related instructions, or are inapplicable, and therefore have been omitted

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;&nbsp;Exhibits:

The documents listed below are filed/furnished with this Annual Report on Form 10-K as exhibits or incorporated into this Annual Report on Form 10-K by reference as noted:

Exhibit

<u>Number</u>

2.1 <u>[Agreement and Plan of Merger, dated July 25, 2017 between First Financial Bancorp. and MainSource Financial Group, Inc. (Incorporated by reference from Exhibit 2.1 to the Current Report on Form 8-K filed on July 27, 2017) (certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) (File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000114420417038698/v471487_ex2-1.htm)</u>

2.2 <u>[Agreement and Plan of Merger dated as of June 18, 2019, by and among First Financial Bancorp., First Financial Bank, Wallace Merger Sub, LLC, Bannockburn Global Forex, LLC and Fortis Advisors, LLC, solely in its capacity as Member Representative (filed as Exhibit 1.1 to First Financial's Current Report on Form 8-K filed on June 19, 2019) (File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000110465919036292/a19-11745_1ex1d1.htm)</u>

2.3 <u>[Amendment No. 1 to Agreement and Plan of Merger, dated as of August 6, 2019, by and among First Financial Bancorp., First Financial Bank, Wallace Merger Sub, Bannockburn Global Forex, LLC, and Fortis Advisors, LLC, solely in its capacity as the Member Representative (Incorporated by reference from Exhibit 2.1 to the Current Report on Form 8-K filed on August 6, 2019)(/File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000070895519000058/ex21amendno1toplanandagree.htm)</u>

2.4 <u>[Amendment No. 2 to Agreement and Plan of Merger, dated as of August 29, 2019, by and among First Financial Bancorp., First Financial Bank, Wallace Merger Sub LLC, Bannockburn Global Forex, LLC, and Fortis Advisors, LLC, solely in its capacity as the Member Representative (filed as Exhibit 2.1 to First Financial's Current Report on Form 8-K filed on September 3, 2019, and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/708955/000070895519000067/ex21amendno2-mergeragr.htm)</u>

2.5 <u>[Stock Purchase Agreement, dated as of December 6, 2021, by and among First Financial Bancorp., First Financial Bank, Summit Funding Group, Inc., the Sellers (as defined therein), and Richard L. Ross, as Sellers' Representative (Incorporated by reference from Exhibit 2.1 to the Current Report on Form 8-K filed on December 7, 2021) (certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K) (File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000110465921147039/tm2134749d1_ex2-1.htm)</u>

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3.1 <u>[Amended Articles of Incorporation of First Financial Bancorp (reflecting all amendments filed with the Ohio Secretary of State) \[for purposes of SEC reporting compliance only - not filed with the Ohio Secretary of State\] (filed as exhibit 3.2 to the Form S-3 on July 31, 2014 and incorporated hereby by reference)(File No. 333-197771).](http://www.sec.gov/Archives/edgar/data/708955/000114420414046172/v385117_ex3-2.htm)</u>

3.2 <u>[Amended and Restated Regulations of First Financial Bancorp, amended as of July 28, 2015 (filed as Exhibit 3.1 to the Form 8-K filed on July 29, 2015 and incorporated herein by reference) (File No. 000-34762).](http://www.sec.gov/Archives/edgar/data/708955/000070895515000044/ex31amendedandrestatedregu.htm)</u>

4.1 <u>[Letter Agreement, dated as of December 23, 2008, between First Financial Bancorp. and the United States Department of the Treasury, which includes the Securities Purchase Agreement - Standard Terms (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on December 30, 2008, and incorporated herein by reference) (File No. 000-12379).](http://www.sec.gov/Archives/edgar/data/708955/000114420408071563/v135810_ex10-1.htm)</u>

4.2 <u>[Warrant to Purchase up to 930,233 shares of Common Stock dated as of December 23, 2008 (filed as Exhibit 4.1 to the Form 8-K filed on December 30, 2008 and incorporated herein by reference) (File No. 000-12379).](http://www.sec.gov/Archives/edgar/data/708955/000114420408071563/v135810_ex4-1.htm)</u>

4.3 <u>[Indenture, dated as of August 25, 2015, by and between First Financial Bancorp. and Wells Fargo Bank, National Association, as Trustee. (filed as Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on August 26, 2015, and incorporated herein by reference) (File No. 000-34762).](http://www.sec.gov/Archives/edgar/data/708955/000114420415052045/v419118_ex4-1.htm)</u>

4.4 <u>[Supplemental Indenture, dated as of August 25, 2015, by and between First Financial Bancorp. and Wells Fargo Bank, National Association, as Trustee. (filed as Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on August 26, 2015, and incorporated herein by reference) (File No. 000-34762).](http://www.sec.gov/Archives/edgar/data/708955/000114420415052045/v419118_ex4-2.htm)</u>

4.5 <u>[Form of 5.125% Subordinated Note due 2025 (included as part of Exhibit 4.4 to this Annual Report).](http://www.sec.gov/Archives/edgar/data/708955/000114420415052045/v419118_ex4-2.htm)</u>

4.6 <u>[Indenture dated as of December 19, 2002 between MainSource Financial Group, Inc., as issuer, and State Street Bank and Trust Company of Connecticut, N.A., as trustee, re: floating rate junior subordinated deferrable interest debentures due 2032 (incorporated by reference to Exhibit 4.6 to the Annual Report on Form 10-K of MainSource Financial Group, Inc. for the fiscal year ended December 31, 2002 filed March 28, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000214/ex4-6.txt)</u>

4.7 <u>[Amended and Restated Declaration of Trust dated as of December 19, 2002 among State Street Bank and Trust Company of Connecticut, N.A., as institutional trustee, MainSource Financial Group, Inc., as sponsor, and James L. Saner Sr., Donald A. Benziger and James M. Anderson, as administrators (incorporated by reference to Exhibit 4.7 to the Annual Report on Form 10-K of MainSource Financial Group, Inc. for the fiscal year ended December 31, 2002 filed March 28, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000214/ex4-7.txt)</u>

4.8 <u>[Guarantee Agreement dated as of December 19, 2002 between MainSource Financial Group, Inc., and State Street Bank and Trust Company of Connecticut, N.A (incorporated by reference to Exhibit 4.8 to the Annual Report on Form 10-K of MainSource Financial Group, Inc. for the fiscal year ended December 31, 2002 filed March 28, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000214/ex4-8.txt)</u>

4.9 <u>[Indenture dated as of April 1, 2003 between MainSource Financial Group, Inc., as issuer, and U.S. Bank, N.A., as trustee, re: floating rate junior subordinated deferrable interest debentures due 2033 (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q of MainSource Financial Group, Inc. for the quarter ended June 30, 2003 filed August 14, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000327/ex4-1.txt)</u>

4.10 <u>[Amended and Restated Declaration of Trust dated as of April 1, 2003 among U.S. Bank, N.A., as institutional trustee, MainSource Financial Group, Inc., as sponsor, and James L. Saner Sr., Donald A. Benziger and James M. Anderson, as administrators (incorporated by reference to Exhibit 4.2 to the Quarterly Report on Form 10-Q of MainSource Financial Group, Inc. for the quarter ended June 30, 2003 filed August 14, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000327/ex4-2.txt)</u>

4.11 <u>[Guarantee Agreement dated as of April 1, 2003 between MainSource Financial Group, Inc., and U.S. Bank, N.A (incorporated by reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q of MainSource Financial Group, Inc. for the quarter ended June 30, 2003 filed August 14, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000327/ex4-3.txt)</u>

4.12 <u>[Indenture dated as of June 12, 2003 between MainSource Financial Group, Inc., as issuer, and The Bank of New York, as trustee, re: rate junior subordinated deferrable interest debentures due (incorporated by reference to Exhibit 4.4 to the Quarterly Report on Form 10-Q of MainSource Financial Group, Inc. for the quarter ended June 30, 2003 filed August 14, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000327/ex4-4.txt)</u>

4.13 <u>[Amended and Restated Declaration of Trust dated as of June 12, 2003 among The Bank of New York, as institutional trustee, MainSource Financial Group, Inc., as sponsor, and James L. Saner Sr., Donald A. Benziger and James M. Anderson, as administrators (incorporated by reference to Exhibit 4.5 to the Quarterly Report on Form 10-Q of MainSource Financial Group, Inc. for the quarter ended June 30, 2003 filed August 14, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000327/ex4-5.txt)</u>

4.14 <u>[Guarantee Agreement dated as of June 12, 2003 between MainSource Financial Group, Inc., and The Bank of New York (incorporated by reference to Exhibit 4.6 to the Quarterly Report on Form 10-Q of MainSource Financial Group, Inc. for the quarter ended June 30, 2003 filed August 14, 2003 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000092627403000327/ex4-6.txt)</u>

4.15 <u>[Form of Amended and Restated Declaration of Trust dated as of October 13, 2006, of MainSource Statutory Trust IV, among MainSource Financial Group, Inc. as sponsor, Wells Fargo Delaware Trust Company as Delaware trustee and Wells Fargo Bank, National Association, as institutional trustee (incorporated by reference to Exhibit 10.1 to the periodic report on Form 8-K of MainSource Financial Group, Inc. filed October 17, 2006 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000110465906067003/a06-21335_1ex10d1.htm)</u>

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4.16 <u>[Form of Indenture dated as of October 13, 2006, between MainSource Financial Group, Inc. and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 10.2 to the periodic report on Form 8-K of MainSource Financial Group, Inc. filed October 17, 2006 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000110465906067003/a06-21335_1ex10d2.htm)</u>

4.17 <u>[Form of Guarantee Agreement dated as of October 13, 2006, between MainSource Financial Group, Inc., as guarantor, and Wells Fargo Bank, National Association, as guarantee trustee (incorporated by reference to Exhibit 10.3 to the periodic report on Form 8-K of MainSource Financial Group, Inc. filed October 17, 2006 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000110465906067003/a06-21335_1ex10d3.htm)</u>

4.18 <u>[Warrant for the Purchase of Shares of MainSource Financial Group, Inc. Common Stock (incorporated by reference to Exhibit 4.2 to the Report on Form 8-K of MainSource Financial Group, Inc. filed January 20, 2009 with the Commission).](http://www.sec.gov/Archives/edgar/data/720002/000110465909003084/a09-3445_1ex4d2.htm)</u>

4.19 <u>[Second Supplemental Indenture, dated April 30, 2020, between First Financial Bancorp. and Wells Fargo Bank, National Association (Incorporated by reference from Exhibit 4.2 to the Current Report on Form 8-K filed on April 30, 2020)(File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000110465920054136/tm2015795d5_ex4-2.htm)</u>

4.20 <u>[Form of 5.25% Fixed-to-Floating Rate Subordinated Notes due 2030 (Included in Exhibit 4.19 of this Form 10-K)(Incorporated by reference from Exhibit 4.3 to the Current Report on Form 8-K filed on April 30, 2020) (File No. 001-34762).)](http://www.sec.gov/Archives/edgar/data/708955/000110465920054136/tm2015795d5_ex4-2.htm)</u>

4.21 <u>[Description of Registrant's Securities (filed as Exhibit 4.19 to the Annual Report on Form 10-K filed on February 221, 2020).](http://www.sec.gov/Archives/edgar/data/708955/000070895520000011/a201910-kex419.htm)</u>

10.1 <u>[First Financial Bancorp. 1999 Stock Incentive Plan for Officers and Employees, dated April 27, 1999 (filed as Exhibit A to the Registrant's Proxy Statement filed on March 22, 1999, and incorporated herein by reference) (File No. 000-12379).\*](http://www.sec.gov/Archives/edgar/data/708955/0000914317-99-000159.txt)</u>

10.2 <u>[Form of Stock Option Agreement for Non-Qualified Stock Options (2005-2008) under the First Financial Bancorp. 1999 Stock Incentive Plan for Officers and Employees (filed as Exhibit 10.2 to the Form 8-K filed on April 22, 2005 and incorporated herein by reference) (File No. 000-12379).\*](http://www.sec.gov/Archives/edgar/data/708955/000095015205003435/l13545aexv10w2.htm)</u>

10.3 <u>[Form of Executive Supplemental Retirement Agreement (filed as Exhibit 10.7 to the Form 10-Q for the quarter ended March 31, 2010 and incorporated herein by reference) (File No. 000-12379).\*](http://www.sec.gov/Archives/edgar/data/708955/000114420410025812/v184014_ex10-7.htm)</u>

10.4 <u>[Form of Endorsement Method Split Dollar Agreement (filed as Exhibit 10.8 to the Form 10-Q for the quarter ended March 31, 2010 and incorporated herein by reference) (File No. 000-12379).\*](http://www.sec.gov/Archives/edgar/data/708955/000114420410025812/v184014_ex10-8.htm)</u>

10.5 <u>[First Financial Bancorp. Amended and Restated Deferred Compensation Plan (filed as Exhibit 10.9 to the Form 10-Q for the quarter ended March 31, 2010 and incorporated herein by reference) (File No. 000-12379).\*](http://www.sec.gov/Archives/edgar/data/708955/000114420410025812/v184014_ex10-9.htm)</u>

10.6 <u>[First Financial Bancorp. Key Executive Short Term Incentive Plan Amended and Restated March 10, 2015 (originally established in 2011)(filed as Exhibit 10.1 to the Form 8-K on May 25, 2016 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000123/ex101ffbckeyexecutiveshort.htm)</u>

10.7 <u>[Form of Agreement for Stock Award pursuant to the Key Executive Incentive Plan between First Financial Bancorp. (3-year holding period) (filed as Exhibit 10.21 to First Financial Bancorp's Annual Report for the year ended December 31, 2015 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000103/exh1021formrsaagreementsti.htm)</u>

10.8 <u>[First Financial Bancorp. 2012 Stock Plan (filed as Appendix A to the Definitive Proxy Statement filed on April 13, 2012 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000114420412021568/v309270_def14a.htm)</u>

10.9 <u>[Form of Agreement for 2015 Performance Stock Awards under the First Financial Bancorp. 2012 Stock Plan (3-year vesting/accrual of dividends)) (filed as Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000103/ex1026form2015performances.htm)</u>

10.10 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. 2012 Stock Plan (employees of First Financial Bank, 3-year vesting/accrual of dividends)) (filed as Exhibit 10.27 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000103/ex1027formrsaagreementffb2.htm)</u>

10.11 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. 2012 Stock Plan (employees of Oak Street Funding, 3-year vesting/accrual of dividends)) (filed as Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000103/ex1028formrsaagreementosf2.htm)</u>

10.12 <u>[Form of Agreement for Performance Stock Awards under the First Financial Bancorp. 2012 Stock Plan (3-year vesting/accrual of dividends)) (filed as Exhibit 10.29 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000103/exh1029formperformancestoc.htm)</u>

10.13 <u>[Form of Agreement for Performance Stock Awards under the First Financial Bancorp. 2012 Stock Plan (employees of Oak Street Funding, 3-year vesting/accrual of dividends)) (filed as Exhibit 10.30 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000103/ex1030formperformancestock.htm)</u>

10.14 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. 2012 Stock Plan (Directors, 1-year vest/accrual of dividends)) (filed as Exhibit 10.31 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895516000103/ex1031formdirectorrsaagree.htm)</u>

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10.15 <u>[Executive Supplemental Savings Agreement between First Financial Bancorp. and Claude E. Davis, President and Chief Executive Officer dated December 31, 2013 (filed as Exhibit 10.1 to the Form 8-K filed on January 7, 2014 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895514000003/exhibit101davisagreement.htm)</u>

10.16 <u>[First Financial Bancorp Amended and Restated 2012 Stock Plan (filed as Exhibit A to the Definitive Proxy Statement filed on April 13, 2017 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000162612917000237/ffbc-def14a_052317.htm)</u>

10.17 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. Amended and Restated 2012 Stock Plan (Directors, 1-year vest/accrual of dividends) (filed as Exhibit 10.2 to the Form10-Q for the quarter ended June 30, 2017 and incorporated herein by reference).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895517000073/ex102-2017directorrsaagree.htm)</u>

10.18 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. Amended and Restated 2012 Stock Plan (employees of First Financial Bank, 3-year vesting/accrual of dividends) (filed as Exhibit 10.3 to the Form10-Q for the quarter ended June 30, 2017 and incorporated herein by reference).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895517000073/ex103-2017rsaagreement2012.htm)</u>

10.19 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. Amended and Restated 2012 Stock Plan (employees of Oak Street Funding, 3-year vesting/accrual of dividends) (filed as Exhibit 10.4 to the Form10-Q for the quarter ended June 30, 2017 and incorporated herein by reference).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895517000073/ex104-2017rsaagreement2012.htm)</u>

10.20 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. Amended and Restated 2012 Stock Plan (employees of First Franchise Capital Corporation, 3-year vesting/accrual of dividends) (filed as Exhibit 10.5 to the Form10-Q for the quarter ended June 30, 2017 and incorporated herein by reference).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895517000073/ex105-2017rsaagreement2012.htm)</u>

10.21 <u>[Form of Agreement for Stock Awards under the Key Executive Short Term Incentive Plan and the First Financial Bancorp. Amended and Restated 2012 Stock Plan (immediate vest, 1-year holding) (filed as Exhibit 10.8 to the Form10-Q for the quarter ended June 30, 2017 and incorporated herein by reference).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895517000073/ex108-2017rsaagreement2012.htm)</u>

10.22 <u>[Form of Agreement for Performance Stock Awards under the First Financial Bancorp. Amended and Restated 2012 Stock Plan (employees of First Financial Bank) 3-year vesting/accrual of dividends)(filed as Exhibit 10.36 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2017 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895518000037/ex10362017performancestock.htm)</u>

10.23 <u>[Form of Agreement for Performance Stock Awards under the First Financial Bancorp. Amended and Restated 2012 Stock Plan (employees of Oak Street Funding, 3-year vesting/accrual of dividends)(filed as Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2017 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895518000037/ex10372017performancestock.htm)</u>

10.24 <u>[Employment and Non-Competition Agreement between Archie M. Brown, Jr. and First Financial Bancorp. and First Financial bank, dated as of July 25, 2017 (filed as Exhibit 10.1 of the Registrant's Current Report on Form 8-K filed on July 27, 2017 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000114420417038698/v471487_ex10-1.htm)</u>

10.25 <u>[Employment and Non-Competition Agreement between Claude E. Davis and First Financial Bancorp. and First Financial bank, dated as of July 25, 2017 (filed as Exhibit 10.2 of the Registrant's Current Report on Form 8-K filed on July 27, 2017 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000114420417038698/v471487_ex10-2.htm)</u>

10.26 <u>[Severance and Change in Control Agreement between John M. Gavigan and First Financial Bank dated September 22, 2017 (filed as exhibit 10.2 of the Registrant's Current Report on Form 8-K filed on September 22, 2017 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895517000081/ex102-jmgcicxseverance0917.htm)</u>

10.27 <u>[Severance and Change in Control Agreement between James M. Anderson and First Financial Bank dated September 18, 2017 (filed as exhibit 10.4 of the Registrant's Current Report on Form 8-K filed on September 22, 2017 and incorporated herein by reference) (File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895517000081/ex104-andersoncicxseveranc.htm)</u>

10.28 <u>[MainSource Financial Group, Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K of MainSource Financial Group, Inc. for the year ending December 31, 2007, filed March 17, 2008 with the Commission).\*](http://www.sec.gov/Archives/edgar/data/720002/000104746908002878/a2183642zex-10_9.htm)</u>

10.29 <u>[Letter Agreement dated June 3, 2019, between Claude E. Davis and First Financial Bancorp (filed as Exhibit 10.2 to First Financial's Current Report on Form 8-K filed on June 5, 2019 and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/708955/000070895519000039/ex102davisagreementfinal.htm)</u>

10.30 <u>[First Financial Bancorp. 2020 Stock Plan (Incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed on May 27, 2020)(File No. 001-34762) .\*](http://www.sec.gov/Archives/edgar/data/708955/000070895520000027/ex1012020stockplan.htm)</u>

10.31 <u>[Form of Agreement for Restricted Stock Awards under the First Financial Bancorp. 2020 Stock Plan (filed as Exhibit 10.34 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2020 and incorporated herein by reference) (File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1034stockplan-rsaag.htm)</u>

10.32 <u>[Form of Agreement for Performance Stock Awards under the First Financial Bancorp. 2020 Stock Plan (filed as Exhibit 10.35 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2020 and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm) [)](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm) [(File No. 001-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm)</u>

10.33 <u>[Severance and Change in Control Agreement between Richard Dennen and First Financial Bank dated September 21, 2021](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1033-ffbcicxseverancexde.htm) [(filed as Exhibit 10.3](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm) [3](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm) [to the Registrant's Annual Report on Form 10-K for the year ended December 31,202](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm) [1](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm) [and incorporated herein by reference((File No. 001-34762)](http://www.sec.gov/Archives/edgar/data/708955/000070895521000014/a2020ex1035stockplan-perfo.htm) [.\*](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1033-ffbcicxseverancexde.htm)</u>

10.34 <u>[Credit Agreement by and between First Financial Bancorp. and Stifel Bank & Trust dated as of December 29, 2021 (filed](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1034-stifelbankfirstfina.htm) [as Exhibit 10.34 to the Registrant's Annual](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1034-stifelbankfirstfina.htm) [Report on Form 10-K for the year ended December 31, 2021 and incorporated herein by reference) (](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1034-stifelbankfirstfina.htm) [File No. 00](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1034-stifelbankfirstfina.htm) [1-34762).\*](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1034-stifelbankfirstfina.htm) [.](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1034-stifelbankfirstfina.htm)</u>

------

<u>[**TABLE OF CONTENTS**](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>

---

| | |
|:---|:---|
| 10.35 | <u>[Pledge and Security Agreement by and between First Financial Bancorp. and Stifel Bank & Trust dated as of December 29, 2021 (filed](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[as Exhibit 10.35 to t](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[he Registrant's Annual Report on](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[Form 10-K for the](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[year ended December 31, 2021 and incorporated](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[here](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[i](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[n by reference) (File No. 001-34762](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)[).](http://www.sec.gov/Archives/edgar/data/708955/000070895522000016/ex1035-stifelbankrefirstfi.htm)</u>\* |
| 13 | <u>[Registrant's annual report to shareholders for the year ended December 31, 202](ffbc-20221231_d2.htm)[2](ffbc-20221231_d2.htm)[.](ffbc-20221231_d2.htm)</u> |
| 14.1 | <u>[First Financial Bancorp. Code of Conduct, as approved January 28, 2020 (filed as Exhibit 14.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2019 and incorporated herein by reference) (File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000070895520000011/ex141codeofconduct.htm)</u> |
| 14.2 | <u>[Code of Ethics for the CEO and Senior Financial Officers (filed as Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on October 29, 2012 and incorporated herein by reference) (File No. 001-34762).](http://www.sec.gov/Archives/edgar/data/708955/000070895512000066/ex102ceoandcfocodeofethics.htm)</u> |
| 21 | <u>[First Financial Bancorp. Subsidiaries](a202210-kexhibit21.htm)</u>. |
| 23 | <u>[Consent of Crowe LLP, Independent Registered Public Accounting Firm](a202210-kexhibit23.htm)</u>. |
| 31.1 | <u>[Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.](q4202210-kexh311.htm)</u> |
| 31.2 | <u>[Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.](q4202210-kexh312.htm)</u> |
| 32.1 | <u>[Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.](q4202210-kexh321.htm)</u> |
| 32.2 | <u>[Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished herewith.](q4202210-kexh322.htm)</u> |
| 101.1 | Financial statements from the Annual Report on Form 10-K of the Company for the year ended December 31, 2022, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in Shareholders' Equity, and (vi) Notes to Consolidated Financial Statements, as blocks of text and in detail.\*\* |

---

First Financial will furnish, without charge, to a security holder upon request a copy of the documents, portions of which are incorporated by reference (Annual Report to Shareholders and Proxy Statement), and will furnish any other Exhibit upon the payment of reproduction costs.

\* Compensation plan(s) or arrangement(s).

\*\* As provided in Rule 406T of Regulation S-T, this information shall not be deemed "filed" for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934 or otherwise subject to liability under those sections.

**Item 16. Form 10-K Summary.**

None.

------

<u>[**TABLE OF CONTENTS**](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FIRST FINANCIAL BANCORP.

---

| | |
|:---|:---|
| By: | &nbsp;&nbsp;&nbsp;/s/ Archie M. Brown |
| Archie M. Brown, Director | Archie M. Brown, Director |
| President and Chief Executive Officer | President and Chief Executive Officer |

---

Date <u>2/24/2023</u>

Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

---

| | | | |
|:---|:---|:---|:---|
| /s/ Archie M. Brown | /s/ Archie M. Brown | &nbsp;&nbsp;&nbsp;/s/ James M. Anderson | &nbsp;&nbsp;&nbsp;/s/ James M. Anderson |
| Archie M. Brown, Director<br>President and Chief Executive Officer | Archie M. Brown, Director<br>President and Chief Executive Officer | James M. Anderson, Executive Vice President and Chief Financial Officer | James M. Anderson, Executive Vice President and Chief Financial Officer |
| Date | 2/24/2023 | Date | 2/24/2023 |
| &nbsp;&nbsp;&nbsp;/s/ Claude E. Davis | &nbsp;&nbsp;&nbsp;/s/ Claude E. Davis | &nbsp;&nbsp;&nbsp;/s/ Scott T. Crawley | &nbsp;&nbsp;&nbsp;/s/ Scott T. Crawley |
| Claude E. Davis, Director | Claude E. Davis, Director | Scott T. Crawley, Senior Vice President and Controller | Scott T. Crawley, Senior Vice President and Controller |
| Chairman of the Board | Chairman of the Board | (Principal Accounting Officer) | (Principal Accounting Officer) |
| Date | 2/24/2023 | Date | 2/24/2023 |
| &nbsp;&nbsp;&nbsp;/s/ William G. Barron | &nbsp;&nbsp;&nbsp;/s/ William G. Barron | &nbsp;&nbsp;&nbsp;/s/ Vincent A. Berta | &nbsp;&nbsp;&nbsp;/s/ Vincent A. Berta |
| &nbsp;&nbsp;&nbsp;William G. Barron, Director | &nbsp;&nbsp;&nbsp;William G. Barron, Director | &nbsp;&nbsp;Vincent A. Berta, Director | &nbsp;&nbsp;Vincent A. Berta, Director |
| Date | 2/24/2023 | &nbsp;&nbsp;&nbsp;Date | 2/24/2023 |
| &nbsp;&nbsp;&nbsp;/s/ Cynthia O. Booth | &nbsp;&nbsp;&nbsp;/s/ Cynthia O. Booth | &nbsp;&nbsp;&nbsp;/s/ Corinne R. Finnerty | &nbsp;&nbsp;&nbsp;/s/ Corinne R. Finnerty |
| &nbsp;&nbsp;Cynthia O. Booth, Director | &nbsp;&nbsp;Cynthia O. Booth, Director | &nbsp;&nbsp;Corinne R. Finnerty, Director | &nbsp;&nbsp;Corinne R. Finnerty, Director |
| Date | 2/24/2023 | Date | 2/24/2023 |
| &nbsp;&nbsp;&nbsp;/s/ Susan L. Knust | &nbsp;&nbsp;&nbsp;/s/ Susan L. Knust | &nbsp;&nbsp;&nbsp;/s/ William J. Kramer | &nbsp;&nbsp;&nbsp;/s/ William J. Kramer |
| &nbsp;&nbsp;Susan L. Knust, Director | &nbsp;&nbsp;Susan L. Knust, Director | &nbsp;&nbsp;William J. Kramer, Director | &nbsp;&nbsp;William J. Kramer, Director |
| Date | 2/24/2023 | Date | 2/24/2023 |
| &nbsp;&nbsp;&nbsp;/s/ Thomas M. O'Brien | &nbsp;&nbsp;&nbsp;/s/ Thomas M. O'Brien | &nbsp;&nbsp;&nbsp;/s/ Maribeth S. Rahe | &nbsp;&nbsp;&nbsp;/s/ Maribeth S. Rahe |
| &nbsp;&nbsp;Thomas M. O'Brien, Director | &nbsp;&nbsp;Thomas M. O'Brien, Director | &nbsp;&nbsp;Maribeth S. Rahe, Director | &nbsp;&nbsp;Maribeth S. Rahe, Director |
| Date | 2/24/2023 | Date | 2/24/2023 |

---

------

<u>[**TABLE OF CONTENTS**](#ie454cd170e0945ec85b7c43fa18faaf9_7)</u>

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;/s/ Gary W. Warzala | &nbsp;&nbsp;&nbsp;/s/ Gary W. Warzala |
| Gary W. Warzala, Director | Gary W. Warzala, Director |
| Date | 2/24/2023 |

---

## Ex-13

?xml version="1.0" ? ffbc-20221231_d2

**EXHIBIT 13**

**Glossary of Abbreviations and Acronyms**

First Financial Bancorp has identified the following list of abbreviations and acronyms that are used in the Notes to Consolidated Financial Statements and the Management's Discussion and Analysis of Financial Condition and Results of Operations.

---

| | | | |
|:---|:---|:---|:---|
| ABL | Asset backed loans | FRB | Federal Reserve Bank |
| ACL or Allowance | Allowance for credit losses | GAAP | U.S. Generally Accepted Accounting Principles |
| AFS | Available-for-sale | GNMA | Government National Mortgage Association |
| AOCI | Accumulated other comprehensive income | HTC | Historic tax credit |
| ASC | Accounting standards codification | HTM | Held-to-maturity |
| ASU | Accounting standards update | Insignificant | Less than $0.1 million |
| ATM | Automated teller machine | IRLC | Interest Rate Lock Commitment |
| Bank | First Financial Bank | LIHTC | Low income housing tax credit |
| Basel III | Basel Committee regulatory capital reforms, Third Basel Accord | MBSs | Mortgage-backed securities |
| BGF or Bannockburn | Bannockburn Global Forex | MSFG | MainSource Financial Group, Inc. |
| Bp/bps | Basis point(s) | N/A | Not applicable |
| BOLI | Bank owned life insurance | NII | Net interest income |
| CDs | Certificates of deposit | NMTC | New markets tax credit |
| CARES Act | Coronavirus Aid, Relief, and Economic Security Act | N/M | Not meaningful |
| CECL | Current Expected Credit Loss | Oak Street | Oak Street Holdings Corporation |
| C&I | Commercial & industrial | ODFI | Ohio Department of Financial Institutions |
| CMOs | Collateralized mortgage obligations | OREO | Other real estate owned |
| CRE | Commercial real estate | PCA | Prompt corrective action |
| Company | First Financial Bancorp. | PCD | Purchase credit deteriorated |
| DDA | Demand deposit account | PCI | Prompt corrective action |
| Dodd-Frank | Dodd-Frank Wall Street Reform and Consumer Protection Act | PD | Probability of default |
| EAD | Exposure at Default | PPP | Paycheck Protection Program |
| ERISA | Employee Retirement Income Security Act | PPPLF | Paycheck Protection Program Liquidity Facility |
| ERM | Enterprise Risk Management | R&S | Reasonable and supportable |
| EVE | Economic value of equity | ROU | Right-of-use |
| Fair Value Topic | FASB ASC Topic 825, Financial Instruments | SEC | United States Securities and Exchange Commission |
| FASB | Financial Accounting Standards Board | SFG or Summit | Summit Funding Group, Inc |
| FDIC | Federal Deposit Insurance Corporation | SOFR | Secured Overnight Financing Rate |
| FHLB | Federal Home Loan Bank | Topic 842 | FASB ASC Topic 842, Leasing |
| FHLMC | Federal Home Loan Mortgage Corporation | Special Assets | Special Assets Division |
| First Financial | First Financial Bancorp. | TDR | Troubled debt restructuring |
| FNMA | Federal National Mortgage Association | TTC | Through the cycle |
| Form 10-K | First Financial Bancorp. Annual Report on Form 10-K | USD | United States dollars |

---

**First Financial Bancorp** 2022 Annual Report **1**

------

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

This annual report contains forward-looking statements. See the Forward-Looking Statements section that follows for further information on the risks and uncertainties associated with forward-looking statements.

The following discussion and analysis is presented by management to facilitate the understanding of the financial condition, cash flows, changes in financial condition and results of operations of First Financial Bancorp. Management's discussion and analysis identifies trends and material changes that occurred during the reporting periods presented and should be read in conjunction with the Consolidated Financial Statements and accompanying Notes.

Certain reclassifications of prior years' amounts have been made to conform to current year presentation. Such reclassifications had no effect on net earnings, total assets, liabilities and shareholders' equity.

**EXECUTIVE SUMMARY**

First Financial Bancorp. is a $17.0 billion financial holding company headquartered in Cincinnati, Ohio, which operates through its subsidiaries. These subsidiaries include First Financial Bank, an Ohio-chartered commercial bank, which operated 132 full service banking centers as of December 31, 2022. First Financial provides banking and financial services products to business and retail clients through its six lines of business: Commercial, Retail Banking, Mortgage Banking, Wealth Management, Investment Commercial Real Estate and Commercial Finance. The Commercial Finance business lends into targeted industry verticals on a nationwide basis. Operating under the brand of Yellow Cardinal Advisory Group, Wealth Management had $3.2 billion in assets under management as of December 31, 2022, and provides the following services: financial planning, investment management, trust administration, estate settlement, brokerage services and retirement planning.

Additional information about First Financial, including its products, services and banking locations, is available on the Company's website at www.bankatfirst.com.

The major components of First Financial's operating results for the previous three years are summarized in Table 1 – Financial Summary and are discussed in greater detail in the sections that follow.

**MARKET STRATEGY**

First Financial develops a competitive advantage by utilizing a local market focus to provide superior service and build long-term relationships with clients while helping them achieve greater financial success. First Financial serves a combination of metropolitan and community markets in Ohio, Indiana, Kentucky and Illinois through its full-service banking centers. First Financial also has certain lending platforms that extend beyond the geographic banking center footprint to provide financing to franchise owners and clients within the financial services industry as well as equipment lease financing to commercial businesses. First Financial's investment in community markets is an important part of the Bank's core funding base and has historically provided stable, low-cost funding sources.

First Financial's market selection process includes multiple factors, but markets are primarily chosen for their potential for long-term profitability and growth. First Financial intends to concentrate plans for future growth and capital investment within its current markets, and will continue to evaluate additional growth opportunities in metropolitan markets located within, or in close proximity to, the Company's current geographic footprint. Additionally, First Financial may seek strategic acquisitions that provide product line extensions or additional industry verticals that complement its existing business and diversify its product suite and revenue streams.

**BUSINESS COMBINATIONS**

In December 2021, the Company completed its acquisition of Summit Funding Group, Inc. and its subsidiaries. Summit was a privately held, full service, equipment financing company that originates, purchases, sells and services equipment leases to commercial businesses in the United States and Canada. Upon completion of the transaction, Summit became a subsidiary of the Bank and continues to operate as Summit Funding Group, taking advantage of its existing brand recognition within the equipment financing industry.

**2 First Financial Bancorp** 2022 Annual Report

------

First Financial acquired all of the issued and outstanding equity securities of Summit for aggregate consideration of approximately $127.1 million, consisting of $113.5 million in cash, $10.0 million of First Financial common stock, and a $3.6 million earn-out payment. Pursuant to the purchase agreement, the earn-out payments are payable annually for each of the five years following the closing of the acquisition, contingent upon the results of Summit's operations. First Financial incurred expenses related to the Summit acquisition of $0.6 million for the year ended December 31, 2022 and $2.6 million for the year ended December 31, 2021.

The Summit transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed were $185.8 million and $122.5 million, respectively, and included $41.9 million of financing leases and $75.3 million of operating leases. These present value measurements were subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values became available. The measurement period ended in December 2022.

Goodwill arising from the Summit acquisition was $63.7 million and reflects the business's high growth potential and the expectation that the acquisition will provide additional revenue growth with the expansion of the Bank's leasing business. The goodwill is not deductible for income tax purposes as the transaction was accounted for as a tax-free exchange. For further detail, see Note 10 – Goodwill and Other Intangible Assets.

See Note 24 – Business Combinations in the Notes to Consolidated Financial Statements, for further discussion of these transactions.

**COVID-19 CONSIDERATIONS**

The Company's operations and financial results were substantially influenced by the COVID-19 pandemic. At the onset of the pandemic, the Company updated operating protocols to continuously provide virtually all banking services while prioritizing the health and safety of both its clients and associates.

Sales associates, support teams and management returned to corporate offices and operations centers in the second and third quarters of 2021. The Company has continued to prioritize the health and safety of clients and associates, although without the significant disruptions to its workforce that occurred at the onset of the pandemic.

To assist clients during the pandemic, the Company implemented distinct COVID-19 relief programs to provide payment deferrals and fee waivers, in addition to temporarily suspending vehicle repossessions and residential property foreclosures. Further, the Company continuously monitored the actions of federal and state governments to proactively assist clients and ensure awareness of each financial assistance program available to them, while focusing internally on enhancing remote, mobile and online processes to better support a bank anytime, anywhere environment.

The Bank underwent a significant level of cross training and redeployment of associate resources to rapidly meet the influx of

client requests in response to the passage of the CARES Act, the establishment of the Paycheck Protection Program and the

approval of the Consolidated Appropriations Act. As of December 31, 2022, the Company had $3.0 million of outstanding PPP loans, net of unearned fees, compared to $55.6 million as of December 31, 2021.

As of December 31, 2021, the Company had $16.5 million of modified loans to COVID-19 impacted borrowers with principal amounts deferred and interest-only payments required. These loans had all returned to regular payment schedules as of December 31, 2022. As provided in the CARES Act and subsequently amended by the Consolidated Appropriations Act, loan modifications in response to COVID-19 that were executed between March 1, 2020 and January 1, 2022 on a loan that was not more than 30 days past due as of December 31, 2019 are not required to be reported as TDR.

**First Financial Bancorp** 2022 Annual Report **3**

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

---

| | | | |
|:---|:---|:---|:---|
| **Table 1 • Financial Summary** | | | |
|  | December 31, | December 31, | December 31, |
| *(Dollars in thousands, except per share data)* | 2022 | 2021 | 2020 |
| **Summary of operations** |  |  |  |
| Interest income | $585006 | $483217 | $524963 |
| Tax equivalent adjustment <sup>(1)</sup> | 6357 | 6091 | 6529 |
| Interest income tax – equivalent <sup>(1)</sup> | 591363 | 489308 | 531492 |
| Interest expense | 65863 | 31099 | 68452 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Net interest income tax – equivalent** <sup>(1)</sup> | $525500 | $458209 | $463040 |
| Interest income | $585006 | $483217 | $524963 |
| Interest expense | 65863 | 31099 | 68452 |
| **Net interest income** | 519143 | 452118 | 456511 |
| Provision for credit losses | 11713 | (18121) | 70559 |
| Noninterest income | 189641 | 171506 | 189123 |
| Noninterest expenses | 455349 | 400812 | 390664 |
| Income before income taxes | 241722 | 240933 | 184411 |
| Income tax expense | 24110 | 35773 | 28601 |
| **Net income** | $217612 | $205160 | $155810 |
| **Per share data** |  |  |  |
| &nbsp;&nbsp;&nbsp;**Earnings per common share** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic | $2.33 | $2.16 | $1.60 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diluted | $2.30 | $2.14 | $1.59 |
| &nbsp;&nbsp;&nbsp;**Cash dividends declared per common share** | $0.92 | $0.92 | $0.92 |
| Average common shares outstanding–basic (in thousands) | 93529 | 95035 | 97364 |
| Average common shares outstanding–diluted (in thousands) | 94587 | 95897 | 98093 |
| **Selected year-end balances** |  |  |  |
| Total assets | $17003316 | $16329141 | $15973134 |
| Earning assets | 14331900 | 13941829 | 13651843 |
| Investment securities | 3636829 | 4409237 | 3689465 |
| Total loans and leases | 10298971 | 9288299 | 9900970 |
| Interest-bearing demand deposits | 3037153 | 3198745 | 2914787 |
| Savings deposits | 3828139 | 4157374 | 3680774 |
| Time deposits | 1700705 | 1330263 | 1872733 |
| Noninterest-bearing demand deposits | 4135180 | 4185572 | 3763709 |
| Total deposits | 12701177 | 12871954 | 12232003 |
| Short-term borrowings | 1287156 | 296203 | 166594 |
| Long-term debt | 346672 | 409832 | 776202 |
| Shareholders' equity | 2041373 | 2258942 | 2282070 |
| **Select Financial Ratios** |  |  |  |
| Average loans to average deposits <sup>(2)</sup> | 76.11% | 76.15% | 87.13% |
| Net charge-offs to average loans and leases | 0.06% | 0.26% | 0.14% |
| Average shareholders' equity to average total assets | 12.85% | 14.06% | 14.30% |
| Average tangible shareholders' equity to average tangible assets | 6.59% | 8.29% | 8.28% |
| Return on average assets | 1.33% | 1.28% | 1.00% |
| Return on average equity | 10.34% | 9.08% | 7.02% |
| Return on average tangible shareholders' equity | 21.62% | 16.43% | 12.97% |
| Net interest margin | 3.73% | 3.27% | 3.46% |
| Net interest margin (tax equivalent basis) <sup>(1)</sup> | 3.77% | 3.31% | 3.51% |
| Dividend payout | 39.48% | 42.59% | 57.50% |
| Tangible book value per share | $9.97 | $12.26 | $12.93 |

---

<sup>(1)</sup> Tax equivalent basis was calculated using a 21% tax rate.

<sup>(2)</sup> Includes loans held for sale.

**4 First Financial Bancorp** 2022 Annual Report

------

**OVERVIEW OF OPERATIONS**

Net income for the year ended December 31, 2022 was $217.6 million, resulting in earnings per diluted common share of $2.30. This compares to net income of $205.2 million and earnings per diluted common share of $2.14 in 2021. Return on average assets was was 1.33% and 1.28% for 2022 and 2021, respectively. First Financial's return on average tangible shareholders' equity for 2022 was 21.62%, compared to 16.43% for 2021.

Net interest income in 2022 increased $67.0 million, or 14.8%, from 2021, to $519.1 million, primarily driven by higher yields earned on the loan and investment portfolios resulting from a higher interest rate environment. The net interest margin on a fully tax equivalent basis was 3.77% for 2022 compared to 3.31% in 2021.

Noninterest income increased $18.1 million, or 10.6%, to $189.6 million during 2022 from $171.5 million in 2021. The increase in 2022 was primarily driven by increases in leasing business income and foreign exchange income, and was partially offset by lower mortgage banking income.

Noninterest expense increased $54.5 million, or 13.6%, from $400.8 million in 2021 to $455.3 million in 2022. This increase was largely driven by higher salaries and incentives, higher other noninterest expenses and leasing business expenses resulting from the acquisition of Summit at the end of 2021.

Income tax expense decreased $11.7 million, or 32.6%, to $24.1 million in 2022 from $35.8 million in 2021, with the effective tax rate decreasing to 10.0% in 2022 from 14.8% in 2021. The lower effective tax rate in 2022 was primarily related to tax credit investments realized during 2022.

Total loans increased $1.0 billion, or 10.9%, to $10.3 billion at December 31, 2022 from $9.3 billion at December 31, 2021, primarily driven by growth in C&I loans. Total deposits decreased $170.8 million, or 1.3%, to $12.7 billion as of December 31, 2022 from $12.9 billion at December 31, 2021 due to competitive pressures arising from an elevated interest rate environment.

The ACL was $133.0 million, or 1.29% of total loans at December 31, 2022, compared to $132.0 million, and 1.42% of total loans at December 31, 2021. First Financial recorded $6.7 million in provision expense during 2022, compared to $19.0 million in provision recapture during 2021.

First Financial's operational results may be influenced by certain economic factors and conditions, such as market interest rates, industry competition, household and business spending levels, consumer confidence and the regulatory environment. For a more detailed discussion of the Company's operations, please refer to the sections that follow.

**NON-GAAP FINANCIAL MEASURES**

The Company utilizes certain non-GAAP financial measures, which it believes provide useful insight to the reader of the Consolidated Financial Statements. These non-GAAP measures should be supplemental to primary GAAP measures and should not be read in isolation or relied upon as a substitute for the primary GAAP measures.

For analytical purposes, net interest income is presented in the following table adjusted to a tax equivalent basis assuming a 21% marginal tax rate. Net interest income is disclosed on a tax equivalent basis to consistently reflect income from tax-exempt assets, such as municipal loans and investments, in order to facilitate a comparison between taxable and tax-exempt amounts. Management believes it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax equivalent basis as these measures provide useful information to make peer comparisons.

**First Financial Bancorp** 2022 Annual Report **5**

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

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| | | | |
|:---|:---|:---|:---|
| **Table 2 • Non-GAAP - Net Interest Income** | | | |
|  | Year ended December 31, | Year ended December 31, | Year ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Net interest income | $519143 | $452118 | $456511 |
| Tax equivalent adjustment | 6357 | 6091 | 6529 |
| &nbsp;&nbsp;&nbsp;**Net interest income - tax equivalent** | $525500 | $458209 | $463040 |
| Average earning assets | $13921563 | $13826645 | $13193650 |
| Net interest margin <sup>(1)</sup> | 3.73% | 3.27% | 3.46% |
| Net interest margin (FTE) <sup>(1)</sup> | 3.77% | 3.31% | 3.51% |

---

<sup>(1)</sup> Calculated using net interest income divided by average earning assets.

In addition to capital ratios defined by the U.S. banking agencies, First Financial considers various measures when evaluating capital utilization and adequacy, including the return on average tangible shareholder's equity and the tangible common equity ratio. These calculations are intended to complement the capital ratios defined by the U.S. banking agencies for both absolute and comparative purposes. As GAAP does not include capital ratio measures, the Company believes there are no comparable GAAP financial measures to these ratios. These ratios are not formally defined by GAAP or codified in the federal banking regulations and, therefore, are considered to be non-GAAP financial measures.

First Financial believes return on average tangible common equity is an important measure for comparative purposes with other financial institutions, but it is not defined under GAAP, and therefore is considered a non-GAAP financial measure. This measure is useful for evaluating the performance of a business as it calculates the return available to common shareholders without the impact of intangible assets and their related amortization.

First Financial encourages readers to consider its Consolidated Financial Statements in their entirety and not to rely on any single financial measure.

The following table reconciles non-GAAP capital ratios to GAAP:

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| | | | |
|:---|:---|:---|:---|
| **Table 3 • Non-GAAP - Capital Ratios** | | | |
|  | Year ended December 31, | Year ended December 31, | Year ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Net income (a) | $217612 | $205160 | $155810 |
| Average total shareholders' equity | 2105339 | 2259807 | 2220645 |
| Less: |  |  |  |
| &nbsp;&nbsp;&nbsp;Goodwill | (999611) | (937943) | (937771) |
| &nbsp;&nbsp;&nbsp;Other intangibles | (99081) | (73496) | (81684) |
| &nbsp;&nbsp;&nbsp;&nbsp;Average tangible equity (b) | 1006647 | 1248368 | 1201190 |
| Total shareholders' equity | 2041373 | 2258942 | 2282070 |
| Less: |  |  |  |
| &nbsp;&nbsp;&nbsp;Goodwill | (1001507) | (1000749) | (937771) |
| &nbsp;&nbsp;&nbsp;Other intangibles | (93919) | (104367) | (77361) |
| &nbsp;&nbsp;&nbsp;&nbsp;Ending tangible equity (c) | 945947 | 1153826 | 1266938 |
| Total assets | 17003316 | 16329141 | 15973134 |

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**6 First Financial Bancorp** 2022 Annual Report

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| | | | |
|:---|:---|:---|:---|
| **Table 3 • Non-GAAP - Capital Ratios** | | | |
|  | Year ended December 31, | Year ended December 31, | Year ended December 31, |
| Less: |  |  |  |
| &nbsp;&nbsp;&nbsp;Goodwill | (1001507) | (1000749) | (937771) |
| &nbsp;&nbsp;&nbsp;Other intangibles | (93919) | (104367) | (77361) |
| &nbsp;&nbsp;&nbsp;&nbsp;Ending tangible assets (d) | 15907890 | 15224025 | 14958002 |
| Risk-weighted assets (e) | 12923233 | 11642201 | 11219114 |
| Total average assets | 16382730 | 16072360 | 15529144 |
| Less: |  |  |  |
| &nbsp;&nbsp;&nbsp;Goodwill | (999611) | (937943) | (937771) |
| &nbsp;&nbsp;&nbsp;Other intangibles | (99081) | (73496) | (81684) |
| &nbsp;&nbsp;&nbsp;&nbsp;Average tangible assets (f) | 15284038 | 15060921 | 14509689 |
| Ending common shares outstanding (g) | 94891099 | 94149240 | 98021929 |
| **Ratios** |  |  |  |
| Return on average tangible shareholders' equity (a)/(b) | 21.62% | 16.43% | 12.97% |
| Ending tangible shareholders' equity as a percent of: |  |  |  |
| &nbsp;&nbsp;Ending tangible assets (c)/(d) | 5.95% | 7.58% | 8.47% |
| &nbsp;&nbsp;Risk-weighted assets (c)/(e) | 7.32% | 9.91% | 11.29% |
| Average tangible shareholders' equity to average tangible assets (b)/(f) | 6.59% | 8.29% | 8.28% |
| Tangible book value per share (c)/(g) | $9.97 | $12.26 | $12.93 |

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**NET INCOME**

**2022 vs. 2021.** First Financial's net income increased $12.5 million, or 6.1%, to $217.6 million in 2022, compared to net income of $205.2 million in 2021. The increase in 2022 was primarily related to a $67.0 million, or 14.8%, increase in net interest income, a $18.1 million, or 10.6%, increase in noninterest income and a $11.7 million, or 32.6%, decrease in income tax expense, partially offset by a $54.5 million, or 13.6%, increase in noninterest expenses and a $25.8 million, or 135.4%, increase in provision expense.

**2021 vs. 2020.** First Financial's net income increased $49.4 million, or 31.7%, to $205.2 million in 2021, compared to net

income of $155.8 million in 2020. The increase in 2021 was primarily related to a $89.8 million, or 126.9%, decrease in

provision expense, which was partially offset by a $17.6 million, or 9.3%, decline in noninterest income, a $10.1 million, or

2.6%, increase in noninterest expenses, a $7.2 million, or 25.1%, increase in income tax expense, and a $4.4 million, or 1.0%,

decrease in net interest income.

For more detail, refer to the Net interest income, Noninterest income, Noninterest expenses, Income taxes, and Asset quality and allowance for credit losses sections that follow.

**NET INTEREST INCOME**

First Financial's net interest income for the years 2020 through 2022 is shown in Table 1 – Financial Summary.

First Financial's principal source of income is net interest income, which is the excess of interest received from earning assets, including loan-related fees and purchase accounting accretion, less interest paid on interest-bearing liabilities. The amount of net interest income is determined by the volume and mix of earning assets, the rates earned on such assets and the volume, mix and rates paid for the deposits and borrowed money that support the earning assets. Earning assets consist of interest-bearing

**First Financial Bancorp** 2022 Annual Report **7**

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

loans to customers as well as marketable investment securities. First Financial's tax equivalent net interest margin was 3.77%, 3.31% and 3.51% for 2022, 2021 and 2020, respectively.

Table 5 – Volume/Rate Analysis - Tax Equivalent Basis describes the extent to which changes in interest rates as well as changes in the volume of earning assets and interest-bearing liabilities have affected First Financial's net interest income on a tax equivalent basis during the years presented. Nonaccrual loans and loans held for sale were included in the average loan balances used to determine the yields in Table 5 – Volume/Rate Analysis - Tax Equivalent Basis, which should be read in conjunction with Table 2 – Statistical Information.

Loan fees included in the interest income computation for 2022, 2021 and 2020 were $19.2 million, $46.8 million and $32.8 million, respectively, with the 2021 and 2020 activity being heavily influenced by PPP activity. Interest income also included purchase accounting accretion of $8.8 million, $12.3 million and $20.0 million for 2022, 2021 and 2020, respectively.

**2022 vs. 2021.** Net interest income increased $67.0 million, or 14.8%, from $452.1 million in 2021 to $519.1 million in 2022, as interest rates rose during 2022. The tax equivalent yield on earning assets increased due to higher interest rates which more than offset an increase in average earning asset balances during the period.

Net interest margin on a fully tax equivalent basis increased 46 bps to 3.77% for 2022 compared to 3.31% in 2021 as the Company's asset sensitive balance sheet responded to multiple Fed rate hikes. This resulted in a 71 bp increase in asset yields, which more than offset an increase in interest-bearing liabilities and a 36 bp increase in funding costs during the period.

Interest income grew $101.8 million, or 21.1%, in 2022 when compared to the prior year as the yield on earning assets rose to 4.25% from 3.54%. Additionally, average earning assets increased to $13.9 billion as of December 31, 2022 from $13.8 billion in 2021.

Total interest expense increased due to a 17 bp increase in the cost of interest-bearing deposits, an increase in average borrowings and a 63 bp increase in the average rate on those borrowings. The increasing rate environment drove the rise in the cost of interest-bearing deposits, which was 34 bps in 2022 compared to 17 bps for the same period in the prior year. Average borrowed funds increased $529.8 million in 2022, while the cost of these borrowed funds increased to 3.20% in 2022 from 2.57% during 2021.

**2021 vs. 2020**. Net interest income decreased $4.4 million, or 1.0%, from $456.5 million in 2020 to $452.1 million in 2021, as

interest rates declined and purchase accounting accretion moderated during 2021. The tax equivalent yield on earning assets

declined due to lower interest rates and more than offset an increase in average earning asset balances during the period.

Additionally, PPP fees increased $12.6 million, or 73.3%, in 2021, partially offsetting the impact from a challenging interest

rate environment.

Net interest margin on a fully tax equivalent basis decreased 20 bps to 3.31% for 2021 compared to 3.51% in 2020 as a decline

in interest rates drove a 49 bp decline in asset yields. These lower rates more than offset higher earning asset balances and a 39

bp decline in funding costs.

Interest income declined $41.7 million, or 8.0%, in 2021 when compared to the prior year as the yield on earning assets

declined to 3.54% from 4.03%, which more than offset the impact of higher earning asset balances. Average earning assets

increased to $13.8 billion as of December 31, 2021 from $13.2 billion in 2020 as the Company invested excess liquidity into

investment securities.

Interest expense decreased due to a 35 basis point decline in the cost of interest-bearing deposits and lower borrowing balances.

The low interest rate environment drove the decline in the cost of interest-bearing deposits, which was 17 bps in 2021 compared

to 52 bps for the same period in the prior year. Average borrowed funds declined $811.5 million in 2021, while the cost of

these borrowed funds increased to 2.57% in 2021 from 1.82% during 2020. Both the decline in balances and the increase in

rate were attributable to the repayment of PPPLF borrowings in 2021, which were used to fund PPP activity and carried a

relatively modest interest rate of 0.35%.

**8 First Financial Bancorp** 2022 Annual Report

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Table 4 • Statistical Information**  | **Table 4 • Statistical Information**  | **Table 4 • Statistical Information**  | **Table 4 • Statistical Information**  | | | | | | |
|  | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 |
| *(Dollars in thousands)* | Average Balance | Interest | Average Yield | Average Balance | Interest | Average Yield | Average Balance | Interest | Average Yield |
| **Earning assets** |  |  |  |  |  |  |  |  |  |
| Loans and leases <sup>(1), (4)</sup> |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Commercial and industrial <sup>(2)</sup> | 2979273 | 154152 | 5.17% | 2790733 | 137841 | 4.94% | 2999223 | 143720 | 4.79% |
| &nbsp;&nbsp;Lease financing <sup>(2)</sup> | 153380 | 11785 | 7.68% | 67822 | 2739 | 4.04% | 79882 | 3769 | 4.72% |
| &nbsp;&nbsp;&nbsp;Construction-real estate | 476597 | 23036 | 4.83% | 575883 | 18743 | 3.25% | 535740 | 20497 | 3.83% |
| &nbsp;&nbsp;Commercial-real estate <sup>(2)</sup> | 4040365 | 185017 | 4.58% | 4379325 | 152251 | 3.48% | 4317396 | 177038 | 4.10% |
| &nbsp;&nbsp;&nbsp;Residential-real estate | 989743 | 40083 | 4.05% | 971692 | 40275 | 4.14% | 1077430 | 48001 | 4.46% |
| &nbsp;&nbsp;&nbsp;Installment and other consumer | 935607 | 46118 | 4.93% | 854780 | 34906 | 4.08% | 892985 | 40046 | 4.48% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total loans and leases | 9574965 | 460191 | 4.81% | 9640235 | 386755 | 4.01% | 9902656 | 433071 | 4.37% |
| Investment securities <sup>(3)</sup> |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Taxable | 3293010 | 102314 | 3.11% | 3271601 | 79213 | 2.42% | 2460707 | 73789 | 3.00% |
| &nbsp;&nbsp;Tax-exempt <sup>(2)</sup> | 739036 | 23374 | 3.16% | 841639 | 23193 | 2.76% | 751344 | 24357 | 3.24% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total investment securities <sup>(3)</sup> | 4032046 | 125688 | 3.12% | 4113240 | 102406 | 2.49% | 3212051 | 98146 | 3.06% |
| Interest-bearing deposits with other banks | 314552 | 5484 | 1.74% | 73170 | 147 | 0.20% | 78943 | 275 | 0.35% |
| &nbsp;&nbsp;&nbsp;**Total earning assets** | 13921563 | 591363 | 4.25% | 13826645 | 489308 | 3.54% | 13193650 | 531492 | 4.03% |
| **Nonearning assets** |  |  |  |  |  |  |  |  |  |
| Allowance for credit losses | (125001) |  |  | (162477) |  |  | (153596) |  |  |
| Cash and due from banks | 233925 |  |  | 242201 |  |  | 245436 |  |  |
| Accrued interest and other assets | 2352243 |  |  | 2165991 |  |  | 2243654 |  |  |
| &nbsp;&nbsp;&nbsp;**Total assets** | 16382730 |  |  | 16072360 |  |  | 15529144 |  |  |
| **Interest-bearing liabilities** |  |  |  |  |  |  |  |  |  |
| Deposits |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest-bearing demand | 3158560 | 8933 | 0.28% | 2988359 | 1930 | 0.06% | 2626252 | 4534 | 0.17% |
| &nbsp;&nbsp;&nbsp;Savings | 4049883 | 8871 | 0.22% | 4065654 | 4122 | 0.10% | 3260882 | 7232 | 0.22% |
| &nbsp;&nbsp;&nbsp;Time | 1175086 | 10336 | 0.88% | 1601295 | 8383 | 0.52% | 2167553 | 30156 | 1.39% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 8383529 | 28140 | 0.34% | 8655308 | 14435 | 0.17% | 8054687 | 41922 | 0.52% |
| Borrowed funds |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Short-term borrowings | 817495 | 19132 | 2.34% | 204503 | 198 | 0.10% | 590903 | 6442 | 1.09% |
| &nbsp;&nbsp;&nbsp;Long-term debt | 359518 | 18591 | 5.17% | 442720 | 16466 | 3.72% | 867798 | 20088 | 2.31% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total borrowed funds | 1177013 | 37723 | 3.20% | 647223 | 16664 | 2.57% | 1458701 | 26530 | 1.82% |
| &nbsp;&nbsp;&nbsp;**Total interest-bearing liabilities** | 9560542 | 65863 | 0.69% | 9302531 | 31099 | 0.33% | 9513388 | 68452 | 0.72% |
| **Noninterest-bearing liabilities** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Noninterest-bearing demand deposits | 4196735 |  |  | 4005034 |  |  | 3310483 |  |  |
| &nbsp;&nbsp;&nbsp;Other liabilities | 520114 |  |  | 504988 |  |  | 484628 |  |  |
| &nbsp;&nbsp;&nbsp;**Shareholders' equity** | 2105339 |  |  | 2259807 |  |  | 2220645 |  |  |
| &nbsp;&nbsp;&nbsp;**Total liabilities and shareholders' equity** | 16382730 |  |  | 16072360 |  |  | 15529144 |  |  |
| &nbsp;&nbsp;&nbsp;**Net interest income and interest rate spread (fully tax equivalent)** |  | 525500 | 3.56% |  | 458209 | 3.21% |  | 463040 | 3.31% |
| &nbsp;&nbsp;&nbsp;**Net interest margin (fully tax equivalent)** |  |  | 3.77% |  |  | 3.31% |  |  | 3.51% |
| Interest income and yield |  | 585006 | 4.20% |  | 483217 | 3.49% |  | 524963 | 3.98% |
| Interest expense and rate |  | 65863 | 0.69% |  | 31099 | 0.33% |  | 68452 | 0.72% |
| &nbsp;&nbsp;&nbsp;**Net interest income and spread** |  | 519143 | 3.51% |  | 452118 | 3.16% |  | 456511 | 3.26% |
| &nbsp;&nbsp;&nbsp;**Net interest margin** |  |  | 3.73% |  |  | 3.27% |  |  | 3.46% |
| <sup>(1)</sup> Nonaccrual loans are included in average loan balance and loan fees are included in interest income. | <sup>(1)</sup> Nonaccrual loans are included in average loan balance and loan fees are included in interest income. | <sup>(1)</sup> Nonaccrual loans are included in average loan balance and loan fees are included in interest income. | <sup>(1)</sup> Nonaccrual loans are included in average loan balance and loan fees are included in interest income. | <sup>(1)</sup> Nonaccrual loans are included in average loan balance and loan fees are included in interest income. | <sup>(1)</sup> Nonaccrual loans are included in average loan balance and loan fees are included in interest income. | <sup>(1)</sup> Nonaccrual loans are included in average loan balance and loan fees are included in interest income. |  |  |  |
| <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. | <sup>(2)</sup> Interest income on tax-exempt investments and on certain tax-exempt loans and leases has been adjusted to a tax equivalent basis using a 21% tax rate. |
| <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. | <sup>(3)</sup> Includes HTM securities, AFS securities and other investments. |
| <sup>(4)</sup> Includes loans held-for-sale. |  |  |  |  |  |  |  |  |  |
| N/M = not meaningful |  |  |  |  |  |  |  |  |  |

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**First Financial Bancorp** 2022 Annual Report **9**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Table 5 • Volume/Rate Analysis - Tax Equivalent Basis** <sup>(1)</sup>  | **Table 5 • Volume/Rate Analysis - Tax Equivalent Basis** <sup>(1)</sup>  | **Table 5 • Volume/Rate Analysis - Tax Equivalent Basis** <sup>(1)</sup>  | **Table 5 • Volume/Rate Analysis - Tax Equivalent Basis** <sup>(1)</sup>  | **Table 5 • Volume/Rate Analysis - Tax Equivalent Basis** <sup>(1)</sup>  | | |
|  | 2022 change from 2021 due to | 2022 change from 2021 due to | 2022 change from 2021 due to | 2021 change from 2020 due to | 2021 change from 2020 due to | 2021 change from 2020 due to |
| *(Dollars in thousands)* | Volume | Rate | Total | Volume | Rate | Total |
| **Interest income** |  |  |  |  |  |  |
| Loans <sup>(2)</sup> | $(3137) | $76573 | $73436 | $(10528) | $(35788) | $(46316) |
| Investment securities <sup>(3)</sup> |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Taxable | 665 | 22436 | 23101 | 19634 | (14210) | 5424 |
| &nbsp;&nbsp;&nbsp;Tax-exempt | (3245) | 3426 | 181 | 2488 | (3652) | (1164) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total investment securities interest <sup>(3)</sup> | (2580) | 25862 | 23282 | 22122 | (17862) | 4260 |
| Interest-bearing deposits with other banks | 4208 | 1129 | 5337 | (12) | (116) | (128) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | (1509) | 103564 | 102055 | 11582 | (53766) | (42184) |
| **Interest expense** |  |  |  |  |  |  |
| Interest-bearing demand deposits | 481 | 6522 | 7003 | 234 | (2838) | (2604) |
| Savings deposits | (35) | 4784 | 4749 | 816 | (3926) | (3110) |
| Time deposits | (3749) | 5702 | 1953 | (2964) | (18809) | (21773) |
| Short-term borrowings | 14346 | 4588 | 18934 | (374) | (5870) | (6244) |
| Long-term debt | (4302) | 6427 | 2125 | (15810) | 12188 | (3622) |
| &nbsp;&nbsp;&nbsp;**Total** | 6741 | 28023 | 34764 | (18098) | (19255) | (37353) |
| &nbsp;&nbsp;&nbsp;**Net interest income** | $(8250) | $75541 | $67291 | $29680 | $(34511) | $(4831) |

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<sup>(1)</sup> Tax equivalent basis was calculated using a 21% tax rate.

<sup>(2)</sup> Includes nonaccrual loans and loans held-for-sale.

<sup>(3)</sup> Includes HTM securities, AFS securities and other investments.

**NONINTEREST INCOME AND NONINTEREST EXPENSES**

Noninterest income and noninterest expenses for 2022, 2021 and 2020 are shown in Table 6 – Noninterest Income and Noninterest Expenses.

**NONINTEREST INCOME**

**2022 vs. 2021.** Noninterest income increased $18.1 million, or 10.6%, from $171.5 million in 2021 to $189.6 million in 2022. The increase was attributed to $31.6 million of leasing business income, a $10.2 million, or 22.7%, increase in foreign exchange income and a $2.0 million, or 12.6%, increase in other noninterest income. These increases were partially offset by an $18.0 million, or 54.4%, decrease in gain on sale of loans, a $3.8 million, or 12.0%, decrease in service charges on deposit accounts, a $2.5 million, or 31.4%, decrease in client derivative fees and a $1.3 million, or 191.0%, decrease in unrealized gain (loss) on equity securities.

Elevated noninterest income in 2022 included leasing business income, which reflected new activity acquired as part of the Summit Funding Group acquisition at the end of 2021. In addition, noninterest income was bolstered by higher foreign exchange income, which had record demand for currency transactions in 2022. The increase in other noninterest income was driven by higher income earned on limited partnership investments during the year.

Partially offsetting those increases, gains on sales of retail mortgage loans declined in 2022 as loan demand slowed due to a significant increase in interest rates. Service charge income declined during the year as a result of the Company's changes to its service charge and overdraft programs, and client derivative fees declined as a result of lower product demand. The unrealized loss on equity securities in 2022 was related to a decline in the value of the Company's Class B Visa shares.

**2021 vs. 2020.** Noninterest income decreased $17.6 million, or 9.3%, from $189.1 million in 2020 to $171.5 million in 2021.

The decline was attributed to an $18.2 million, or 35.5%, decrease in gain on sale of loans, an $8.3 million, or 92.2%, decrease

in unrealized gain (loss) on equity securities, a $5.3 million, or 116.6%, decrease on sales of investment securities and a $2.4

million, or 23.1%, decrease in client derivative fees. These declines were partially offset by a $5.4 million, or 13.8%, increase

in foreign exchange income, a $3.7 million, or 30.1%, increase in other noninterest income, a $2.6 million, or 22.0%, increase

in bankcard income, a $2.5 million, or 11.7%, increase in trust and wealth management fees, and a $2.4 million, or 8.3%,

**10 First Financial Bancorp** 2022 Annual Report

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increase in service charges on deposit accounts.

Gains on the sales of retail mortgage loans declined from record levels in 2020, as loan demand softened and premiums

moderated in 2021. Gains from sales of investment securities and unrealized gains on equity securities both declined in 2021

due to sales of Visa Class B shares and recording the remaining shares at fair value during 2020. Client derivatives fees

declined from prior year as demand moderated in 2021 in line with a decrease in loan balances.

Partially offsetting those declines, foreign exchange income increased in 2021 as Bannockburn had their best year to date, while other noninterest income increased due to an increase in limited partnership income and syndication fees during the period. In addition, wealth management, bankcard and service charge income all increased in 2021 as the economy began to recover from pandemic-related uncertainty.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Table 6 • Noninterest Income and Noninterest Expenses** | **Table 6 • Noninterest Income and Noninterest Expenses** | **Table 6 • Noninterest Income and Noninterest Expenses** | **Table 6 • Noninterest Income and Noninterest Expenses** | **Table 6 • Noninterest Income and Noninterest Expenses** | **Table 6 • Noninterest Income and Noninterest Expenses** | **Table 6 • Noninterest Income and Noninterest Expenses** |
|  | 2022 | 2022 | 2021 | 2021 | 2020 | 2020 |
| *(Dollars in thousands)* | Total | % Change | Total | % Change | Total | % Change |
| **Noninterest income** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Service charges on deposit accounts | $28062 | (12.0)% | $31876 | 8.3% | $29446 | (22.4)% |
| &nbsp;&nbsp;&nbsp;Trust and wealth management fees | 23506 | (1.2)% | 23780 | 11.7% | 21286 | 2.7% |
| &nbsp;&nbsp;&nbsp;Bankcard income | 14380 | 0.6% | 14300 | 22.0% | 11726 | (37.6)% |
| &nbsp;&nbsp;&nbsp;Client derivative fees | 5441 | (31.4)% | 7927 | (23.1)% | 10313 | (34.2)% |
| &nbsp;&nbsp;&nbsp;Foreign exchange income | 54965 | 22.7% | 44793 | 13.8% | 39377 | 408.8% |
| &nbsp;&nbsp;&nbsp;Leasing business income | 31574 | N/M | 0 | N/M | 0 | N/M |
| &nbsp;&nbsp;&nbsp;Net gains from sales of loans | 15048 | (54.4)% | 33021 | (35.5)% | 51176 | 244.6% |
| &nbsp;&nbsp;&nbsp;Net gain (loss) on equity securities | (639) | (191.0)% | 702 | (92.2)% | 9045 | N/M |
| &nbsp;&nbsp;&nbsp;Other | 17873 | 12.6% | 15866 | 30.1% | 12191 | (21.3)% |
| &nbsp;&nbsp;&nbsp;&nbsp;Subtotal | 190210 | 10.4% | 172265 | (6.7)% | 184560 | 40.1% |
| &nbsp;&nbsp;&nbsp;Net gain (loss) on sales/transfers of investment securities | (569) | (25.0)% | (759) | (116.6)% | 4563 | N/M |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $189641 | 10.6% | $171506 | (9.3)% | $189123 | 44.0% |
| **Noninterest expenses** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | $269368 | 9.5% | $245924 | 3.9% | $236779 | 13.3% |
| &nbsp;&nbsp;&nbsp;Net occupancy | 22208 | 0.3% | 22142 | (4.8)% | 23266 | (3.3)% |
| &nbsp;&nbsp;&nbsp;Furniture and equipment | 13224 | (4.3)% | 13819 | (7.7)% | 14968 | (5.9)% |
| &nbsp;&nbsp;&nbsp;Data processing | 33662 | 7.3% | 31363 | 14.0% | 27514 | 25.7% |
| &nbsp;&nbsp;&nbsp;Marketing | 8744 | 9.5% | 7983 | 24.5% | 6414 | (7.2)% |
| &nbsp;&nbsp;&nbsp;Communication | 2683 | (8.4)% | 2930 | (16.1)% | 3492 | 6.9% |
| &nbsp;&nbsp;&nbsp;Professional services | 9734 | (16.6)% | 11676 | 17.2% | 9961 | (11.5)% |
| &nbsp;&nbsp;&nbsp;Debt extinguishment | 0 | N/M | 0 | (100.0)% | 7257 | N/M |
| &nbsp;&nbsp;&nbsp;State intangible tax | 4285 | 0.7% | 4256 | (29.7)% | 6058 | 3.9% |
| &nbsp;&nbsp;&nbsp;FDIC assessments | 7194 | 27.8% | 5630 | 10.2% | 5110 | 159.0% |
| &nbsp;&nbsp;&nbsp;Intangible assets amortization | 11185 | 13.7% | 9839 | (11.6)% | 11126 | 15.0% |
| &nbsp;&nbsp;&nbsp;Leasing business expense | 20363 | N/M | 0 | N/M | 0 | N/M |
| &nbsp;&nbsp;&nbsp;Other | 52699 | 16.5% | 45250 | 16.9% | 38719 | 19.1% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $455349 | 13.6% | $400812 | 2.6% | $390664 | 14.1% |

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**First Financial Bancorp** 2022 Annual Report **11**

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**NONINTEREST EXPENSES**

**2022 vs. 2021.** Noninterest expenses increased $54.5 million, or 13.6%, in 2022 compared to 2021, primarily due to

a $23.4 million, or 9.5%, increase in salaries and employee benefits, $20.4 million of leasing business expense, a $7.4 million, or 16.5%, increase in other noninterest expenses, a $2.3 million, or 7.3%, increase in data processing expenses, a $1.6 million, or 27.8%, increase in FDIC assessments and a $1.3 million, or 13.7%, increase in intangible asset amortization expense. These increases were partially offset by a $1.9 million, or 16.6%, decrease in professional services.

Salaries and employee benefits in 2022 were driven higher by annual compensation adjustments, incentive compensation tied to elevated fee income, and performance related incentives tied to the Company's financial results. Leasing business expense reflected new activity acquired as part of the Summit Funding Group transaction. The increase in other noninterest expense was largely attributed to higher write-downs of tax credit investments in 2022, while data processing expenses increased as the Company continued to make strategic investments in technology. FDIC assessment expense increased during the year due to higher assessment rates while intangible amortization expenses increased following the acquisition of Summit. Professional services declined in 2022 due to acquisition and loan sale related expenses in 2021 that did not recur in 2022.

**2021 vs. 2020.** Noninterest expenses increased $10.1 million, or 2.6%, in 2021 compared to 2020, primarily due to a $9.1

million, or 3.9%, increase in salaries and employee benefits, a $3.8 million, or 14.0%, increase in data processing expenses, a

$1.7 million, or 17.2%, increase in professional services, a $1.6 million, or 24.5%, increase in marketing expenses, and a $6.5

million, or 16.9%, increase in other noninterest expenses. These increases were partially offset by a $7.3 million, or 100.0%

decrease in debt extinguishment costs, a $1.8 million, or 29.7%, decrease in state intangible taxes, a $1.3 million, or 11.6%,

decrease in intangible asset amortization expense, a $1.1 million, or 7.7%, decrease in furniture and equipment expenses and

$1.1 million, or 4.8%, decrease in net occupancy expenses.

Higher salaries and employee benefits in 2021 were driven by annual compensation adjustments and performance related

incentives tied to the Company's financial results. Additionally, data processing and professional services increased in 2021 due to the Company's continued investment in technology and expenses associated with the Summit acquisition, respectively, while marketing expenses increased due to sponsoring more events in 2021 than 2020 due to the pandemic.

Other noninterest expenses rose primarily as a result of an increase in tax credit investment write-downs in 2021, as well as

$7.1 million of costs related to overdraft litigation settled during the year. Like many banks, First Financial has been the

subject of lawsuits relating to overdraft fees. This type of litigation is time consuming and expensive in large part due to the

amount of data to be sorted and disclosed, in some cases going back multiple years. During 2021, First Financial determined

that it was in its best interest to settle lawsuits in the states of Indiana and Ohio, resulting in higher litigation settlement expense in the year.

Debt extinguishment costs declined in 2021 as 2020 included $7.3 million of charges that did not recur in 2021 related to the

prepayment of $120.0 million of higher cost long-term FHLB debt.

**INCOME TAXES**

**2022 vs. 2021.** First Financial's income tax expense in 2022 totaled $24.1 million compared to $35.8 million in 2021, resulting in effective tax rates of 10.0% and 14.8% for 2022 and 2021, respectively. The lower effective tax rate in 2022 was primarily related to an increase in tax credit activity during the year, partially offset by higher pre-tax income.

**2021 vs. 2020.** The Company's income tax expense totaled $35.8 million and $28.6 million in 2021 and 2020, respectively, which resulted in effective tax rates of 14.8% for 2021 and 15.5% for 2020. The lower effective tax rate in 2021 was largely the result of the recognition of tax credit investments during the year, partially offset by higher pre-tax income.

For further information on income taxes, see Note 16 – Income Taxes in the Notes to Consolidated Financial Statements.

**INVESTMENTS**

First Financial utilizes its investment portfolio as a source of liquidity and interest income, as well as a tool for managing the Company's interest rate risk profile. As such, the Company's primary investment strategy is to invest in debt securities with low credit risk, such as treasury and agency-backed residential MBS. The investment portfolio is also managed with consideration to prepayment, extension and maturity risk. First Financial invests primarily in MBS issued by U.S. government agencies and corporations, such as GNMA, FHLMC and FNMA, as these securities are considered to have a low credit risk and high

**12 First Financial Bancorp** 2022 Annual Report

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liquidity profile due to government agency guarantees. Government and agency backed securities comprised 47.4% and 44.5% of First Financial's investment securities portfolio as of December 31, 2022 and 2021, respectively.

The Company also invests in certain securities that are not supported by government or agency guarantees and whose realization is dependent on future principal and interest repayments. Prior to purchase, First Financial performs a detailed collateral and structural analysis on these securities and strategically invests in asset classes in which First Financial has expertise and experience, as well as a senior position in the capital structure. First Financial continuously monitors credit risk and geographic concentration risk in its evaluation of market opportunities that would enhance the overall performance of the portfolio. Securities not supported by government or agency guarantees represented 52.6% and 55.5% of First Financial's investment securities portfolio as of December 31, 2022 and 2021, respectively.

The other investments category in the Consolidated Balance Sheets consists primarily of First Financial's investments in FRB stock, FHLB stock and class B Visa shares.

**2022 vs. 2021.** First Financial's investment portfolio at December 31, 2022 totaled $3.5 billion, compared to $4.3 billion at December 31, 2021, and represented 20.5% of total assets at December 31, 2022. The $812.6 million, or 18.9%, decline in the investment portfolio during 2022 was primarily related to the Company's strategic redeployment of balance sheet liquidity to fund strong loan growth during the year as well as a $347.0 million decline in the fair value of AFS securities due to higher interest rates.

First Financial classified $3.4 billion, or 97.6%, and $4.2 billion, or 97.7%, of investment securities as AFS at December 31, 2022 and 2021, respectively. First Financial classified $84.0 million, or 2.4%, and $98.4 million, or 2.3%, of investment securities as HTM at December 31, 2022 and 2021, respectively.

First Financial recorded a $325.9 million unrealized after-tax loss on the investment portfolio as a component of equity in AOCI resulting from changes in the fair value of AFS securities at December 31, 2022 due to rising interest rates. This unrealized loss position declined $347.0 million in 2022 from a $21.0 million unrealized after-tax gain at December 31, 2021. The overall duration of the investment portfolio increased to 4.6 years as of December 31, 2022 from 3.8 years as of December 31, 2021. First Financial has avoided adding to its portfolio any particular securities that would materially increase credit risk or geographic concentration risk and the Company continuously monitors and considers these risks in its evaluation of current market opportunities that would enhance the overall performance of the portfolio.

Debt securities issued by the U.S. government and U.S. government agencies and corporations, including the FHLB, FHLMC, FNMA and the U.S. Export/Import Bank, were not meaningful as a percentage of the portfolio at either December 31, 2022 or December 31, 2021.

Investments in MBS securities, which include CMOs, represented 51.6% and 51.4% of First Financial's total investment portfolio at December 31, 2022 and 2021, respectively. MBS are participations in pools of loans secured by mortgages under which payments of principal and interest are passed through to the security holders. These securities are subject to prepayment risk, particularly during periods of falling interest rates, and extension risk during periods of rising interest rates. Prepayments of the underlying residential real estate loans may shorten the lives of the securities, thereby affecting yields to maturity and market values.

Tax-exempt securities of states, municipalities and other political subdivisions totaled $716.6 million as of December 31, 2022 and $1.1 billion as of December 31, 2021, comprising 20.5% and 25.4% of the investment portfolio at December 31, 2022 and 2021, respectively. The securities are diversified to include states as well as issuing authorities within states, thereby decreasing geographic portfolio risk. First Financial continuously monitors the risk associated with this investment type and reviews underlying ratings for possible downgrades. First Financial does not own any state or other political subdivision securities that are currently impaired.

Asset-backed securities were $711.3 million, or 20.4% of the investment portfolio at December 31, 2022 and $719.6 million, or 16.7% of the investment portfolio at December 31, 2021. First Financial considers these investment securities to have lower credit risk and a high liquidity profile as a result of explicit guarantees on the collateral.

Other securities, consisting primarily of taxable securities of states, municipalities and other political subdivisions, in addition to debt securities issued by corporations, were $164.6 million, or 4.7% of the investment portfolio, at December 31, 2022 and $166.1 million, or 3.9% of the investment portfolio, at December 31, 2021.

**First Financial Bancorp** 2022 Annual Report **13**

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| | | | | |
|:---|:---|:---|:---|:---|
| **Table 7 • Investment Securities as of December 31** | | | | |
|  | 2022 | 2022 | 2021 | 2021 |
|  |  | Percent of |  | Percent of |
| *(Dollars in thousands)* | Amount | Portfolio | Amount | Portfolio |
| U.S. Treasuries | $32696 | 0.9% | $34776 | 0.8% |
| Securities of U.S. government agencies and corporations | 66468 | 1.9% | 79117 | 1.8% |
| Mortgage-backed securities-residential | 650063 | 18.6% | 724137 | 16.8% |
| Mortgage-backed securities-commercial | 664925 | 19.0% | 778252 | 18.1% |
| Collateralized mortgage obligations | 486992 | 14.0% | 709622 | 16.5% |
| Obligations of state and other political subdivisions | 716591 | 20.5% | 1094658 | 25.4% |
| Asset-backed securities | 711325 | 20.4% | 719581 | 16.7% |
| Other securities | 164609 | 4.7% | 166123 | 3.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $3493669 | 100.0% | $4306266 | 100.0% |

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The estimated maturities and weighted-average yields of HTM and AFS investment securities as of December 31, 2022 are shown in Table 7 – Investment Securities. Tax-equivalent adjustments using a rate of 21% were included in calculating yields on tax-exempt obligations of state and other political subdivisions.

First Financial held cash on deposit with the Federal Reserve of $388.2 million and $214.8 million at December 31, 2022 and 2021, respectively. First Financial continually monitors its liquidity position as part of its ERM framework, specifically through its asset/liability management process.

The Company had a $0.6 million unrealized loss on equity securities recorded in noninterest income for the twelve months ended December 31, 2022 compared to a $0.7 million unrealized gain for the same period of 2021. The unrealized loss in 2022 is related to a decline in the value of the Company's Class B Visa shares.

First Financial will continue to monitor loan and deposit demand, balance sheet composition, capital sensitivity and the interest rate environment as it manages investment strategies in future periods. See Note 4 – Investment Securities in the Notes to Consolidated Financial Statements for additional information on the Company's investment portfolio and Note 23 – Fair Value Disclosures for additional information on how First Financial determines the fair value of investment securities.

**14 First Financial Bancorp** 2022 Annual Report

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** | **Table 8 • Investment Securities as of December 31, 2022** |
|  | Maturity <sup>(2)</sup> | Maturity <sup>(2)</sup> | Maturity <sup>(2)</sup> | Maturity <sup>(2)</sup> | Maturity <sup>(2)</sup> | Maturity <sup>(2)</sup> | Maturity <sup>(2)</sup> | Maturity <sup>(2)</sup> |
|  | Within one year | Within one year | After one but within five years | After one but within five years | After five but within ten years | After five but within ten years | After ten years | After ten years |
| *(Dollars in thousands)* | Amount | Yield<sup>(1)</sup> | Amount | Yield<sup>(1)</sup> | Amount | Yield<sup>(1)</sup> | Amount | Yield<sup>(1)</sup> |
| **Held-to-Maturity** |  |  |  |  |  |  |  |  |
| Securities of other U.S. government agencies and corporations | $0 | 0.00% | $0 | 0.00% | $0 | 0.00% | $0 | 0.00% |
| Mortgage-backed securities-residential | 0 | 0.00% | 0 | 0.00% | 0 | 0.00% | 0 | 0.00% |
| Mortgage-backed securities-commercial | 579 | 3.00% | 34784 | 2.30% | 0 | 0.00% | 0 | 0.00% |
| Collateralized mortgage obligations | 0 | 0.00% | 1116 | 1.75% | 8164 | 1.77% | 0 | 0.00% |
| Obligations of state and other political subdivisions | 0 | 0.00% | 2584 | 3.66% | 3670 | 3.42% | 1874 | 2.25% |
| Other securities | 0 | 0.00% | 15250 | 4.42% | 16000 | 4.95% | 0 | 0.00% |
| **Total** | $579 | 3.00% | $53734 | 2.96% | $27834 | 3.81% | $1874 | 2.25% |
| **Available-for-Sale** |  |  |  |  |  |  |  |  |
| U.S. treasuries | $2383 | 0.00% | $0 | 0.00% | $30313 | 1.32% | $0 | 0.00% |
| Securities of other U.S. government agencies and corporations | 0 | 0.00% | 0 | 0.00% | 66468 | 1.74% | 0 | 0.00% |
| Mortgage-backed securities-residential | 39 | 5.35% | 117984 | 2.26% | 289436 | 2.46% | 242604 | 1.93% |
| Mortgage-backed securities-commercial | 241125 | 7.04% | 321469 | 5.06% | 57541 | 1.56% | 9427 | 2.75% |
| Collateralized mortgage obligations | 15886 | 5.25% | 237725 | 2.59% | 140849 | 2.18% | 83252 | 2.35% |
| Obligations of state and other political subdivisions | 26596 | 2.75% | 132332 | 3.20% | 298260 | 2.63% | 251275 | 2.23% |
| Asset-backed securities | 87567 | 4.29% | 521836 | 4.45% | 90392 | 3.28% | 11530 | 5.11% |
| Other securities | 16289 | 8.13% | 96730 | 5.97% | 16843 | 4.87% | 3497 | 4.08% |
| **Total** | $389885 | 6.11% | $1428076 | 4.07% | $990102 | 2.45% | $601585 | 2.20% |

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<sup>(1)</sup> Tax equivalent basis was calculated using a 21% tax rate and yields were based on amortized cost.

<sup>(2)</sup> Maturity represents estimated life of investment securities.

**LENDING PRACTICES**

First Financial remains dedicated to meeting the financial needs of individuals and businesses through its client-focused business model. The loan portfolio is comprised of a broad range of borrowers primarily located in the Ohio, Indiana and Kentucky markets; however, the commercial finance and leasing lines of business serve a national client base.

First Financial's loan portfolio consists of commercial loan types, including C&I, lease financing (equipment leasing), construction real estate and commercial real estate, as well as consumer loan types, such as residential real estate, home equity, installment and credit card loans. First Financial's lending portfolios are managed to avoid the creation of inappropriate industry, geographic, franchise concept or borrower concentration risk.

**Credit Management.** Subject to First Financial's credit policy and guidelines, credit underwriting and approval occur within the market and/or the centralized line of business originating the loan. First Financial has delegated a lending limit sufficient to address the majority of client requests in a timely manner to each market president and line of business manager. Loan requests for amounts greater than those limits require the approval of a designated credit officer or senior credit committee and may require additional approvals from the chief credit officer, the chief executive officer and the board of directors. This allows First Financial to manage the initial credit risk exposure through a standardized, strategic and disciplined approval process, but with an increasingly higher level of authority. Plans to purchase or sell a participation in a loan, or a group of loans, requires the approval of certain senior lending and administrative officers, and in some cases could include the board of directors.

Credit management practices are dependent on the type and nature of the loan. First Financial monitors all significant

**First Financial Bancorp** 2022 Annual Report **15**

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exposures on an ongoing basis. Commercial loans are assigned internal risk ratings reflecting the risk of loss inherent in the loan. These internal risk ratings are assigned upon initial approval of credit and are updated periodically thereafter. First Financial reviews and adjusts its risk ratings based on actual experience, which is the basis for determining an appropriate ACL. First Financial's commercial risk ratings of pass, special mention, substandard and doubtful are derived from standard regulatory rating definitions and facilitate the monitoring of credit quality across the commercial loan portfolio. For further information regarding these risk ratings, see Note 5 – Loans and Leases in the Notes to the Consolidated Financial Statements.

Commercial loans rated as special mention, substandard or doubtful are considered criticized, while loans rated as substandard or doubtful are considered classified. Commercial loans may be designated as criticized/classified based on individual borrower performance or industry and environmental factors. Criticized/classified loans are subject to more frequent internal reviews to assess the borrower's credit status and develop appropriate action plans.

Management considers classified loans to be the leading indicator of credit losses, and these loans are typically managed by the Special Assets Department. Special Assets is a commercial credit group whose primary focus is to handle the day-to-day management of commercial workouts, recoveries and problem loan resolutions. Special Assets ensures that First Financial has appropriate oversight, improved communication and timely resolution of issues throughout the loan portfolio. Additionally, the Credit Risk Management group within First Financial's Risk Management function provides independent, objective oversight and assessment of commercial credit quality and processes.

Consumer lending credit approvals are based on, among other factors, the financial strength and payment history of the borrower, type of exposure and the transaction structure. Consumer loans are generally smaller dollar amounts than other types of lending and are made to a large number of customers, providing diversification within the portfolio. Credit risk in the consumer loan portfolio is managed by loan type, and consumer loan asset quality indicators, including delinquency, are continuously monitored. The Credit Risk Management group performs product-level performance reviews and assesses credit quality and compliance with underwriting and loan administration guidelines across the consumer loan portfolio.

**LOANS AND LEASES** 

**2022 vs. 2021.** Loans, excluding loans held for sale, totaled $10.3 billion at December 31, 2022, increasing $1.0 billion, or 10.9%, compared to December 31, 2021.

C&I loans increased $690.2 million, or 25.4%, largely due to the Company's strong origination efforts over the course of 2022.

Installment loans increased $90.4 million, or 75.7%, during 2022 largely as a result of First Financial's partnership with a loan origination provider, which sourced $55.3 million of loans during the first half of the year before the Company began winding down the relationship. Finance lease balances increased $126.5 million, or 115.4%, due to added production from Summit Funding Group. Residential real estate loans increased $196.2 million, or 21.9%, as rising interest rates led to more adjustable rate and nonconforming jumbo mortgage originations, which the Company retains on its balance sheet. Construction real estate loans increased $56.2 million, or 12.3%, and home equity loans increased $25.4 million, or 3.6%. Partially offsetting these increases were declines in both commercial real estate loans and credit cards. Commercial real estate loans decreased $173.9 million, or 4.1%, and credit card balances decreased $0.4 million, or 0.8%. Average loan balances, including loans held for sale, were $9.6 billion for 2022, a decrease of $65.3 million, or 0.7%, compared to 2021, with the decline driven by outstanding PPP balances during 2021.

Table 9 – Loan Maturity/Rate Sensitivity indicates the contractual maturity of all loans outstanding at December 31, 2022 as well as their sensitivity to changes in interest rates.

For discussion of risks associated with the loan portfolio and First Financial's ACL, see the Asset Quality and Allowance for Credit Losses section included in Management's Discussion and Analysis.

**16 First Financial Bancorp** 2022 Annual Report

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Table 9 • Loan Maturity/Rate Sensitivity** | **Table 9 • Loan Maturity/Rate Sensitivity** | **Table 9 • Loan Maturity/Rate Sensitivity** | **Table 9 • Loan Maturity/Rate Sensitivity** | **Table 9 • Loan Maturity/Rate Sensitivity** | **Table 9 • Loan Maturity/Rate Sensitivity** |
|  | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
|  | Maturity | Maturity | Maturity | Maturity | Maturity |
|  |  | After one | After five |  |  |
|  | Within | but within | but within | After |  |
| *(Dollars in thousands)* | one year | five years | fifteen years | fifteen years | Total |
| Commercial & industrial | $729584 | $2180874 | $496432 | $3382 | $3410272 |
| Lease financing | 61323 | 162598 | 12203 | 0 | 236124 |
| Construction real estate | 118238 | 298146 | 21545 | 74121 | 512050 |
| Commercial real estate | 642374 | 2067009 | 1302999 | 40377 | 4052759 |
| Residential real estate | 36566 | 132320 | 361718 | 561661 | 1092265 |
| Home equity | 23202 | 113303 | 156575 | 440711 | 733791 |
| Installment | 81001 | 104582 | 22782 | 1530 | 209895 |
| Credit card | 0 | 0 | 0 | 51815 | 51815 |
| **Total** | $1692288 | $5058832 | $2374254 | $1173597 | $10298971 |
|  |  | After one | After five |  |  |
|  | Within | but within | but within | After |  |
| *(Dollars in thousands)* | one year | five years | fifteen years | fifteen years | Total |
| **Fixed rate** |  |  |  |  |  |
| &nbsp;&nbsp;Commercial & industrial | $132653 | $366693 | $115427 | $1227 | $616000 |
| &nbsp;&nbsp;Lease financing | 61323 | 162598 | 12203 | 0 | 236124 |
| &nbsp;&nbsp;Construction real estate | 1146 | 3087 | 3465 | 60188 | 67886 |
| &nbsp;&nbsp;Commercial real estate | 105672 | 265758 | 141125 | 4575 | 517130 |
| &nbsp;&nbsp;Residential real estate | 28712 | 97814 | 269707 | 438295 | 834528 |
| &nbsp;&nbsp;Home equity | 12236 | 47264 | 69235 | 26716 | 155451 |
| &nbsp;&nbsp;Installment | 73723 | 102662 | 22669 | 1467 | 200521 |
| &nbsp;&nbsp;Credit card | 0 | 0 | 0 | 439 | 439 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $415465 | $1045876 | $633831 | $532907 | $2628079 |
| **Variable rate** |  |  |  |  |  |
| &nbsp;&nbsp;Commercial & industrial | $596931 | $1814181 | $381005 | $2155 | $2794272 |
| &nbsp;&nbsp;Lease financing | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;Construction real estate | 117092 | 295059 | 18080 | 13933 | 444164 |
| &nbsp;&nbsp;Commercial real estate | 536702 | 1801251 | 1161874 | 35802 | 3535629 |
| &nbsp;&nbsp;Residential real estate | 7854 | 34506 | 92011 | 123366 | 257737 |
| &nbsp;&nbsp;Home equity | 10966 | 66039 | 87340 | 413995 | 578340 |
| &nbsp;&nbsp;Installment | 7278 | 1920 | 113 | 63 | 9374 |
| &nbsp;&nbsp;Credit card | 0 | 0 | 0 | 51376 | 51376 |
| &nbsp;&nbsp; **Total** | $1276823 | $4012956 | $1740423 | $640690 | $7670892 |

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**COMMITMENTS AND CONTINGENCIES**

Off-balance sheet arrangements include commitments to extend credit and financial guarantees. Loan commitments are agreements to extend credit to a client absent any violation of any condition established in the commitment agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

First Financial had commitments outstanding to extend credit totaling $4.4 billion and $4.0 billion at December 31, 2022 and 2021, respectively. This increase in commitments was driven by the Company's strong origination efforts during the year.

**First Financial Bancorp** 2022 Annual Report **17**

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As of December 31, 2022, loan commitments with variable interest rates totaled $4.2 billion, while commitments with a fixed interest rate totaled $126.3 million. At December 31, 2021, commitments with variable interest rates totaled $3.8 billion, while loan commitments with a fixed interest rate totaled $129.2 million. The fixed rate loan commitments have interest rates ranging from 0% to 21% for both December 31, 2022 and 2021 and have maturities ranging from less than 1 year to 31.6 years at December 31, 2022 and less than 1 year to 30.9 years at December 31, 2021.

Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party. First Financial's portfolio of letters of credit consists primarily of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services. First Financial issued letters of credit aggregating $31.5 million and $41.1 million at December 31, 2022, and 2021, respectively. Management conducts regular reviews of these instruments on an individual client basis.

First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amount of $379.3 million and $362.8 million at December 31, 2022 and 2021, respectively.

First Financial is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation or community revitalization projects. These investments are included in Accrued interest and other assets in the Consolidated Balance Sheets, with any unfunded commitments included in Accrued interest and other liabilities in the Consolidated Balance Sheets. As of December 31, 2022, First Financial expects to recover its remaining investments through the use of the tax credits that are generated by the investments. First Financial had unfunded commitments related to tax credit investments of $84.3 million and $72.5 million at December 31, 2022 and 2021, respectively.

In the ordinary course of business, First Financial and its subsidiaries are parties to litigation, including claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral, foreclosure interests that are incidental to our regular business activities and other matters. While the ultimate liability with respect to these litigation matters and claims cannot be determined at this time, First Financial believes that damages, if any, and other amounts relating to pending matters are not probable or cannot be reasonably estimated as of December 31, 2022. Reserves are established for these various matters of litigation, when appropriate, under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel. First Financial had no reserves related to litigation matters as of December 31, 2022 or December 31, 2021.

**ASSET QUALITY AND ALLOWANCE FOR CREDIT LOSSES**

Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful or when principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to a borrower's continued failure to adhere to contractual payment terms, coupled with other pertinent factors. When a loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued but unpaid interest is reversed.

Loans are classified as TDRs when borrowers are experiencing financial difficulties and concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. TDRs are generally classified as nonaccrual for a minimum period of six months and may qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement.

Nonperforming assets consist of nonaccrual loans, accruing TDRs (collectively, nonperforming loans) and OREO.

See Table 10 – Summary of the ACL and Selected Statistics for a summary of First Financial's nonaccrual loans, TDRs and OREO.

**2022 vs. 2021.** Nonaccrual loans were $28.6 million, or 28 bps of total loans as of December 31, 2022. This represents a $19.8 million, or 40.9%, decline from $48.4 million as of December 31, 2021. The decline in nonaccrual loans was largely the result of strong resolution efforts during the year, risk rating upgrades as borrower performance improved, as well as the sale of select loans. Total nonperforming assets declined $20.3 million, or 33.8%, to $39.8 million at December 31, 2022 from $60.1 million at December 31, 2021. The decline in nonperforming assets was driven by the decline in nonaccrual loans as well as a $0.7 million decline in accruing TDRs.

**18 First Financial Bancorp** 2022 Annual Report

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Classified asset balances increased $23.3 million, or 22.3%, to $128.1 million at December 31, 2022 from $104.8 million at December 31, 2021. The increase in classified asset balances during 2022 was primarily attributed to the downgrade of one large healthcare credit and one large specialty retail credit.

**Allowance for credit losses.** The ACL is a reserve accumulated on the Consolidated Balance Sheets through the recognition of the provision for loan and lease losses. First Financial records provision expense in the Consolidated Statements of Income to maintain the ACL at a level considered sufficient to absorb expected credit losses for financial assets in the portfolio over their expected remaining lives with consideration given to current and forward-looking information.

The recorded values of the loans and leases actually removed from the Consolidated Balance Sheets due to credit deterioration are referred to as charge-offs. First Financial's policy is to charge-off all or a portion of a loan when, in management's opinion, it is unlikely to collect the principal amount owed in full either through payments from the borrower or from the liquidation of collateral. All loans charged-off are subject to continuous review and concerted efforts are made to maximize any recovery. In most cases, the borrower's debt obligation is not canceled even though the balance may have been charged-off. Actual losses on loans and leases are charged against the ACL. Any subsequent recovery of a previously charged-off loan is credited back to the ACL.

Management estimates the allowance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions not already considered therein. These adjustments are commonly known as the Qualitative Framework. The evaluation of these factors is the responsibility of the ACL committee, which is comprised of senior officers from the risk management, credit administration, finance and lending areas.

See Table 10 – Summary of the ACL and Selected Statistics for a summary of activity impacting the ACL and Table 11 – Allocation of the ACL for detail on its composition.

**2022 vs. 2021.** The total ACL, which includes both funded and unfunded reserves, was $151.4 million at December 31, 2022, which combined with 6 bps of net charge-offs to result in $11.7 million in total provision expense for the year. This compared to a total allowance of $145.4 million as of December 31, 2021 and $18.1 million of provision recapture in 2021.

The Company utilized the Moody's December baseline forecast as its R&S forecast in the quantitative model at December 31, 2022. For reasonableness, the Company also considered the impact to the model from alternative, more adverse economic forecasts, slower prepayment speeds and increased default rates. These alternative analyses were utilized to inform the Company's qualitative adjustments. Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future credit stress, such as franchise, hotel and investor commercial real estate lending, when making qualitative adjustments to the ACL model.

**ACL - Loans and Leases**. The ACL on loans and leases at December 31, 2022 was $133.0 million, or 1.29% of total loans, which was a $1.0 million, or 0.7%, increase from $132.0 million, and 1.42% of loans at December 31, 2021. Provision expense increased $25.8 million, or 135.4%, to $6.7 million in 2022 from $19.0 million of provision recapture in 2021. Modest ACL growth and the related increase in provision expense in 2022 was driven by strong loan growth, slower prepayments speeds and stable credit quality during the period. Provision recapture in 2021 was driven by improvements in credit quality and economic outlook following peak pandemic uncertainty in 2020.

Net charge-offs decreased $18.9 million, or 76.7%, to $5.7 million for 2022 compared to $24.7 million for 2021, while the ratio of net charge-offs as a percentage of average loans outstanding decreased to 6 bps in 2022 from 26 bps in 2021. This decline in net charge-offs reflected stable credit quality and the Company's focused resolution efforts over the course of the year. Additionally, $9.2 million of net charge-offs incurred in 2021 were the result of the sale of $133.8 million of hotel loans, which was executed to address various portfolio concentrations.

The ACL as a percentage of nonaccrual loans was 464.6% at December 31, 2022 and 272.8% at December 31, 2021. The increase in this ratio was attributed to the decline in nonaccrual loans during the period coupled with the slight increase in the ACL. The ACL as a percentage of nonperforming loans including accruing TDRs was 335.9% at December 31, 2022 compared to 220.0% at December 31, 2021.

**First Financial Bancorp** 2022 Annual Report **19**

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

Provision expense is a product of the Company's ACL model combined with net charge-off activity during the period. Provision expense increased $25.8 million during 2022 as the Company recorded $6.7 million of provision expense during the period compared to $19.0 million of provision recapture in 2021.

**ACL - Unfunded Commitments**. The ACL on unfunded commitments was $18.4 million as of December 31, 2022 and $13.4 million as of December 31, 2021. First Financial recorded $5.0 million of provision expense on unfunded commitments for the year ended December 31, 2022 compared to $0.9 million for the same period of 2021. The increases in both the ACL and provision expense on unfunded commitments were driven by an increase in the volume of outstanding commitments due to strong origination efforts during 2022 as well as a decline in commercial prepayments, which resulted in a longer duration for the unfunded commitment portfolio.

For further discussion of First Financial's ACL, see Note 6 – Allowance for Credit Losses in the Notes to Consolidated Financial Statements.

**20 First Financial Bancorp** 2022 Annual Report

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Table 10 • Summary of the ACL and Selected Statistics** | **Table 10 • Summary of the ACL and Selected Statistics** | **Table 10 • Summary of the ACL and Selected Statistics** | **Table 10 • Summary of the ACL and Selected Statistics** | **Table 10 • Summary of the ACL and Selected Statistics** | **Table 10 • Summary of the ACL and Selected Statistics** |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 | 2019 | 2018 |
| Transactions in the allowance for credit losses: |  |  |  |  |  |
| Balance at January 1 | $131992 | $175679 | $57650 | $56542 | $54021 |
| &nbsp;&nbsp;Day one adoption impact of ASC 326 | 0 | 0 | 61505 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchase accounting ACL for PCD | 0 | 17 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 6731 | (19024) | 70796 | 30598 | 14586 |
| Loans charged-off: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial & industrial | 5899 | 15620 | 5345 | 26676 | 11533 |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease financing | 152 | 0 | 852 | 162 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Construction real estate | 0 | 1498 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial real estate | 3667 | 13471 | 12100 | 3689 | 4835 |
| &nbsp;&nbsp;&nbsp;&nbsp;Real estate-residential | 224 | 127 | 488 | 677 | 422 |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity | 160 | 1073 | 1541 | 2591 | 1725 |
| &nbsp;&nbsp;&nbsp;&nbsp;Installment | 1549 | 334 | 148 | 223 | 435 |
| &nbsp;&nbsp;&nbsp;&nbsp;Credit card | 907 | 780 | 885 | 1547 | 1720 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total loans charged-off | 12558 | 32903 | 21359 | 35565 | 20670 |
| Recoveries of loans previously charged-off: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial & industrial | 939 | 1612 | 2907 | 2883 | 2066 |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease financing | 49 | 0 | 0 | 0 | 1 |
| &nbsp;&nbsp;&nbsp;Construction real estate | 0 | 3 | 17 | 68 | 146 |
| &nbsp;&nbsp;&nbsp;Commercial real estate | 4304 | 4785 | 2262 | 1113 | 4106 |
| &nbsp;&nbsp;&nbsp;Real estate-residential | 174 | 228 | 381 | 273 | 211 |
| &nbsp;&nbsp;&nbsp;Home equity | 898 | 1223 | 1132 | 1335 | 1309 |
| &nbsp;&nbsp;&nbsp;Installment | 165 | 151 | 158 | 251 | 575 |
| &nbsp;&nbsp;&nbsp;Credit card | 283 | 221 | 230 | 152 | 191 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total recoveries | 6812 | 8223 | 7087 | 6075 | 8605 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net charge-offs | 5746 | 24680 | 14272 | 29490 | 12065 |
| **&nbsp;&nbsp;&nbsp;&nbsp; Balance at December 31** | $132977 | $131992 | $175679 | $57650 | $56542 |
| **Net charge-offs to average loans and leases** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial & industrial | 0.17% | 0.50% | 0.08% | 0.95% | 0.38% |
| &nbsp;&nbsp;&nbsp;Lease financing | 0.07% | 0.00% | 1.07% | 0.17% | 0.00% |
| &nbsp;&nbsp;&nbsp;Construction real estate | 0.00% | 0.26% | 0.00% | (0.01)% | (0.03)% |
| &nbsp;&nbsp;&nbsp;Commercial real estate | (0.02)% | 0.20% | 0.23% | 0.07% | 0.02% |
| &nbsp;&nbsp;&nbsp;Real estate-residential | 0.01% | (0.01)% | 0.01% | 0.04% | 0.03% |
| &nbsp;&nbsp;&nbsp;Home equity | (0.10)% | (0.02)% | 0.05% | 0.16% | 0.06% |
| &nbsp;&nbsp;&nbsp;Installment | 0.87% | 0.20% | (0.01)% | (0.03)% | (0.15)% |
| &nbsp;&nbsp;&nbsp;Credit card | 1.14% | 1.13% | 1.39% | 2.81% | 3.19% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total net charge-offs** | 0.06% | 0.26% | 0.14% | 0.33% | 0.15% |
| **Nonperforming assets** |  |  |  |  |  |
| Nonaccrual loans <sup>(2)</sup> | $28623 | $48392 | $80752 | $48165 | $70700 |
| Accruing troubled debt restructurings  | 10960 | 11616 | 7099 | 11435 | 16109 |
| &nbsp;&nbsp;**Total nonperforming loans** | 39583 | 60008 | 87851 | 59600 | 86809 |
| Other real estate owned (OREO) | 191 | 98 | 1287 | 2033 | 1401 |
| &nbsp;&nbsp;**Total nonperforming assets** | 39774 | 60106 | 89138 | 61633 | 88210 |
| Accruing loans past due 90 days or more | 857 | 137 | 169 | 201 | 63 |
| &nbsp;&nbsp;**Total underperforming assets** | $40631 | $60243 | $89307 | $61834 | $88273 |
| Total classified assets | $128137 | $104815 | $142021 | $89250 | $131668 |
| **Credit quality ratios:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;As a percent of year-end loans, net of unearned income: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Allowance for credit losses | 1.29% | 1.42% | 1.77% | 0.63% | 0.64% |
| &nbsp;&nbsp;&nbsp;&nbsp; Nonaccrual loans | 0.28% | 0.52% | 0.82% | 0.52% | 0.80% |
| &nbsp;&nbsp;&nbsp;&nbsp; Nonperforming loans <sup>(1)</sup> | 0.38% | 0.65% | 0.89% | 0.65% | 0.98% |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses to nonaccrual loans | 464.58% | 272.76% | 217.55% | 119.69% | 79.97% |
| &nbsp;&nbsp;&nbsp;&nbsp;Allowance for credit losses to nonperforming loans | 335.94% | 219.96% | 199.97% | 96.73% | 65.13% |

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(1) Includes loans classified as nonaccrual and troubled debt restructurings.

(2) Nonaccrual loans include nonaccrual TDRs of $10.0 million, $16.0 million, $14.7 million, $18.5 million, and $22.4 million, as of December 31, 2022, 2021, 2020, 2019, and 2018, respectively.

**First Financial Bancorp** 2022 Annual Report **21**

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

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** | **Table 11 • Allocation of the ACL** |
|  | December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | December 31, |
|  | 2022 | 2022 | 2021 | 2021 | 2020 | 2020 | 2019 | 2019 | 2018 | 2018 |
| *(Dollars in thousands)* | Allowance | Percent of Loans to Total Loans | Allowance | Percent of Loans to Total Loans | Allowance | Percent of Loans to Total Loans | Allowance | Percent of Loans to Total Loans | Allowance | Percent of Loans to Total Loans |
| Balance at End of Period Applicable to: |  |  |  |  |  |  |  |  |  |  |
| Commercial and industrial | $42313 | 33.1% | $44052 | 29.3% | $51454 | 30.4% | $18584 | 32.6% | $18746 | 28.5% |
| Lease financing | 3571 | 2.3% | 1633 | 1.2% | 995 | 0.8% | 971 | 0.8% | 1130 | 1.1% |
| Real estate – construction | 13527 | 5.0% | 11874 | 4.9% | 21736 | 6.4% | 2381 | 5.0% | 3413 | 6.2% |
| Real estate – commercial | 41106 | 39.3% | 53420 | 45.5% | 76795 | 43.5% | 23579 | 42.6% | 21048 | 42.5% |
| Real estate – residential | 12684 | 10.6% | 6225 | 9.6% | 8560 | 10.1% | 5299 | 10.3% | 4964 | 10.8% |
| Installment, home equity & credit card | 19776 | 9.7% | 14788 | 9.5% | 16139 | 8.8% | 6836 | 8.7% | 7241 | 10.9% |
| **Total** | $132977 | 100.0% | $131992 | 100.0% | $175679 | 100.0% | $57650 | 100.0% | $56542 | 100.0% |

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**DERIVATIVES**

First Financial is authorized to use certain derivative instruments including interest rate caps, floors, swaps and foreign exchange contracts to meet the needs of its clients while managing interest rate risk associated with certain transactions. The Company does not use derivatives for speculative purposes.

First Financial primarily utilizes interest rate swaps, which generally involve the receipt by First Financial of floating rate amounts from swap counterparties in exchange for payments to these counterparties by First Financial of fixed rate amounts received from borrowers. This results in the Company's loan customers receiving fixed rate funding while providing First Financial with a floating rate asset.

In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation agreements with counterparties whereby First Financial assumes a portion of the credit exposure associated with an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make payments to the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with the counterparty.

First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans to third party investors, which are considered derivatives. When borrowers secure an IRLC with First Financial and the loan is intended to be sold, First Financial will enter into forward commitments for the future delivery of the loans to third party investors in order to hedge against the effect of changes in interest rates impacting IRLCs and loans held for sale.

First Financial may enter into foreign exchange derivative contracts for the benefit of commercial customers to hedge their exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from interest rate derivative contracts, First Financial also enters into foreign exchange contracts with major financial institutions to economically hedge the exposure from client driven foreign exchange activity. The Company has risk limits and internal controls in place to help ensure excessive risk is not being taken in providing this service to customers.

See Note 13 – Derivatives in the Notes to Consolidated Financial Statements for additional information regarding First Financial's use of derivative instruments.

**DEPOSITS**

First Financial solicits deposits by offering commercial and consumer clients a wide variety of transaction and savings accounts, including checking, savings, money-market and time deposits of various maturities and rates.

**2022 vs. 2021.** First Financial's total deposits decreased $170.8 million, or 1.3%, to $12.7 billion as of December 31, 2022 from $12.9 billion at December 31, 2021. This decline was driven by a decrease in savings deposits of $329.2 million, or 7.9%, a decrease in interest-bearing checking deposits of $161.6 million, or 5.1%, and a decrease in noninterest bearing deposits of $50.4 million, or 1.2%. These changes were partially offset by a $370.4 million, or 27.8%, increase in time deposits. Total non-time deposit balances were $11.0 billion as of December 31, 2022 and $11.5 billion as of December 31, 2021. The decline in deposits was driven by rising interest rates and the corresponding competitive pressures.

**22 First Financial Bancorp** 2022 Annual Report

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Total average deposits for 2022 decreased $80.1 million, or 0.6%, from 2021 primarily due to a decrease in average time deposits of $426.2 million, or 26.6%, and a decrease in average savings deposits $15.8 million, or 0.4%, partially offset by

an increase in average noninterest bearing deposits of $191.7 million, or 4.8%, and an increase in average interest-bearing demand deposits of $170.2 million, or 5.7%. The decline in time deposits was largely attributed to a $292.1 million decrease in average brokered deposits as the Company shifted to short term borrowings to satisfy its funding needs.

Table 12 – Uninsured Deposits-Maturities of Time Deposits Greater Than or Equal to $250,000 details the contractual maturity of deposits that are not FDIC insured. Time Deposits Greater Than or Equal to $250,000 represented 1.3% of total deposits outstanding at December 31, 2022 and 1.5% at December 31, 2021.

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| | | | |
|:---|:---|:---|:---|
| **Table 12 • Uninsured Deposits-Maturities of Time Deposits Greater than or Equal to $250,000** | **Table 12 • Uninsured Deposits-Maturities of Time Deposits Greater than or Equal to $250,000** | **Table 12 • Uninsured Deposits-Maturities of Time Deposits Greater than or Equal to $250,000** | **Table 12 • Uninsured Deposits-Maturities of Time Deposits Greater than or Equal to $250,000** |
| *(Dollars in thousands)* | CDs | IRAs | Total |
| **December 31, 2022** |  |  |  |
| &nbsp;&nbsp;Maturing in |  |  |  |
| &nbsp;&nbsp; 3 months or less | $38264 | $1382 | $39646 |
| &nbsp;&nbsp; 3 months to 6 months | 21380 | 610 | 21990 |
| &nbsp;&nbsp; 6 months to 12 months | 46710 | 2385 | 49095 |
| &nbsp;&nbsp; over 12 months | 49806 | 4602 | 54408 |
| &nbsp;&nbsp;**&nbsp;&nbsp;&nbsp;&nbsp; Total** | $156160 | $8979 | $165139 |
| **December 31, 2021** |  |  |  |
| &nbsp;&nbsp;Maturing in |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;3 months or less | 37198 | 2274 | $39472 |
| &nbsp;&nbsp;&nbsp;&nbsp;3 months to 6 months | 46053 | 1215 | 47268 |
| &nbsp;&nbsp;&nbsp;&nbsp;6 months to 12 months | 51377 | 4571 | 55948 |
| &nbsp;&nbsp;&nbsp;&nbsp;over 12 months | 49945 | 2993 | 52938 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $184573 | $11053 | $195626 |

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**BORROWINGS**

First Financial's short-term borrowings are utilized to manage the Company's normal liquidity needs. These borrowings include repurchase agreements utilized for corporate sweep accounts with cash management account agreements in place, as well as overnight advances from the FHLB. The Company's long-term borrowings consist of subordinated debt, FRB borrowings, FHLB long-term advances, repurchase agreements utilizing investment securities pledged as collateral and a capital loan from a municipality.

**2022 vs. 2021.** First Financial utilizes both short-term borrowings and long-term advances from the FHLB as wholesale funding sources. Borrowed funds were $1.6 billion as of December 31, 2022 compared to $706.0 million as of December 31, 2021. Borrowings increased during the period largely as a result of the Company utilizing short term advances in lieu of brokered CDs to satisfy its funding needs.

Short-term borrowings increased $991.0 million, or 334.6%, to $1.3 billion at December 31, 2022, from $296.2 million at December 31, 2021. First Financial had $1.1 billion of short-term borrowings from the FHLB at December 31, 2022 compared to $225.0 million at December 31, 2021. These short-term borrowings provided the required liquidity for funding the Company's loan growth. Short-term borrowings included no repurchase agreements as of December 31, 2022 compared to $51.2 million at December 31, 2021. The Company had no federal funds purchased as of December 31, 2022 or 2021.

Total long-term debt was $346.7 million and $409.8 million at December 31, 2022 and 2021, respectively. Outstanding subordinated debt totaled $313.7 million and $313.2 million as of December 31, 2022 and 2021, respectively. The subordinated debt is treated as Tier 2 capital for regulatory capital purposes and also included unamortized valuation and debt issuance costs of $7.8 million and $8.6 million as of December 31, 2022 and 2021, respectively.

In conjunction with the acquisition of Summit, First Financial assumed $96.4 million in outstanding long-term borrowings at December 31, 2021. These acquired long-term borrowings included $23.0 million of lines of credit with other banks utilized to

**First Financial Bancorp** 2022 Annual Report **23**

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

operate the business and carried an average interest rate of 2.77%. These lines of credit were paid off in January 2022. Acquired long term borrowings also included term notes, both with and without recourse. These term notes had outstanding balances of $32.5 million and $73.4 million with average interest rates of 4.44% and 4.09% at December 31, 2022 and 2021, respectively. These term notes were used to finance Summit's equity investment in the purchase of equipment to be leased to customers.

The Company had no FHLB long-term advances as of December 31, 2022 or 2021. First Financial's total remaining borrowing capacity from the FHLB was $347.4 million at December 31, 2022. For ease of borrowing execution, First Financial utilizes a blanket collateral agreement with the FHLB. First Financial pledged $6.0 billion of certain eligible residential, commercial and agricultural real estate loans, home equity lines of credit and certain agency CMOs, municipals and CMBS securities as collateral for borrowings from the FHLB as of December 31, 2022.

See Note 12 – Borrowings in the Notes to Consolidated Financial Statements for additional information on First Financial's borrowings.

**LIQUIDITY**

Liquidity management is the process by which First Financial manages the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost. These funding commitments include withdrawals by depositors, credit commitments to borrowers, shareholder dividends, share repurchases, operating expenses and capital expenditures. Liquidity is derived primarily from deposit growth, principal and interest payments on loans and investment securities, maturing loans and investment securities and access to wholesale funding sources.

First Financial's most stable source of liability-funded liquidity for both long and short-term needs is deposit growth and retention of the core deposit base. In addition to core deposit funding, First Financial also utilizes a variety of other short and long-term funding sources, which include subordinated notes, longer-term advances from the FRB and FHLB and its short-term line of credit. For further information regarding the company's liability-funded liquidity, see Note 11 - Deposits and Note 12 - Borrowings.

First Financial has a $40.0 million short-term credit facility with an unaffiliated bank that matures in December 2023. This facility has a variable interest rate and provides First Financial additional liquidity, if needed, for various corporate activities including the repurchase of First Financial common stock and the payment of dividends to shareholders. As of December 31, 2022, First Financial had no outstanding balance and at December 31, 2021, First Financial had an outstanding balance of $20.0 million on this short-term credit facility. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality and capital levels, and First Financial was in compliance with all covenants associated with this facility as of December 31, 2022.

Both First Financial and the Bank received investment grade credit ratings from Kroll Bond Rating Agency, Inc., an independent rating agency. These credit ratings impact the cost and availability of financing to First Financial, and a downgrade to these credit ratings could affect First Financial's or the Bank's abilities to access the credit markets and potentially increase borrowing costs, negatively impacting financial condition and liquidity. Key factors in maintaining high credit ratings include consistent and diverse earnings, strong credit quality and capital ratios, diverse funding sources and disciplined liquidity monitoring procedures. The ratings of First Financial and the Bank at December 31, 2022 were as follows:

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| | | |
|:---|:---|:---|
| **Table 13 • Credit Ratings** | **Table 13 • Credit Ratings** | **Table 13 • Credit Ratings** |
| | First Financial Bancorp | First Financial Bank |
| Senior Unsecured Debt | BBB+ | A- |
| Subordinated Debt | BBB | BBB+ |
| Short-Term Debt | K2 | K2 |
| Deposit | N/A | A- |
| Short-Term Deposit | N/A | K2 |

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For ease of borrowing execution, First Financial utilizes a blanket collateral agreement with the FHLB. First Financial pledged $6.0 billion of certain eligible residential, commercial and farm real estate loans, home equity lines of credit and government, agency and CMBS investments as collateral for borrowings from the FHLB as of December 31, 2022.

**24 First Financial Bancorp** 2022 Annual Report

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First Financial's principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. The market value of investment securities classified as AFS totaled $3.4 billion and $4.2 billion at December 31, 2022 and 2021, respectively. As of December 31, 2022, $1.9 billion of AFS securities were unpledged and there were $371.4 million of securities available to be sold at breakeven.

HTM securities that are maturing within a short period of time can be an additional source of liquidity. As of December 31, 2022 and 2021, the Company had no HTM securities maturing within one year.

In total, First Financial expects $814.2 million of cash flows from its investment portfolio in the next 12 months.

Other sources of liquidity include cash and due from banks and interest-bearing deposits with other banks. At December 31, 2022, these balances totaled $595.7 million, and First Financial had unused and available overnight wholesale funding sources of $3.7 billion, or 22.0% of total assets, to fund loan and deposit activities in addition to general corporate requirements.

Certain restrictions exist regarding the Bank's ability to transfer funds to First Financial in the form of cash dividends, loans, other assets or advances and the approval of the Bank's primary federal regulator is required to pay dividends in excess of regulatory limitations. Dividends paid to First Financial from the Bank totaled $170.0 million, $200.0 million and $80.0 million for 2022, 2021 and 2020, respectively. As of December 31, 2022, the Bank had retained earnings of $794.6 million, of which $219.3 million was available for distribution to First Financial without prior regulatory approval. As an additional source of liquidity, First Financial had $91.0 million in cash at the parent company as of December 31, 2022.

Share repurchases also impact First Financial's liquidity. For further information regarding share repurchases, see the Capital section that follows.

Capital expenditures were $13.8 million for 2022, $15.3 million for 2021 and $16.5 million for 2020. Material commitments for capital expenditures as of December 31, 2022, were $31.6 million. Management believes that sufficient liquidity exists to fund its future capital expenditure commitments.

Management is not aware of any other trends, events or regulatory requirements that, if implemented, are likely to have a material effect on First Financial's liquidity.

**CAPITAL**

**Risk-Based Capital.** First Financial and its subsidiary, First Financial Bank, are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory guidelines. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate regulatory action.

The Board of Governors of the Federal Reserve System approved Basel III in order to strengthen the regulatory capital framework for all banking organizations, subject to a phase-in period for certain provisions. Basel III established and defined quantitative measures to ensure capital adequacy. These measures require First Financial to maintain minimum amounts and ratios of Common equity Tier 1 capital, Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets (Leverage ratio).

Basel III includes a minimum ratio of Common equity Tier 1 capital to risk-weighted assets of 7.0% and includes a fully phased-in capital conservation buffer of 2.5% of risk-weighted assets. Further, the minimum ratio of Tier 1 capital to risk-weighted assets is 8.5% and all banks are subject to a 4.0% minimum leverage ratio, while the minimum required Total risk-based capital ratio is 10.5%. Failure to maintain the required Common equity Tier 1 capital will result in potential restrictions on a bank's ability to pay dividends, repurchase stock and pay discretionary compensation to its employees. The capital requirements also provide strict eligibility criteria for regulatory capital instruments and change the method for calculating risk-weighted assets in an effort to better identify riskier assets, such as highly volatile commercial real estate and nonaccrual loans.

First Financial's Tier 1 capital remained relatively stable at 11.17% at December 31, 2022 compared to 11.22% at December 31, 2021, while the total capital ratio decreased to 13.64% from 14.11% during the same period. The leverage ratio increased to 8.89% at December 31, 2022, compared to 8.70% at December 31, 2021, while the Company's tangible common equity ratio decreased to 5.95% at December 31, 2022 from 7.58% at December 31, 2021. The decline in the tangible common equity ratio

**First Financial Bancorp** 2022 Annual Report **25**

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

was primarily driven by the decline in accumulated other comprehensive income during the period, which was due to unrealized losses in the investment portfolio as a result of rising interest rates.

As of December 31, 2022, First Financial met all capital adequacy requirements to which it was subject. At December 31, 2022 and 2021, regulatory notifications categorized First Financial Bank as well-capitalized under the regulatory framework for prompt corrective action. There have been no conditions or events that management believes has changed the Company's capital categorization.

For further detail on First Financial's capital ratios at December 31, 2022, see Note 20 – Capital in the Notes to Consolidated Financial Statements.

---

| | | |
|:---|:---|:---|
| **Table 14 • Capital Adequacy** | **Table 14 • Capital Adequacy** | |
|  | December 31, | December 31, |
| *(Dollars in thousands)* | 2022 | 2021 |
| **Consolidated capital calculations** | **Consolidated capital calculations** |  |
| Common stock | $1634605 | $1640358 |
| Retained earnings | 968237 | 837473 |
| Accumulated other comprehensive loss | (358663) | (433) |
| Treasury stock, at cost | (202806) | (218456) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total shareholders' equity** | 2041373 | 2258942 |
| Common equity tier 1 capital adjustments |  |  |
| &nbsp;&nbsp;&nbsp;Goodwill and other intangibles | (1095426) | (1105116) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total tangible equity** | $945947 | $1153826 |
| Total assets | $17003316 | $16329141 |
| Goodwill and other intangibles | (1095426) | (1105116) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total tangible assets** | $15907890 | $15224025 |
| **Common tier 1 capital** | $1399420 | $1262789 |
| **Tier 1 capital** | 1443698 | 1306571 |
| **Total capital** | 1762971 | 1642549 |
| **Total risk-weighted assets** | 12923233 | 11642201 |
| **Average assets** <sup>(1)</sup> | 16240905 | 15010256 |
| **Regulatory capital** |  |  |
| Common tier 1 ratio | 10.83% | 10.85% |
| Tier 1 ratio | 11.17% | 11.22% |
| Total capital ratio | 13.64% | 14.11% |
| Leverage ratio | 8.89% | 8.70% |
| **Other capital ratios** |  |  |
| Total shareholders' equity to ending assets | 12.01% | 13.83% |
| Total tangible shareholders' equity to ending tangible assets | 5.95% | 7.58% |
| Total tangible shareholders' equity to risk-weighted assets | 7.32% | 9.91% |
| <sup>(1)</sup> For purposes of calculating the Leverage ratio, certain intangible assets are excluded from average assets. | <sup>(1)</sup> For purposes of calculating the Leverage ratio, certain intangible assets are excluded from average assets. | <sup>(1)</sup> For purposes of calculating the Leverage ratio, certain intangible assets are excluded from average assets. |

---

First Financial generally seeks to balance the return of earnings to shareholders through shareholder dividends and share repurchases with capital retention in order to maintain adequate levels of capital and support the Company's growth plans.

**Shareholder Dividends.** First Financial's dividend payout ratio, or total dividends paid divided by net income available to common shareholders, was 39.5%, 42.6% and 57.5% for the years 2022, 2021 and 2020, respectively. The dividend payout ratio is continually reviewed by management and the board of directors for consistency with First Financial's overall capital

**26 First Financial Bancorp** 2022 Annual Report

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planning activities and compliance with applicable regulatory limitations. In January 2023, the board of directors authorized a dividend of $0.23 per common share, payable on March 15, 2023 to all shareholders of record as of March 1, 2023.

**Share Repurchases.** Effective January 2022, First Financial's board of directors approved a stock repurchase plan (the 2022 Repurchase Plan), replacing the 2020 Repurchase Plan which became effective in January 2021. The 2022 Repurchase Plan continues for two years and authorizes the purchase of up to 5,000,000 shares of the Company's common stock and will expire in December 2023. First Financial did not purchase any shares under the 2022 Repurchase Plan during 2022.

The 2020 Repurchase Plan replaced the plan that expired on December 31, 2020 (the 2019 Repurchase Plan). Under the 2020 Repurchase Plan, First Financial repurchased 4,633,355 shares at an average market price of $23.33 during 2021.

**Shareholders' Equity.** Total shareholders' equity at December 31, 2022 and December 31, 2021 was $2.0 billion and $2.3 billion, respectively. The decline in total equity compared to the prior year was due to $358.2 million decline in accumulated other comprehensive income during the period, which was driven by higher unrealized losses in the investment portfolio as a result of rising interest rates. This decline more than offset an increase in retained earnings during the year, which was the result of the Company's strong earnings.

For further detail, see the Consolidated Statements of Changes in Shareholders' Equity.

**PENSION PLAN**

First Financial sponsors a non-contributory defined-benefit pension plan covering substantially all employees. The significant assumptions used in the valuation and accounting for the pension plan include the discount rate, expected return on plan assets and the rate of employee compensation increase. The discount rate assumption was determined based on highly rated corporate bonds, weighted to adjust for their relative size, projected plan cash flows using the annuity substitution method as well as comparisons to external industry surveys. The expected return on plan assets was 7.25% for both 2022 and 2021, and was based on the composition of plan assets, actual returns, economic forecasts and economic trends. The assumed rate of compensation increase was 3.50% and was compared to historical increases for plan participants for reasonableness.

Presented below is the estimated impact on First Financial's projected benefit obligation and pension expense as of December 31, 2022, assuming shifts in the significant assumptions:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Table 15 • Rate Change Impact on Pension Parameters** | **Table 15 • Rate Change Impact on Pension Parameters** | **Table 15 • Rate Change Impact on Pension Parameters** | **Table 15 • Rate Change Impact on Pension Parameters** | **Table 15 • Rate Change Impact on Pension Parameters** | | |
|  | Discount rate | Discount rate | Expected return on<br>plan assets | Expected return on<br>plan assets | Rate of compensation increase | Rate of compensation increase |
| *(Dollars in thousands)* | -100 BP | +100 BP | -100 BP | +100 BP | -100 BP | +100 BP |
| Change in Projected Benefit Obligation | $3465 | $(2654) | N/A | N/A | $(377) | $774 |
| Change in Pension Expense | 128 | 165 | $1515 | $(1515) | (296) | 540 |

---

Based upon the plan's current funding status and updated actuarial projections for 2022, First Financial recorded expense related to its pension plan of $2.0 million for 2022, $3.4 million for 2021 and $2.5 million for 2020 in the Consolidated Statements of Income. First Financial will make contributions to the plan if plan assets do not meet or exceed ERISA's minimum funding standards. Given the plan's over-funded status, First Financial made no cash contributions to fund the pension plan in 2022, 2021 or 2020 nor does it expect to make a cash contribution in 2023.

See Note 17 – Employee Benefit Plans in the Notes to Consolidated Financial Statements for additional information on First Financial's pension plan.

**First Financial Bancorp** 2022 Annual Report **27**

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

**ENTERPRISE RISK MANAGEMENT** 

First Financial considers risk to be any issue that could have an adverse impact on the Company's capital or earnings, or negatively impact the Company's ability to meet its objectives. First Financial manages risks through a structured ERM approach that routinely assesses the overall level of risk, identifies specific risks and evaluates the steps being taken to mitigate those risks. First Financial continues to enhance its risk management capabilities and has, over time, embedded risk awareness into the Company's culture. ERM allows First Financial to align a variety of risk management activities within the Company into a cohesive, enterprise-wide approach and focus on process-level risk management activities and strategic objectives within the risk management culture. Additionally, ERM allows the Company to deliberately develop risk responses and evaluate the effectiveness of mitigation compared to established thresholds for risk appetite and tolerance, in addition to facilitating the consideration of significant organizational changes and consolidation of information through a common process for management and the board of directors.

First Financial has identified nine types of risk that it monitors in its ERM framework. These risks include credit, market (composed of interest rate, liquidity, capital, foreign exchange and financial risk), operational, compliance, strategic, reputation, information technology, cybersecurity and legal.

First Financial uses a robust regulatory risk framework as one of the foundational components of its ERM framework. This allows for a common categorization across the Company and provides a consistent and complete risk framework that can be summarized and assessed enterprise-wide. Additionally, the risk framework utilized is consistent with that used by the Company's regulators, which results in additional feedback on First Financial's ability to assess and measure risk across the organization as well as the ability for management and the board of directors to identify and understand differences in assessed risk profiles.

ERM helps ensure that First Financial continues to identify and adequately address risks that emerge from a combination of new customers, products and associates, changing markets, new lines of business and processes and new or evolving systems.

The goals of First Financial's ERM framework are to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• focus on the Company at both the enterprise and line of business levels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• align the Company's risk appetite with its strategic, operational, compliance and reporting objectives;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• enhance risk response decisions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reduce operational deficiencies and possible losses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• identify and manage interrelated risks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provide integrated responses to multiple risks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• improve the deployment and allocation of capital; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• improve overall business performance.

Specific enterprise-level objectives include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• creating a holistic view of risk in which risk is comprehensively considered, consistently communicated and documented in decision making;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• centralizing the oversight of risk management activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• defining the risks that will be addressed by the enterprise and each functional area or business unit to create an awareness of risks affecting the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• establishing and maintaining systems and mechanisms to identify, assess, monitor and measure risks that may impact First Financial's ability to achieve its business objectives;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• creating a process which ensures that, for all new lines of business and new product decisions, management evaluates the expertise needed and assesses the risks involved;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• establishing and maintaining systems and mechanisms to monitor risk responses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• developing risk occurrence information systems to provide early warning of events or situations that create risk for the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• maintaining a compliance culture and framework that ensures adherence to laws, rules and regulations, fair treatment and privacy of customers and prevention of money laundering and terrorist financing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• implementing and reviewing risk measurement techniques that management may use to establish the Company's risk tolerance, assess risk likelihood and impact, main effective controls and analyze risk and control monitoring processes; and

**28 First Financial Bancorp** 2022 Annual Report

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• establishing appropriate management reporting systems regarding the enterprise-wide risk exposures and allocation of capital.

Line of business-level objectives focus on why and where the particular business or business unit risk exists; how the business unit's management of its risks affects the Company's strategy, earnings, reputation and other key success factors; whether the line of business objectives are aligned with enterprise objectives, how effective internal procedures are integral to successful

business operations , and whether internal controls and their maintenance are reliable.

**Board of Directors and Board Risk & Compliance Committees.** First Financial's board of directors is responsible for understanding the Company's compliance and risk management objectives and risk tolerance, and as such, board oversight of the Company's compliance and risk management activities is a key component to an effective risk management process. The Board's oversight responsibilities include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• establishing and guiding the Company's strategic direction and tolerance for risk, including the determination of the aggregate risk appetite and identifying the senior managers who have the responsibility for managing risk;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• monitoring the Company's performance and overall risk profile, ensuring that the level of risk is maintained at prudent levels and is supported by adequate capital;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ensuring that the Company implements sound fundamental principles that facilitate the identification, measurement, monitoring and control of risk;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• ensuring that adequate resources are dedicated to compliance and risk management; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• confirming that awareness of risk management activities is evident throughout the organization.

The board of directors has defined broad risk tolerance levels, or limits, to guide management in the decision-making process, and is responsible for establishing information and communication requirements to ensure that risk management activities remain within these tolerance limits. The risk and compliance committee, a standing committee of the board of directors, is responsible for carrying out the board's responsibilities in this regard. Other standing committees of the board (audit, compensation, corporate governance and nominating, and capital markets) oversee particular areas of risk governance assigned specifically to them.

**Executive and Senior Management.** Members of executive and senior management are responsible for managing risk activities and delegating risk authority and tolerance to the responsible risk owners.

Management is responsible for identifying which processes and activities are critical to achieving the Company's business objectives within tolerance levels. Management then delegates responsibility, authority and accountability to the appropriate risk owners who are responsible for ensuring that the respective processes and activities are designed and implemented to manage the related risks within those delegated tolerance levels. Management analyzes and monitors risk management performance with key risk indicator and key performance indicator dashboards.

**Chief Risk Officer.** The chief risk officer is responsible for the oversight of the Company's ERM processes. The chief risk officer may appoint other officers or establish other management committees as required for effective risk management and governance, including risk identification, risk measurement, risk monitoring, risk control or mitigation and risk reporting and assurance. The chief risk officer is also responsible for the maintenance of procedures, methodologies and guidelines considered necessary to administer the ERM program.

**Chief Compliance Officer**. The chief compliance officer is responsible for the oversight of the Company's compliance management function, which includes Bank Secrecy Act/Anti-Money Laundering and all other regulatory compliance. The chief compliance officer is authorized to implement all necessary actions to ensure achievement of the objectives of an effective compliance program and may appoint other officers or establish other management committees as required for effective compliance management. The chief compliance officer reviews and evaluates compliance issues and concerns and is responsible for monitoring and reporting results of the compliance efforts in addition to providing guidance to the board of directors and senior management team on matters relating to compliance.

**Committee Chairs.** The ERM program utilizes multiple management committees as its primary assessment and communication mechanism for identified risks. Committee chairs play key roles in the execution of risk management activities throughout the enterprise and are responsible for continuous updates and communication among committee members in conjunction with the risk management department regarding changes to risk profiles, changes to risk assessments and the emergence of new risks that could impact the Company.

**First Financial Bancorp** 2022 Annual Report **29**

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

**Internal Audit.** Internal audit is responsible for planning audit activities to periodically reassess the design and operation of key risk management processes and to make periodic evaluations of the ongoing accuracy and effectiveness of the communications from risk owners to senior management and from senior management to the board of directors.

**Risk Assessment Process.** The periodic assessment of risks is a key component of a sound ERM program. Managers, business line leaders and executives are responsible for developing the risk and control assessment for their individual departments, business lines and subsidiaries. The chief risk officer, management and the board risk and compliance committee are responsible for ensuring that risk is viewed and analyzed from an enterprise-level global perspective. Furthermore, interrelated risks are considered, assessing how a single risk or event may create multiple risks.

Risk management programs, in each functional component and in aggregate, accomplish the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• identify risks and their respective owners;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• link identified risks and their mitigation to the Company's strategic objectives;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• utilize risk and control assessments that evaluate both inherent risks and their associated likelihood of occurrence and consequences, as well as the associated controls employed and their effectiveness in reducing risk; the risks and their associated likelihood of occurrence and consequences;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• encourage employees in all units to develop a working understanding of upstream and downstream activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• develop strategies to manage risk, such as avoiding the risk; reducing the negative effect of the risk; transferring the risk to another party; and/or accepting some or all of the consequences of a particular risk;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• prioritize the risk issues with regard to the current residual risk status and trend;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• provide reports to management and risk owners that will assist them in implementing appropriate risk management processes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• assist management in assessing the alternatives for managing risks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• assist management in the development of risk management plans; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• track risk management/mitigation efforts.

**Monitoring and Reporting.** The board of directors oversees risk reporting and monitoring through the board risk and compliance committee, which meets at least quarterly.

Management continually reviews any risk identified as key, as well as the appropriateness of established tolerance limits and the actions considered as necessary to mitigate key risks. As circumstances warrant, management provides recommendations to the board risk and compliance committee related to changes or adjustments to key risks or tolerance limits.

First Financial believes that communication is fundamental to successful risk management and productive reporting and communication between the risk management department, management and the board of directors is required for collaborative and effective risk management.

**CREDIT RISK**

Credit risk represents the risk of loss due to failure of a customer or counterparty to meet its financial obligations in accordance with contractual terms. First Financial manages credit risk through its underwriting and ongoing administration practices, periodically reviewing and approving its credit exposures using credit policies and guidelines approved by the board of directors.

**MARKET RISK**

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, foreign exchange rates and equity prices. The primary sources of market risk for First Financial are interest rate risk and liquidity risk.

Interest rate risk is the risk to earnings and the value of the Company's equity arising from changes in market interest rates. Interest rate risk arises in the normal course of business to the extent that there is a divergence between the amount of interest-earning assets and the amount of interest-bearing liabilities that are prepaid, withdrawn, re-priced or mature in specified periods. First Financial seeks to achieve consistent growth in net interest income and equity while managing volatility from shifts in market interest rates.

**30 First Financial Bancorp** 2022 Annual Report

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First Financial monitors its interest rate risk position using income simulation models and EVE sensitivity analyses that capture both short-term and long-term interest rate risk exposure. Income simulation involves forecasting NII under a variety of interest rate scenarios. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest rate scenarios. First Financial uses EVE sensitivity analysis to understand the impact of changes in interest rates on long-term cash flows, income and capital. For both NII and EVE modeling, First Financial leverages instantaneous parallel shocks to evaluate interest rate risk exposure across rising and falling rate scenarios. Additional scenarios evaluated include various non-parallel yield curve twists.

First Financial's interest rate risk models are based on the contractual and assumed cash flows and repricing characteristics for the Company's assets, liabilities and off-balance sheet exposure. A number of assumptions are also incorporated into the interest rate risk models, including prepayment behaviors and repricing spreads for assets in addition to attrition and repricing rates for liabilities. Assumptions are primarily derived from behavior studies of the Company's historical client base and are continually refined. Modeling the sensitivity of NII and EVE to changes in market interest rates is highly dependent on the assumptions incorporated into the modeling process.

Non-maturity deposit modeling is particularly dependent on the assumption for repricing sensitivity known as a beta. Beta is the amount by which First Financial's interest bearing non-maturity deposit rates will increase when short-term interest rates rise. The Company utilized a weighted average deposit beta of 35% in its interest rate risk modeling as of December 31, 2022. First Financial also includes an assumption for the migration of non-maturity deposit balances into CDs for all upward rate scenarios beginning with the +100 BP scenario, thereby increasing deposit costs and reducing asset sensitivity.

Presented below is the estimated impact on First Financial's NII and EVE as of December 31, 2022, assuming immediate, parallel shifts in interest rates:

---

| | | | |
|:---|:---|:---|:---|
| **Table 16 • Rate Change Impact on NII and EVE** | **Table 16 • Rate Change Impact on NII and EVE** | **Table 16 • Rate Change Impact on NII and EVE** | **Table 16 • Rate Change Impact on NII and EVE** |
|  | % Change from base case for<br> immediate parallel changes in rates | % Change from base case for<br> immediate parallel changes in rates | % Change from base case for<br> immediate parallel changes in rates |
|  | -100 BP | +100 BP | +200 BP |
| NII - Year 1 | (6.67)% | 4.49% | 8.15% |
| NII - Year 2 | (7.23)% | 4.78% | 8.82% |
| EVE | (3.98)% | 2.52% | 4.62% |

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*"Risk-neutral"* refers to the absence of a strong bias toward either asset or liability sensitivity. *"Asset sensitivity"* is when a company's interest-earning assets reprice more quickly or in greater quantities than interest-bearing liabilities. Conversely, *"liability sensitivity"* is when a company's interest-bearing liabilities reprice more quickly or in greater quantities than interest-earning assets. In a rising interest rate environment, asset sensitivity results in higher net interest income while liability sensitivity results in lower net interest income. In a declining interest rate environment, asset sensitivity results in lower net interest income while liability sensitivity results in higher net interest income.

The projected results for NII and EVE reflect an asset sensitive position, due to a strong funding mix of low cost transactional deposits supporting loans priced primarily off the short end of the rate curve. The down rate shock sensitivity remains elevated due to asset yields improving faster than lagged deposit costs. First Financial continues to manage its balance sheet with a bias toward asset sensitivity while simultaneously balancing the potential earnings impact of this strategy.

First Financial continually evaluates the sensitivity of its interest rate risk position to modeling assumptions. The following table reflects First Financial's estimated NII sensitivity profile as of December 31, 2022 assuming both a 25% increase and decrease to the beta assumption on managed rate deposit products:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Table 17 • Estimated Interest Sensitivity on NII** | **Table 17 • Estimated Interest Sensitivity on NII** | **Table 17 • Estimated Interest Sensitivity on NII** | **Table 17 • Estimated Interest Sensitivity on NII** | |
|  | Beta sensitivity (% change from base) | Beta sensitivity (% change from base) | Beta sensitivity (% change from base) | Beta sensitivity (% change from base) |
|  | +100 BP | +100 BP | +200 BP | +200 BP |
|  | Beta 25% lower | Beta 25% higher | Beta 25% lower | Beta 25% higher |
| NII-Year 1 | 5.30% | 3.69% | 8.93% | 7.37% |
| NII-Year 2 | 5.57% | 3.99% | 9.58% | 8.06% |

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See the Net Interest Income section of Management's Discussion and Analysis for further discussion.

**First Financial Bancorp** 2022 Annual Report **31**

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

Table 18 – Market Risk Disclosure projects the principal maturities and yields of First Financial's interest-bearing financial instruments at December 31, 2022 for the next five years and thereafter, as well as the fair value of the instruments. For loans, securities and liabilities with contractual maturities, the table presents principal cash flows and related weighted-average interest rates by contractual maturities. For investment securities, including MBS and CMO, principal cash flows are based on estimated average lives. For loan instruments without contractual maturities, such as credit card loans, principal payments are allocated based on historical payment activity trends. Maturities for interest-bearing liability accounts with no contractual maturity dates are estimated according to historical experience of cash flows and current expectations of client behaviors when calculating fair value, but are included in the maturing in one year or less category as they can be withdrawn on demand.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** | **Table 18 • Market Risk Disclosure** |
|  |  |  |  |  |  |  |  | Fair Value |
|  | Principal Amount Maturing In | Principal Amount Maturing In | Principal Amount Maturing In | Principal Amount Maturing In | Principal Amount Maturing In | Principal Amount Maturing In | Principal Amount Maturing In | December 31, |
| *(Dollars in thousands)* | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | 2022 |
| **Rate sensitive assets** |  |  |  |  |  |  |  |  |
| Fixed interest rate loans <sup>(1)</sup> | $417925 | $313701 | $283213 | $244982 | $204152 | $1117088 | $2581061 | $2353681 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 4.74% | 4.76% | 4.71% | 4.72% | 4.62% | 3.99% | 4.39% |  |
| Variable interest rate loans <sup>(1)</sup> | 1279082 | 1222269 | 943376 | 941274 | 957423 | 2249427 | 7592851 | 7570590 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 6.87% | 6.77% | 6.70% | 6.55% | 7.00% | 6.32% | 6.64% |  |
| Fixed interest rate securities | 149097 | 202578 | 190155 | 260486 | 358580 | 1564496 | 2725392 | 2720355 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 3.04% | 3.14% | 3.07% | 3.26% | 2.47% | 2.27% | 2.54% |  |
| Variable interest rate securities | 241367 | 144163 | 100540 | 115676 | 109632 | 56899 | 768277 | 765778 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 7.42% | 7.18% | 6.46% | 6.03% | 6.47% | 5.61% | 6.77% |  |
| Other earning assets | 388182 | 0 | 0 | 0 | 0 | 0 | 388182 | 388182 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 4.40% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 4.40% |  |
| **Rate sensitive liabilities** |  |  |  |  |  |  |  |  |
| Noninterest-bearing checking <sup>(2)</sup> | $4135180 | $0 | $0 | $0 | $0 | $0 | $4135180 | $4135180 |
| Savings and interest-bearing checking <sup>(2)</sup> | 6865292 | 0 | 0 | 0 | 0 | 0 | 6865292 | 6865292 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 0.73% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.73% |  |
| Time deposits | 1320228 | 293735 | 37093 | 37881 | 11768 | 0 | 1700705 | 1670275 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 3.05% | 2.07% | 0.38% | 0.56% | 0.52% | 0.00% | 2.75% |  |
| Fixed interest rate borrowings | 1292131 | 5160 | 125580 | 6083 | 6495 | 150379 | 1585828 | 1587432 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 4.58% | 6.78% | 5.19% | 6.56% | 6.57% | 5.35% | 4.72% |  |
| Variable interest rate borrowings | 0 | 0 | 0 | 0 | 0 | 48000 | 48000 | 47765 |
| &nbsp;&nbsp;&nbsp;&nbsp;Average interest rate | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 7.33% | 7.33% |  |

---

<sup>(1)</sup> Includes loans held for sale.

<sup>(2)</sup> Deposits without a stated maturity are represented as maturing within one year due to the ability of the client to withdraw deposited amounts on demand.

Liquidity risk is the potential that an entity will be unable to meet its obligations as they come due because of an inability to liquidate assets or obtain funding or that it cannot easily unwind or offset exposures without significantly lowering market prices because of inadequate market depth or market disruptions. Management focuses on maintaining and enhancing liquidity by maximizing collateral-based liquidity availability. First Financial manages liquidity in relation to the trend and stability of deposits; degree and reliance on short-term, volatile sources of funds, including any undue reliance on borrowings or brokered deposits to fund longer-term assets. Management identifies, measures, monitors and manages liquidity while seeking to maintain diversification of funding sources, both on- and off-balance-sheet.

In 2022, the Company continued to update liquidity risk management processes, such as refining the contingency funding plan, meeting frequently, securing additional contingent borrowing capacity and developing additional ad-hoc liquidity reporting to monitor funding inflows and outflows related to the PPP funding and forgiveness. Management is closely monitoring the usage of excess business deposits, the balance of personal deposits and the broader macroeconomic environment. For further discussion of the Company's liquidity, please see the Liquidity section within Management's Discussion and Analysis.

**32 First Financial Bancorp** 2022 Annual Report

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**OPERATIONAL RISK**

Operational risk is the risk of loss due to human behavior, inadequate or failed internal systems and controls and external influences such as market conditions, fraudulent activities, natural disasters and security risks. First Financial continuously strives to strengthen the Company's system of internal controls and operating processes as well as associates' ability to assess the impact on earnings and capital from operational risk.

**COMPLIANCE RISK**

Compliance risk represents the risk of regulatory sanctions, reputational impact or financial loss resulting from the Company's failure to comply with rules and regulations issued by the various banking agencies and standards of good banking practice. Activities which may expose First Financial to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, community reinvestment initiatives, fair lending challenges resulting from the Company's ongoing management of its banking center network and employment and tax matters.

**STRATEGIC AND REPUTATION RISK**

Strategic risk represents the risk of loss due to failure to fully develop and execute business plans, failure to assess current and new business opportunities, markets and products, inability to effectively manage human capital risk factors such as satisfaction, engagement, attrition, retention, and diversity, equity and, inclusion (DEI) and any other event not identified in the defined risk types previously mentioned. Strategic risk focuses on analyzing factors that affect the direction of the institution or improper implementation of decisions

Reputation risk represents the risk of loss or impairment of earnings and capital from negative publicity. This affects the ability of First Financial to establish new relationships or services or to continue servicing existing relationships. Reputation risk is recognized by the effect that public opinion could have on First Financial's franchise value and has evolved in recent years with the growth in social media. First Financial also seeks to build social responsibility into its brand and has formed a corporate responsibility working group to develop an initial corporate social responsibility (CSR) report, which will highlight First Financial's efforts, goals, and plans to help the environment and our communities.

Mitigation of strategic and reputation risk elements is achieved through initiatives that help First Financial better understand and report on the various risks it faces each day, including those related to the development of new products and business initiatives and client feedback response and mitigation routines that analyze and share feedback data with business lines for client experience and process improvements.

**INFORMATION TECHNOLOGY RISK**

Information technology risk is the risk that the information technologies utilized by FFB are not efficiently and effectively supporting the current and future needs of the business, operating as intended or compromise the availability, integrity and reliability of data and information. This risk also considers whether or not the Company's information technology exposes the Company's assets to potential loss or misuse, or threatens the Company's ability to sustain the operation of critical business processes.

**CYBERSECURITY RISK**

Cybersecurity (cyber) risk is differentiated from information technology risk by threat interactions that yield high impact consequences and ever-increasing probability. First Financial continues to be the target of various evolving and adaptive cyber attacks, including malware, phishing and distributed denial-of-service, in order to disrupt the operations of financial institutions, potentially test their cybersecurity capabilities, commit fraud, or obtain confidential, proprietary or other information. While standard security operations address most day-to-day incidents, cyber risk includes threats and attacks that often use advanced tools, techniques and processes to evade detection or inflict maximum damage to an organization's information assets. Cyber threats and attacks adapt and evolve rapidly, so First Financial works to continuously enhance controls and processes to protect its networks and applications from attack, damage or unauthorized access. Critical components to the Company's cyber risk control structure include corporate governance, threat intelligence, security awareness training and patch management programs. Cyber risk mitigation includes effectively identifying, protecting against, detecting, responding to and recovering from cyber threats.

**First Financial Bancorp** 2022 Annual Report **33**

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

**LEGAL RISK**

Legal risk encompasses the impact of unenforceable contracts, lawsuits or adverse judgments, which can disrupt or otherwise negatively affect the Company's operations or condition. Legal risk also includes the exposure from litigation, fiduciary relationships and contractual obligations from both traditional and nontraditional financial institution activities. Legal risk is present in all areas of the Company and its activities.

**FOURTH QUARTER REVIEW**

For the three months ended December 31, 2022, the Company reported net income of $69.1 million, or $0.73 per diluted common share. These results compare to net income of $55.7 million, or $0.59 per diluted common share, for the third quarter of 2022. Return on average assets for the fourth quarter of 2022 was 1.63% compared to a return on assets of 1.35% in the third quarter of 2022.

Loan balances increased $501.5 million from the third quarter of 2022, an increase of 20.3% on an annualized basis. The increase was attributed to strong origination volumes across much of the portfolio and included $129.7 million in new finance leases from Summit Funding Group. Average deposit balances increased $261.3 million compared to the linked quarter, primarily due to a $319.3 million increase in brokered CD balances. Outside of this increase, average deposit balances were relatively stable during the fourth quarter.

Net interest margin for the fourth quarter of 2022 was 4.43%, or 4.47% on a fully tax-equivalent basis. This was a 50 basis point increase from the third quarter of 2022, and was driven by a 96 bp increase in loan yields due to continued Federal Reserve rate hikes. These asset yields more than offset a 31 bp increase in the cost of deposits for the quarter.

Noninterest income for the fourth quarter of 2022 was $56.0 million, an increase of $13.5 million, or 31.7%, over the prior quarter. The fourth quarter included record Bannockburn income of $19.6 million, an increase of $7.8 million, or 66.7%, from the third quarter as well as record Summit leasing business income of $11.1 million, an increase of $4.0 million, or 56.1%. Mortgage banking income declined $1.5 million, or 40.8%, during the quarter as demand softened due to higher interest rates.

Noninterest expense for the fourth quarter of 2022 was $124.4 million, a decrease of $0.6 million, or 0.5%, from the linked quarter. The decrease included a $7.9 million, or 33.3% decline in other noninterest expense, which was driven by lower write-downs of tax credit investments, but partially offset by a $2.5 million contribution to the First Financial Foundation. Largely offsetting the decline in other noninterest expenses was a $6.8 million, or 10.2%, increase in salaries and employee benefits, which was driven by incentive costs tied to record foreign exchange income during the period as well as the Company's overall performance.

The ACL, including both funded and unfunded reserves, was $151.4 million at December 31, 2022, and the Company recorded $10.0 million in total provision expense during the fourth quarter. The provision expense was driven by significant loan growth combined with the slowing of prepayment speeds, which increased the duration of the portfolio. Asset quality was relatively stable and the Company recorded 1 basis point of net recoveries annualized as a percentage of loan balances during the quarter.

**CRITICAL ACCOUNTING ESTIMATES**

First Financial's Consolidated Financial Statements are prepared based on the application of accounting policies, the most significant of which are described in Note 1 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements. These policies require the reliance on estimates and assumptions which are inherently subjective and may be susceptible to significant change. Changes in underlying factors, assumptions or estimates could have a material impact on First Financial's future financial condition and results of operations. In management's opinion, some of these estimates and assumptions have a more significant impact than others on First Financial's financial reporting.

For First Financial, these estimates and assumptions include accounting for the ACL - loans and leases, goodwill, pension and income taxes. The estimates and assumptions made are based upon historical experience, future forecasts, or other factors that management believes to be reasonable under the circumstances. Because of the nature of the judgment and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations.

**34 First Financial Bancorp** 2022 Annual Report

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**FORWARD-LOOKING STATEMENTS**

Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as ''believes,'' ''anticipates,'' "likely," "expected," "estimated," ''intends'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to, statements we make about (i) our future operating or financial performance, including revenues, income or loss and earnings or loss per share, (ii) future common stock dividends, (iii) our capital structure, including future capital levels, (iv) our plans, objectives and strategies, and (v) the assumptions that underlie our forward-looking statements.

As with any forecast or projection, forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that may cause actual results to differ materially from those set forth in the forward-looking statements. Forward-looking statements are not historical facts but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements. Important factors that could cause actual results to differ materially from those in our forward-looking statements include the following, without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company's business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• future credit quality and performance, including our expectations regarding future loan losses and our allowance for credit losses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of and changes in policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislation and regulation relating to the banking industry; (iv) management's ability to effectively execute its business plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• mergers and acquisitions, including costs or difficulties related to the integration of acquired companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the possibility that any of the anticipated benefits of the Company's acquisitions will not be realized or will not be realized within the expected time period;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of changes in accounting policies and practices;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in consumer spending, borrowing and saving and changes in unemployment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in customers' performance and creditworthiness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the costs and effects of litigation and of unexpected or adverse outcomes in such litigation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• current and future economic and market conditions, including the effects of changes in housing prices, fluctuations in unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the adverse impact on the U.S. economy, including the markets in which we operate, of the novel coronavirus, which causes the Coronavirus disease 2019 ("COVID-19"), global pandemic, and the impact on the performance of our loan and lease portfolio, the market value of our investment securities, the availability of sources of funding and the demand for our products;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation relating to bank products and services;

**First Financial Bancorp** 2022 Annual Report **35**

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of the current interest rate environment or changes in interest rates or in the level or composition of our assets or liabilities on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgage loans held for sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of a fall in stock market prices on our brokerage, asset and wealth management businesses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors or other service providers, including as a result of cyber attacks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to develop and execute effective business plans and strategies.

These and other risk factors are more fully described in First Financial's Annual Report on Form 10-K for the year ended December 31, 2022 under the section entitled "Item 1A. Risk Factors" and from time to time, in other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed in or implied by any forward-looking statements. Except to the extent required by applicable law or regulation, First Financial undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

**36 First Financial Bancorp** 2022 Annual Report

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**Management's Report on Internal Control over Financial Reporting**

First Financial's management is responsible for establishing and maintaining adequate internal control over financial reporting. First Financial's internal control over financial reporting is a process designed under the supervision of First Financial's chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation. As of December 31, 2022, First Financial's management, including the chief executive officer and the chief financial officer, evaluated the effectiveness of First Financial's internal controls over financial reporting, using as its framework for that evaluation the Internal Control – Integrated Framework published by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2013 framework). Based on the evaluation, we believe that, as of December 31, 2022, our internal control over financial reporting is effective based on those criteria.

Crowe LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this Form 10-K, has issued an attestation report on First Financial's internal control over financial reporting as of December 31, 2022. The report, which expresses an unqualified opinion on First Financial's internal control over financial reporting as of December 31, 2022, is included in the information that follows under the heading "Report of Independent Registered Public Accounting Firm."

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| | |
|:---|:---|
| /s/ Archie M. Brown | /s/ James M. Anderson |
| President and Chief Executive Officer | Executive Vice President and Chief Financial Officer |
| February 24, 2023 | February 24, 2023 |

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**First Financial Bancorp** 2022 Annual Report **37**

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| | |
|:---|:---|
| ![ffbc-20221231_g1.jpg](ffbc-20221231_g1.jpg) | **Crowe LLP**<br>Independent Member Crowe Global |

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Report of Independent Registered Public Accounting Firm

Shareholders and the Board of Directors of First Financial Bancorp

Cincinnati, Ohio

**Opinions on the Financial Statements and Internal Control over Financial Reporting**

We have audited the accompanying consolidated balance sheets of First Financial Bancorp (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework: (2013) issued by COSO.

**Basis for Opinions**

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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**Definition and Limitations of Internal Control Over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

***Allowance for Credit Losses for Loans Qualitative Factors - Refer to Notes 1and 6 to the financial statements***

The allowance for credit losses (the "ACL") is an accounting estimate of expected credit losses over the estimated life of financial assets carried at amortized cost and off-balance-sheet credit exposures in accordance with ASC 326. The standard requires a financial asset (or a group of financial assets), including the Company's loan portfolio, measured at amortized cost, to be presented at the net amount expected to be collected. Estimates of expected credit losses for loans are based on historical experience, current conditions and reasonable and supportable forecasts over the estimated life of the loans. In order to estimate the expected credit losses, the Company utilizes a loss estimation model.

Management quantitatively models expected credit loss using Probability of Default ("PD"), Loss Given Default ("LGD"), and Exposure at Default ("EAD") over the Reasonable and Supportable ("R&S") forecast, reversion and post-reversion periods. Utilizing third-party software, the Company forecasts PD by using transition matrices to evaluate when events are more or less likely to occur based on previous events. The transition matrices are adjusted under forward-looking macroeconomic expectations to obtain R&S forecasts. Management utilizes third-party software for estimating LGD. The PD multiplied by LGD produces an expected loss rate that, when calculating the ACL, is applied to contractual loan cash flows, adjusted for expected future rates of principal prepayments. The Company adjusts its quantitative model for certain qualitative factors to reflect the extent to which management expects current conditions and R&S forecasts to differ from the conditions that existed for the period over which historical information was evaluated. The qualitative framework reflects changes related to relevant data, such as changes in asset quality trends, portfolio growth and composition, national and local economic factors, credit policy and administration and other factors not considered in the base model. The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The ACL is influenced by loan volumes, risk rating migration, delinquency status and other conditions influencing loss expectations, such as reasonable and supportable forecasts of economic conditions.

The Allowance for Credit Losses for Loans was identified by us as a critical audit matter because of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective and complex judgments made by management. The principal considerations resulting in our determination included the following:

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Significant audit effort related to the completeness and accuracy of the high volume of data used in the model computation.

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

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Testing the effectiveness of management's internal controls over the preparation and evaluation of the ACL calculation, significant model assumptions, development and reasonableness of qualitative factors, completeness and accuracy of data used in the calculation, systems used in the development of the estimate, and the appropriateness of the overall calculation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Substantively testing management's process for developing qualitative factors and assessing relevance and reliability of data used to develop factors, including evaluating management's judgments and assumptions for reasonableness.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Substantively testing the mathematical accuracy of the EAD model including the completeness and accuracy of loan data used in the model to estimate ACL.

![ffbc-20221231_g2.jpg](ffbc-20221231_g2.jpg)

Crowe LLP

We have served as the Company's auditor since 2015, which is the year the engagement letter was signed for the audit of the 2016 financial statements.

Louisville, Kentucky <br> February 24, 2023

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**Consolidated Balance Sheets**

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| | | |
|:---|:---|:---|
| | December 31, | December 31, |
| *(Dollars in thousands)* | 2022 | 2021 |
| **Assets** |  |  |
| Cash and due from banks | $207501 | $220031 |
| Interest-bearing deposits with other banks | 388182 | 214811 |
| Investment securities available-for-sale, at fair value (amortized cost $3,827,418 at December 31, 2022 and $4,180,589 at December 31, 2021) | 3409648 | 4207846 |
| Investment securities held-to-maturity (fair value $76,485 at December 31, 2022 and $99,898 at December 31, 2021) | 84021 | 98420 |
| Other investments, at fair value | 143160 | 102971 |
| Loans held for sale, at fair value | 7918 | 29482 |
| Loans and leases |  |  |
| &nbsp;&nbsp;&nbsp;Commercial & industrial | 3410272 | 2720028 |
| &nbsp;&nbsp;&nbsp;Lease financing | 236124 | 109624 |
| &nbsp;&nbsp;&nbsp;Construction real estate | 512050 | 455894 |
| &nbsp;&nbsp;&nbsp;Commercial real estate | 4052759 | 4226614 |
| &nbsp;&nbsp;&nbsp;Residential real estate | 1092265 | 896069 |
| &nbsp;&nbsp;&nbsp;Home equity | 733791 | 708399 |
| &nbsp;&nbsp;&nbsp;Installment | 209895 | 119454 |
| &nbsp;&nbsp;&nbsp;Credit card | 51815 | 52217 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total loans and leases** | 10298971 | 9288299 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Allowance for credit losses | (132977) | (131992) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net loans and leases** | 10165994 | 9156307 |
| Premises and equipment | 189080 | 193040 |
| Operating leases | 91738 | 60811 |
| Goodwill | 1001507 | 1000749 |
| Other intangibles | 93919 | 104367 |
| Accrued interest and other assets | 1220648 | 940306 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | $17003316 | $16329141 |
| **Liabilities** |  |  |
| Deposits |  |  |
| &nbsp;&nbsp;&nbsp;Interest-bearing demand | $3037153 | $3198745 |
| &nbsp;&nbsp;&nbsp;Savings | 3828139 | 4157374 |
| &nbsp;&nbsp;&nbsp;Time | 1700705 | 1330263 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 8565997 | 8686382 |
| &nbsp;&nbsp;&nbsp;Noninterest-bearing | 4135180 | 4185572 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total deposits** | 12701177 | 12871954 |
| Federal funds purchased and securities sold under agreements to repurchase | 0 | 51203 |
| FHLB short-term borrowings | 1130000 | 225000 |
| Other short-term borrowings | 157156 | 20000 |
| **&nbsp;&nbsp;&nbsp;&nbsp; Total short-term borrowings** | 1287156 | 296203 |
| Long-term debt | 346672 | 409832 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total borrowed funds** | 1633828 | 706035 |
| Accrued interest and other liabilities | 626938 | 492210 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | 14961943 | 14070199 |
| **Shareholders' equity** |  |  |
| &nbsp;&nbsp;&nbsp;Common stock - no par value |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized - 160,000,000 shares; Issued - 104,281,794 shares in 2022 and in 2021 | 1634605 | 1640358 |
| &nbsp;&nbsp;&nbsp;Retained earnings | 968237 | 837473 |
| &nbsp;&nbsp;&nbsp;Accumulated other comprehensive income (loss) | (358663) | (433) |
| &nbsp;&nbsp;Treasury stock, at cost, 9,390,695 shares in 2022 and 10,132,554 shares in 2021 | (202806) | (218456) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total shareholders' equity** | 2041373 | 2258942 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities and shareholders' equity** | $17003316 | $16329141 |

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See Notes to Consolidated Financial Statements.

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**Consolidated Statements of Income**

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| | | | |
|:---|:---|:---|:---|
| | Years ended December 31, | Years ended December 31, | Years ended December 31, |
| *(Dollars in thousands except per share data)* | 2022 | 2021 | 2020 |
| **Interest income** |  |  |  |
| &nbsp;&nbsp;&nbsp;Loans and leases, including fees | $458742 | $385535 | $431657 |
| &nbsp;&nbsp;&nbsp;Investment securities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taxable | 102314 | 79212 | 73789 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax-exempt | 18466 | 18323 | 19242 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest on investment securities | 120780 | 97535 | 93031 |
| &nbsp;&nbsp;&nbsp;Other earning assets | 5484 | 147 | 275 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total interest income** | 585006 | 483217 | 524963 |
| **Interest expense** |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 28140 | 14435 | 41922 |
| &nbsp;&nbsp;&nbsp;Short-term borrowings | 19132 | 198 | 6442 |
| &nbsp;&nbsp;&nbsp;Long-term borrowings | 18591 | 16466 | 20088 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total interest expense** | 65863 | 31099 | 68452 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net interest income** | 519143 | 452118 | 456511 |
| &nbsp;&nbsp;&nbsp;Provision for credit losses - loan and lease losses | 6731 | (19024) | 70796 |
| &nbsp;&nbsp;&nbsp;Provision for credit losses - unfunded commitments | 4982 | 903 | (237) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net interest income after provision for credit losses** | 507430 | 470239 | 385952 |
| **Noninterest income** |  |  |  |
| &nbsp;&nbsp;&nbsp;Service charges on deposit accounts | 28062 | 31876 | 29446 |
| &nbsp;&nbsp;&nbsp;Trust and wealth management fees | 23506 | 23780 | 21286 |
| &nbsp;&nbsp;&nbsp;Bankcard income | 14380 | 14300 | 11726 |
| &nbsp;&nbsp;&nbsp;Client derivative fees | 5441 | 7927 | 10313 |
| &nbsp;&nbsp;&nbsp;Foreign exchange income | 54965 | 44793 | 39377 |
| &nbsp;&nbsp;&nbsp;Leasing business income | 31574 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Net gain from sales of loans | 15048 | 33021 | 51176 |
| &nbsp;&nbsp;&nbsp;Net gain (loss) on sales/transfers of investment securities | (569) | (759) | 4563 |
| &nbsp;&nbsp;&nbsp;Net gain (loss) on equity securities | (639) | 702 | 9045 |
| &nbsp;&nbsp;&nbsp;Other | 17873 | 15866 | 12191 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total noninterest income** | 189641 | 171506 | 189123 |
| **Noninterest expenses** |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | 269368 | 245924 | 236779 |
| &nbsp;&nbsp;&nbsp;Net occupancy | 22208 | 22142 | 23266 |
| &nbsp;&nbsp;&nbsp;Furniture and equipment | 13224 | 13819 | 14968 |
| &nbsp;&nbsp;&nbsp;Data processing | 33662 | 31363 | 27514 |
| &nbsp;&nbsp;&nbsp;Marketing | 8744 | 7983 | 6414 |
| &nbsp;&nbsp;&nbsp;Communication | 2683 | 2930 | 3492 |
| &nbsp;&nbsp;&nbsp;Professional services | 9734 | 11676 | 9961 |
| &nbsp;&nbsp;&nbsp;Debt extinguishment | 0 | 0 | 7257 |
| &nbsp;&nbsp;&nbsp;State intangible tax | 4285 | 4256 | 6058 |
| &nbsp;&nbsp;&nbsp;FDIC assessments | 7194 | 5630 | 5110 |
| &nbsp;&nbsp;&nbsp;Intangible assets amortization | 11185 | 9839 | 11126 |
| &nbsp;&nbsp;&nbsp;Leasing business expense | 20363 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Other | 52699 | 45250 | 38719 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total noninterest expenses** | 455349 | 400812 | 390664 |
| Income before income taxes | 241722 | 240933 | 184411 |
| Income tax expense | 24110 | 35773 | 28601 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net income** | $217612 | $205160 | $155810 |
| **Earnings per common share** |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $2.33 | $2.16 | $1.60 |
| &nbsp;&nbsp;&nbsp;Diluted | $2.30 | $2.14 | $1.59 |
| **Average common shares outstanding - basic** | 93528712 | 95034690 | 97363952 |
| **Average common shares outstanding - diluted** | 94586851 | 95897385 | 98093098 |

---

See Notes to Consolidated Financial Statements.

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**Consolidated Statements of Comprehensive Income (Loss)**

---

| | | | |
|:---|:---|:---|:---|
| | Years ended December 31, | Years ended December 31, | Years ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Net income | $217612 | $205160 | $155810 |
| Other comprehensive income (loss), net of tax: |  |  |  |
| &nbsp;&nbsp;&nbsp;Unrealized gain (loss) on debt securities arising during the period | (346963) | (52538) | 32312 |
| &nbsp;&nbsp;&nbsp;Change in retirement obligation | (11177) | 4066 | 3029 |
| &nbsp;&nbsp;&nbsp;Unrealized gain (loss) on foreign currency exchange | (90) | (625) | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other comprehensive income (loss) | (358230) | (49097) | 35341 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Comprehensive income (loss)** | $(140618) | $156063 | $191151 |

---

See Notes to Consolidated Financial Statements.

**First Financial Bancorp** 2021 Annual Report **43**

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**Consolidated Statements of Changes in Shareholders' Equity**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | Accumulated | | | |
| | Common | Common | | other | | | |
| | stock | stock | Retained | comprehensive | Treasury stock | Treasury stock | |
| *(Dollars in thousands, except share amounts)* | shares | amount | earnings | income (loss) | Shares | Amount | Total |
| Balance at January 1, 2020 | 104281794 | $1640771 | $711249 | $13323 | (5790796) | $(117638) | $2247705 |
| Impact of cumulative effect of adoption of new accounting principles |  |  | (56882) |  |  |  | (56882) |
| Net income |  |  | 155810 |  |  |  | 155810 |
| Other comprehensive income (loss) |  |  |  | 35341 |  |  | 35341 |
| Cash dividends declared: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Common stock at $0.92 per share |  |  | (89748) |  |  |  | (89748) |
| Purchase of common stock |  |  |  |  | (880000) | (16686) | (16686) |
| Exercise of stock options, net of shares purchased |  | (140) |  |  | 10405 | 212 | 72 |
| Restricted stock awards, net of forfeitures |  | (9362) |  |  | 400526 | 8142 | (1220) |
| Share-based compensation expense |  | 7678 |  |  |  |  | 7678 |
| &nbsp;&nbsp;&nbsp;Balance at December 31, 2020 | 104281794 | 1638947 | 720429 | 48664 | (6259865) | (125970) | 2282070 |
| Net income |  |  | 205160 |  |  |  | 205160 |
| Other comprehensive income (loss) |  |  |  | (49097) |  |  | (49097) |
| Cash dividends declared: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Common stock at $0.92 per share |  |  | (88116) |  |  |  | (88116) |
| Purchase of common stock |  |  |  |  | (4633355) | (108077) | (108077) |
| Common stock issued in connection with business combinations |  | 1251 |  |  | 405805 | 8749 | 10000 |
| Exercise of stock options, net of shares purchased |  | (81) |  |  | 6936 | 145 | 64 |
| Restricted stock awards, net of forfeitures |  | (9394) |  |  | 347925 | 6697 | (2697) |
| Share-based compensation expense |  | 9635 |  |  |  |  | 9635 |
| &nbsp;&nbsp;&nbsp;Balance at December 31, 2021 | 104281794 | 1640358 | 837473 | (433) | (10132554) | (218456) | 2258942 |
| Net income |  |  | 217612 |  |  |  | 217612 |
| Other comprehensive income (loss) |  |  |  | (358230) |  |  | (358230) |
| Cash dividends declared: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Common stock at $0.92 per share |  |  | (86848) |  |  |  | (86848) |
| Exercise of stock options, net of shares purchased |  | (160) |  |  | 15660 | 337 | 177 |
| Restricted stock awards, net of forfeitures |  | (18972) |  |  | 726199 | 15313 | (3659) |
| Share-based compensation expense |  | 13379 |  |  |  |  | 13379 |
| &nbsp;&nbsp;&nbsp;**Balance at December 31, 2022** | 104281794 | $1634605 | $968237 | $(358663) | (9390695) | $(202806) | $2041373 |

---

See Notes to Consolidated Financial Statements.

**44 First Financial Bancorp** 2022 Annual Report

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**Consolidated Statements of Cash Flows**

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| | | | |
|:---|:---|:---|:---|
| | Year ended December 31, | Year ended December 31, | Year ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| **Operating activities** |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $217612 | $205160 | $155810 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by (used in) operating activities: | &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for credit losses | 11713 | (18121) | 70559 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 31181 | 32136 | 33337 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 13379 | 9635 | 7678 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pension expense (income) | 2002 | 3365 | 2484 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net amortization (accretion) on investment securities | 12819 | 28987 | 21053 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (gain) loss on sales/transfers of investments securities | 569 | 759 | (4563) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (gain) loss on equity securities | 639 | (702) | (9045) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Originations of loans held for sale | (368574) | (794524) | (942207) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net (gains) losses on sales of loans held for sale | (15048) | (33021) | (51176) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from sales of loans held for sale | 375122 | 825102 | 965960 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (3505) | 12087 | (8380) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of operating leases | 7626 | 7425 | 7897 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment of operating lease liability | (7824) | (6860) | (8196) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bank owned life insurance income | (2287) | (1833) | (3031) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (increase) in interest receivable | (19134) | 6463 | (9697) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease) increase in interest payable | 6652 | (1889) | (7431) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Decrease (increase) in other assets | (226398) | 138225 | (288857) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Decrease) increase in other liabilities | 164302 | (24237) | 176168 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities | 200846 | 388157 | 108363 |
| **Investing activities** |  |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of investment securities available-for-sale | 277082 | 375276 | 122248 |
| &nbsp;&nbsp;&nbsp;Proceeds from calls, paydowns and maturities of securities available-for-sale | 704304 | 1139498 | 904821 |
| &nbsp;&nbsp;&nbsp;Purchases of securities available-for-sale | (641643) | (2418290) | (1551952) |
| &nbsp;&nbsp;&nbsp;Proceeds from calls, paydowns and maturities of securities held-to-maturity | 14640 | 34563 | 41736 |
| &nbsp;&nbsp;&nbsp;Purchases of securities held-to-maturity | 0 | (1000) | (30250) |
| &nbsp;&nbsp;&nbsp;Proceeds from calls, paydowns and maturities of other securities | 8 | 42403 | 29526 |
| &nbsp;&nbsp;&nbsp;Purchases of other investment securities | (40836) | (11474) | (28659) |
| &nbsp;&nbsp;&nbsp;Net decrease (increase) in interest-bearing deposits with other banks | (173371) | (194506) | 36643 |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of loans and leases held for investment | 0 | 141072 | 0 |
| &nbsp;&nbsp;&nbsp;Net decrease (increase) in loans and leases | (987088) | 503203 | (714594) |
| &nbsp;&nbsp;&nbsp;Proceeds from disposal of other real estate owned | 192 | 1278 | 2076 |
| &nbsp;&nbsp;&nbsp;Purchases of premises and equipment | (13778) | (15333) | (16466) |
| &nbsp;&nbsp;&nbsp;Net change in operating leases | (29475) | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Life insurance death benefits | 6860 | 2305 | 1525 |
| &nbsp;&nbsp;&nbsp;Net cash acquired (paid) from business combinations | 0 | (109024) | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) investing activities | (883105) | (510029) | (1203346) |
| **Financing activities** |  |  |  |
| &nbsp;&nbsp;&nbsp;Net (decrease) increase in total deposits | (170777) | 639951 | 2021774 |
| &nbsp;&nbsp;&nbsp;Net (decrease) increase in short-term borrowings | 990953 | 129609 | (1149587) |
| &nbsp;&nbsp;&nbsp;Payments on long-term borrowings | (64018) | (463382) | (681511) |
| &nbsp;&nbsp;&nbsp;Proceeds from long-term borrowings | 0 | 0 | 1040975 |
| &nbsp;&nbsp;&nbsp;Cash dividends paid on common stock | (86606) | (87316) | (89691) |
| &nbsp;&nbsp;&nbsp;Purchases of common stock | 0 | (108077) | (16686) |
| &nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options | 177 | 64 | 72 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | 669729 | 110849 | 1125346 |
| Cash and due from banks |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net (decrease) increase in Cash and due from banks** | (12530) | (11023) | 30363 |
| Cash and due from banks at beginning of year | 220031 | 231054 | 200691 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Cash and due from banks at end of year** | $207501 | $220031 | $231054 |

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**First Financial Bancorp** 2022 Annual Report **45**

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---

| | | | |
|:---|:---|:---|:---|
| **Supplemental disclosures** | | | |
| &nbsp;&nbsp;&nbsp;Interest paid | $59512 | $32841 | $75884 |
| &nbsp;&nbsp;&nbsp;Income taxes paid | $5696 | $17689 | $32579 |
| &nbsp;&nbsp;&nbsp;Acquisition of other real estate owned through foreclosure | $327 | $98 | $1017 |
| &nbsp;&nbsp;&nbsp;Issuance of restricted stock awards | $22280 | $12231 | $9370 |
| &nbsp;&nbsp;&nbsp;Investment securities purchased not settled | $0 | $0 | $23208 |
| &nbsp;&nbsp;&nbsp;Common stock issued in acquisitions | $0 | $10000 | $0 |
| **Supplemental schedule for investing activities** |  |  |  |
| <u>Business combinations</u> |  |  |  |
| &nbsp;&nbsp;&nbsp;Assets acquired, net of purchase consideration | $64 | $62916 | $0 |
| &nbsp;&nbsp;&nbsp;Liabilities assumed | 822 | 125894 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill | $758 | $62978 | $0 |

---

See Notes to Consolidated Financial Statements.

**46 First Financial Bancorp** 2022 Annual Report

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**Notes to Consolidated Financial Statements**

**1. Summary of Significant Accounting Policies**

**Basis of presentation.** The Consolidated Financial Statements of First Financial Bancorp., a financial holding company, principally serving Ohio, Indiana, Kentucky and Illinois, include the accounts and operations of First Financial and its wholly owned subsidiary, First Financial Bank. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain reclassifications of prior years' amounts have been made to conform to current year presentation. Such reclassifications had no effect on net earnings.

**Use of estimates.** The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. Actual realized amounts could differ materially from those estimates.

**COVID-19.** First Financial's operations and financial results were significantly impacted by the COVID-19 pandemic. The spread of COVID-19 caused significant economic disruption throughout the United States as state and local governments issued stay at home orders and temporarily closed non-essential businesses. The full financial impact from the pandemic is unknown at this time, however prolonged disruption may adversely impact several industries within the Company's geographic footprint and impair the ability of First Financial's customers to fulfill their contractual obligations to the Company. This could cause First Financial to experience a material adverse effect on business operations, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of valuation impairments on First Financial's intangible assets, investments, loans, mortgage servicing rights or counter-party risk derivatives.

**Cash and due from banks.** Cash and due from banks consist of currency, coin and cash items due from banks. Cash items due from banks include noninterest-bearing balances that are on deposit at other depository institutions.

**Investment securities.** First Financial classifies debt securities into three categories: HTM, trading and AFS. Management classifies investment securities into the appropriate category at the time of purchase and re-evaluates that classification as deemed appropriate.

Investment securities are classified as HTM when First Financial has the positive intent and ability to hold the securities to maturity. HTM securities are recorded at amortized cost.

Investment securities classified as trading are held principally for resale in the near-term and are recorded at fair value. Fair value is determined using quoted market prices. Gains or losses on trading securities, both realized and unrealized, are reported in noninterest income.

Investment securities not classified as either HTM or trading are classified as AFS. AFS securities are recorded at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.

The amortized cost of investment securities classified as either HTM or AFS on purchased callable debt securities is adjusted for amortization of premiums to the earliest call date if the call feature meets certain criteria. Otherwise, premiums are amortized to maturity similar to discounts on callable debt securities, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization and accretion are considered an adjustment to the yield on the security and included in interest income from investments. Interest and dividends are also included in interest income from investment securities in the Consolidated Statements of Income. Realized gains and losses are based on the amortized cost of the security sold using the specific identification method.

**Other investments.** Other investments include holdings in FRB and FHLB stock, which are both carried at cost as well as equity securities, including class B Visa shares which are carried at fair value. Changes in the fair value of equity securities are recorded in Net gain (loss) on equity securities in the Consolidated Statements of Income.

**Loans held for sale.** Loans held for sale consist of residential real estate loans newly originated for the purpose of sale to third parties, and in certain circumstances, loans previously originated that have been specifically identified by management for sale based on predetermined criteria. Loans held for sale are carried at fair value. Any subsequent change in the carrying value of

**First Financial Bancorp** 2022 Annual Report **47**

------

**Notes to Consolidated Financial Statements**

transferred loans, not to exceed original cost, is recorded in the Consolidated Statements of Income. First Financial sells loans with servicing retained or released depending on pricing and market conditions.

**Loans and leases.** Loans and leases for which First Financial has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Consolidated Balance Sheets as loans and leases. Loans and leases are carried at the principal amount outstanding, net of unamortized deferred loan origination fees and costs, and net of unearned income. Loan origination and commitment fees received, as well as certain direct loan origination costs paid, are deferred, and the net amount is amortized as an adjustment to the related loan's yield.

Interest income on loans and leases is recorded on an accrual basis. When a loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued, but unpaid interest is reversed. Any payments received while a loan is classified as nonaccrual are applied as a reduction to the carrying value of the loan. A loan may return to accrual status if collection of future principal and interest payments is no longer doubtful.

**Allowance for credit losses - held-to-maturity securities.** Management measures expected credit losses on held-to-maturity debt securities on a collective basis by security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the held-to-maturity portfolio into the following major security types: Mortgage-backed, CMOs, Obligations of state and other political subdivisions and Other.

Nearly all of the HTM securities held by the Company are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The remainder of the Company's HTM securities are non-agency collateralized mortgage obligations and obligations of state and other political subdivisions which currently carry ratings no lower than A+. Accrued interest receivable on held-to maturity debt securities, which totaled $0.4 million and $0.2 million as of December 31, 2022 and 2021, respectively, is excluded by policy election from the estimate of credit losses.

**Allowance for credit losses - available-for-sale securities.** For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income (loss). Changes in the allowance for credit losses are recorded as provision for credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable on AFS debt securities, which totaled $15.9 million and $14.9 million as of December 31, 2022 and 2020, respectively, is excluded from the estimate of credit losses.

**Allowance for credit losses - loans and leases.** The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Management's determination of the adequacy of the ACL is based on an assessment of the expected credit losses on loan and leases over their expected life. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. Loans are charged off when management believes that the collection of the principal amount owed in full, either through payments from the borrower or a guarantor or from the liquidation of collateral is unlikely. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Any interest that is accrued but not collected is reversed against interest income when a loan is placed on nonaccrual status, which typically occurs prior to charging off all, or a portion, of a loan. The Company made the policy election to exclude accrued interest receivable on loans and leases from the estimate of credit losses.

Management estimates the allowance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic

**48 First Financial Bancorp** 2022 Annual Report

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forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions not already considered therein. These adjustments are commonly known as the Qualitative Framework.

First Financial quantitatively models expected credit loss using PD, LGD and EAD over the R&S forecast period, reversion and post-reversion periods.

Utilizing third-party software, First Financial forecasts PD by using a parameterized transition matrix approach. Average transition matrices are calculated over the TTC period, which was defined as the period from December 2007 to December 2016. TTC transition matrices are adjusted under forward-looking macroeconomic expectations to obtain R&S forecasts.

First Financial is not required to develop forecasts over the full contractual term of the financial asset or group of financial assets. Rather, for periods beyond which the entity is able to make or obtain R&S forecasts of expected credit losses, the Company reverts in a straight line manner over a one year period to an average TTC loss level that is reflective of the prepayment adjusted contractual term of the financial asset or group of financial assets. First Financial elected a two year R&S period which is forecasted using econometric data sourced from Moody's, an industry-leading independent third party.

FFB utilizes a non-parametric loss curve approach embedded within a third-party software for estimating LGD. The PD multiplied by LGD produces an expected loss rate that, when calculating the ACL, is applied to contractual loan cash flows, adjusted for expected future rates of principal prepayments.

The Company adjusts its quantitative model for certain qualitative factors to reflect the extent to which management expects current conditions and R&S forecasts to differ from the conditions that existed for the period over which historical information was evaluated. The Qualitative Framework reflects changes related to relevant data, such as changes in asset quality trends, portfolio growth and composition, national and local economic factors, credit policy and administration and other factors not considered in the base quantitative model.

Loans that do not share risk characteristics are evaluated on an individual basis. First Financial will typically evaluate on an individual basis any loans that are on nonaccrual, designated as a TDR, or reasonably expected to be designated as a TDR that are greater than $250,000. When management determines that foreclosure is probable or when repayment is expected to be provided substantially through the operation or sale of underlying collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs, as applicable. For loans evaluated on an individual basis that are not determined to be collateral dependent, a discounted cash flow analysis is performed to determine expected credit losses.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Credit card receivables do not have stated maturities. In determining the estimated life of a credit card receivable, management first estimates the future cash flows expected to be received and then applies those expected future cash flows to the credit card balance.

Significant downturns in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow a reduction in the required allowance. In either instance, unanticipated changes could have a significant impact on results of operations.

**Allowance for credit losses - unfunded commitments**. First Financial estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the Company's ACL methodology for loans and leases. Adjustments to the reserve for unfunded commitments are recorded in Provision for credit losses - unfunded commitments in the Consolidated Statements of Income. The reserve for unfunded commitments is included in Accrued interest and other liabilities on the Consolidated Balance Sheets.

**Premises and equipment.** Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are principally computed on the straight-line method over the estimated useful lives of the assets. Useful lives generally range from 10 to 40 years for building and building improvements; 3 to 10 years for furniture, fixtures

**First Financial Bancorp** 2022 Annual Report **49**

------

**Notes to Consolidated Financial Statements**

and equipment; and 3 to 5 years for software, hardware and data handling equipment. Land improvements are depreciated over 20 years and leasehold improvements are depreciated over the lesser of the term of the respective lease or the useful life of the asset. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Maintenance and repairs are expensed as incurred.

**Operating Leases.** First Financial provides financing for various types of equipment through a variety of leasing arrangements. Operating leases are carried at the aggregate of lease payments plus estimated residual value of the leased equipment, less unearned income. The Company recognizes income over the term of the lease using the constant effective yield method. Lease residual values are reviewed for impairment at least annually. Depreciation expense related to operating lease equipment is recorded in Leasing business expense on the Consolidated Statements of Income.

**Bank-owned life insurance.** First Financial purchases and is the owner and beneficiary of life insurance policies on the lives of certain employees . The Bank invests in these policies to provide an efficient form of funding for long-term retirement and other employee benefits costs. The policies are included within Accrued interest and other assets in the Consolidated Balance Sheets at each policy's respective cash surrender value. Changes in the cash surrender value of these policies are recorded in Other noninterest income in the Consolidated Statements of Income.

**Goodwill.** Under accounting for business combinations, the net assets of entities acquired by First Financial are recorded at their estimated fair value at the date of acquisition. The excess cost of the acquisition over the fair value of net assets acquired is recorded as goodwill. Goodwill and other intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. The Company is required to evaluate goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. First Financial performs its annual impairment test effective October 1, absent events or changes in circumstances that indicate the carrying value of goodwill may not be recoverable.

The Company's goodwill is accounted for in a single reporting unit representing the consolidated entity. When required, management's quantitative impairment analysis utilizes a discounted cash flow model for the income approach and the market multiple methodology and comparable transaction methodology as the market approach. These valuation methodologies utilize key assumptions that include forecasts of revenues and expenses derived from internal management projections for a period of five years, changes in working capital estimates, company specific discount rate derived from a rate build up approach, externally sourced bank peer group market multiples and externally sourced bank peer group change in control premium, all of which are highly subjective and require significant management judgment. Changes in these key assumptions, as well as downturns in economic or business conditions, could materially affect our estimate of the reporting unit fair value and could affect our conclusion regarding the existence of potential impairment. In 2022, management evaluated goodwill for impairment using a qualitative analysis.

**Other intangible assets.** Other intangible assets consist primarily of core deposit, customer list, MSR and other miscellaneous intangibles.

CDI represent the estimated value of acquired customer deposit relationships. CDI are recorded at fair value at the date of acquisition and are based on a discounted cash flow methodology that gives appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits. Core deposit intangibles are amortized on an accelerated basis over their estimated useful lives.

First Financial recorded a customer list intangible asset in conjunction with the Bannockburn and Summit mergers to account for the obligation or advantage on the part of either the Company or the customer to continue pre-existing relationships subsequent to the mergers. Customer list intangible assets are amortized on a straight-line basis over their estimated useful lives.

Other intangible assets also include purchase commissions, non-compete agreements and trade name intangibles.

Mortgage servicing rights are servicing fees First Financial receives from selling fixed and adjustable-rate residential mortgage loans where it obtains servicing responsibilities. In those sales, the First Financial obtained servicing responsibilities and provided certain standard representations and warranties; however, the investors have no recourse to the Company's other assets for failure of debtors to pay when due. First Financial receives servicing fees based on a percentage of the outstanding balance. Mortgage servicing rights are measured at fair value with changes in fair value reported in Other noninterest income in the Consolidated Statements of Income. The market value of the mortgage servicing rights is estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan

**50 First Financial Bancorp** 2022 Annual Report

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prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market conditions. The expected and actual rates of mortgage loan prepayments are the most significant factors driving the value of mortgage servicing rights. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. In determining the market value of the mortgage servicing rights, mortgage interest rates, which are used to determine prepayment rates and discount rates, are held constant over the estimated life of the portfolio. Capitalized mortgage servicing rights are reported in other assets and are amortized against noninterest income offsetting the actual servicing income of the underlying mortgage loans.

Mortgage servicing rights are regularly evaluated for impairment based on the estimated fair value of those rights. The mortgage servicing rights are stratified by certain risk characteristics, primarily loan term and note rate. If impairment exists, a valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair value.

**Other real estate owned.** OREO consists of properties acquired by the Company primarily through the loan foreclosure or repossession process, or other resolution activity that results in partial or total satisfaction of problem loans. OREO properties are recorded at fair value, less estimated disposal costs (net realizable value) establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Losses arising at the time of acquisition of such properties are charged against the ACL. Management performs periodic valuations to assess the adequacy of recorded OREO balances and subsequent changes in the carrying value of OREO properties are recorded in the Consolidated Statements of Income. Improvements to OREO properties may be capitalized if the improvements contribute to the overall value of the property, but may not be capitalized in excess of the net realizable value of the property. When management disposes of an OREO property, any gains or losses realized at the time of disposal are reflected in the Consolidated Statements of Income.

**Affordable housing projects.** First Financial has investments in certain qualified affordable housing projects. These projects are indirect federal subsidies that provide tax incentives to encourage investment in the development, acquisition and rehabilitation of affordable rental housing, and allow investors to claim tax credits and other tax benefits (such as deductions from taxable income for operating losses) on their federal income tax returns. The principal risk associated with qualified affordable housing investments is the potential for noncompliance with the tax code requirements, such as failure to rent properties to qualified tenants, resulting in unavailability or recapture of the tax credits and other tax benefits. Investments in affordable housing projects are included in Accrued interest and other assets in the Consolidated Balance Sheets while any unfunded commitment is recorded with Accrued interest and other liabilities. These investments are accounted for under the proportional amortization method. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other benefits received and recognized as a component of Income tax expense in the Consolidated Statements of Income.

**Investments in historic tax credits.** First Financial has noncontrolling financial investments in private investment funds and partnerships that finance the rehabilitation and re-use of historic buildings. These unconsolidated investments may generate a return through the realization of federal and state income tax credits, as well as other tax benefits, such as tax deductions from net operating losses of the investments over a period of time. Investments in historic tax credits are accounted for under the equity method of accounting and the Company's recorded investment in these entities is carried in Accrued interest and other assets on the Consolidated Balance Sheets with any unfunded commitment recorded in Accrued interest and other liabilities. Impairment of these investments is recorded in Other noninterest expense, while the tax credits and other net tax benefits received are recognized as a component of income tax expense in the Consolidated Statements of Income.

**Investments in renewable energy credits**. First Financial has investments in renewable energy projects where it has noncontrolling interest which is not consolidated. This investment may generate a return through the realization of federal and state income tax credits, as well as other tax benefits, such as tax deductions from net operating losses of the investments over a period of time. Investments in renewable energy tax credits are accounted for under the equity method of accounting and are included in Accrued interest and other assets on the Consolidated Balance Sheets with any unfunded commitment recorded in Accrued interest and other liabilities. Impairment of these investments is recorded in Other noninterest expense, while the tax credits and other net tax benefits received are recognized as a component of income tax expense in the Consolidated Statements of Income.

**Income taxes.** First Financial and its subsidiaries file a consolidated federal income tax return. Each subsidiary provides for income taxes on a separate return basis, and remits to First Financial amounts determined to be currently payable.

**First Financial Bancorp** 2022 Annual Report **51**

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**Notes to Consolidated Financial Statements**

First Financial evaluates and assesses the relative risks and appropriate tax treatment of transactions after considering statutes, regulations, judicial precedent and other information, and maintains tax accruals consistent with its evaluation of these relative risks. Changes to the estimate of accrued taxes occur periodically due to changes in tax rates, interpretations of tax laws, the status of examinations being conducted by taxing authorities and changes to statutory, judicial and regulatory guidance that impact the relative risks of tax positions. These changes, when they occur, can affect deferred taxes and accrued taxes as well as the current period's income tax expense and can be material to the Company's operating results.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Interest and penalties on income tax assessments or income tax refunds are recorded in Other noninterest expense in the Consolidated Statements of Income.

In establishing a provision for income tax expense, we must make judgments and interpretations about the application of complex tax laws as well as make estimates about when in the future certain items will affect taxable income. First Financial regularly reviews its tax positions and establishes reserves for income tax-related uncertainties based on estimates of whether it is more likely than not that the tax uncertainty would be sustained upon challenge by the appropriate tax authorities which would then result in additional taxes, penalties and interest due. Reserves for uncertain tax positions, if any, are included in income tax expense in the Consolidated Financial Statements.

**Pension.** First Financial sponsors a non-contributory defined-benefit pension plan covering substantially all employees. Accounting for the pension plan involves material estimates regarding future plan obligations and investment returns on plan assets. Significant assumptions used in the pension plan include the discount rate, expected return on plan assets and the rate of compensation increase. First Financial determines the discount rate assumption using published corporate bond indices and the projected cash flows of the pension plan. First Financial also utilizes external surveys for industry comparisons to assess the discount rate for reasonableness. The expected long-term return on plan assets is determined based on the composition of plan assets, actual returns and economic forecasts, while the rate of compensation increase is compared to historical increases for plan participants. Changes in these assumptions can have a material impact on the amount of First Financial's future pension obligations, on the funded status of the plan and on the Company's operating results

**Derivative instruments.** First Financial accounts for its derivative financial instruments in accordance with FASB ASC Topic 815, Derivatives and Hedging. FASB ASC Topic 815 requires all derivative instruments to be carried at fair value on the balance sheet.

The accounting for changes in the fair value of derivatives is based on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

*Client derivatives* - First Financial utilizes matched interest rate swaps as a means to offer commercial borrowers fixed rate funding while providing the Company with floating rate assets. Upon entering into an interest rate swap with a borrower, the Bank simultaneously enters into an offsetting swap agreement with an institutional counterparty, with substantially matching terms. These matched interest rate swap agreements generally involve the receipt by First Financial of floating rate amounts from the counterparties in exchange for payments to these counterparties by First Financial of fixed rate amounts received from commercial borrowers over the life of the agreements.

First Financial's matched interest rate swaps qualify as derivatives, but are not designated as hedging instruments. The net interest receivable or payable on matched interest rate swaps is accrued and recognized as an adjustment to interest income. The fair values of client derivatives are included within Accrued interest and other assets and Accrued interest and other liabilities in the Consolidated Balance Sheets.

*Foreign exchange contracts* - First Financial may enter into foreign exchange derivative contracts for the benefit of commercial customers to hedge their exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from interest rate derivative contracts, First Financial also enters into foreign exchange contracts with major financial institutions to economically hedge a substantial portion of the exposure from client driven foreign exchange activity. These derivatives are classified as free-standing instruments with the revaluation gain or loss recorded in Foreign exchange income in the Consolidated Statements of Income.

**52 First Financial Bancorp** 2022 Annual Report

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*Credit derivatives* - In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation agreements with counterparties whereby First Financial assumes a portion of the credit exposure associated with an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make payments to the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with the counterparty. The fair value of these agreements is recorded in the Consolidated Balance Sheets in Accrued interest and other liabilities.

*Mortgage derivatives* - First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans to third party investors, which are considered derivatives. When borrowers secure an IRLC with First Financial and the loan is intended to be sold, First Financial will enter into forward commitments for the future delivery of the loans to third party investors in order to hedge against the effect of changes in interest rates impacting IRLCs and Loans held for sale. The fair value of these agreements is recorded in the Consolidated Balance Sheets in Accrued interest and other assets.

**Stock-based compensation.** First Financial grants stock-based awards, including restricted stock awards and options to purchase the Company's common stock. Restricted stock award grants are for a fixed number of shares to employees and directors with an exercise price equal to the fair value of the shares at the date of grant. Stock-based compensation expense is recognized in the Consolidated Statements of Income on a straight-line basis over the vesting period. As compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise. At the time stock-based awards are exercised, canceled or expire, First Financial may be required to recognize an adjustment to tax expense.

**Earnings per share.** Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding, unvested shares and dilutive common stock equivalents outstanding during the period. Common stock equivalents, which consist of common stock issuable under the assumed exercise of stock options granted under First Financial's stock-based compensation plans and the assumed conversion of common stock warrants, are calculated using the treasury stock method.

**Segments and related information.** While the Company monitors the operating results of its six lines of business, operations are managed and financial performance is evaluated on a consolidated basis. Accordingly, and consistent with prior years, all of the Company's operations are considered by management to be aggregated in one reportable operating segment.

**2. Accounting Standards Recently Adopted or Issued** 

**Standards Adopted in 2022**

During the first quarter of 2022, the SEC issued SAB No. 121. This bulletin adds interpretive guidance on the accounting and disclosure of obligations to safeguard crypto assets held for platform users. This guidance was applicable no later than the financial statements covering the first interim or annual period ending after June 15, 2022. Management has reviewed its business activities and determined SAB 121 is not impactful to the Company's Consolidated Financial Statements as of September 30, 2022 as the Company does not currently safeguard crypto assets.

**Standards Adopted in 2021**

During the first quarter of 2021, the Company adopted ASU 2019-12 - *Income Taxes* (Topic 740): *Simplifying the Accounting*

*for Income Taxes*. This standard simplified the accounting for income taxes by removing certain exceptions to the general

principles in Topic 740 and added new requirements with the intention of simplifying and clarifying existing guidance. This

update did not have a material impact on the Company's Consolidated Financial Statements.

**Standards Issued But Not Yet Adopted**

In March, 2022, the FASB issued ASU 2022-02 - *Financial Instruments - Credit Losses* (Topic 326): *Troubled Debt*

*Restructurings and Vintage Disclosures*. This standard eliminates the accounting guidance on TDRs for creditors in ASC

310-40 and amends the guidance on "vintage disclosures" to require disclosure of current period gross write-offs by year of

origination. The ASU also updates the requirements related to accounting for credit losses under ASC 326 and adds enhanced

disclosures for creditors with respect to loan refinancings and restructurings for borrowers experiencing financial difficulty.

**First Financial Bancorp** 2022 Annual Report **53**

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**Notes to Consolidated Financial Statements**

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods

within those fiscal years. Entities are permitted to early adopt these amendments, including adoption in any interim period,

provided that the amendments are adopted as of the beginning of the annual reporting period that includes the interim period of

adoption. The adoption of this standard is expected to result in amended disclosures in the Company's Consolidated Financial

Statements; however, it is not expected to materially impact the Company's results of operations.

**3. Restrictions on Cash and Dividends**

As of December 31, 2022 and 2021, First Financial had $25.0 million and $34.0 million, respectively, in cash restricted for withdrawal and usage due to the centrally cleared derivative initial margin requirement. Additionally, First Financial had no required reserves with the FRB as of December 31, 2022 and 2021.

Dividends paid by First Financial to its shareholders are principally funded through dividends paid to the Company by its subsidiaries; however, certain restrictions exist regarding the ability of the Bank to transfer funds to First Financial in the form of cash dividends, loans or advances. The approval of the Federal Reserve Board and the ODFI is required for the Bank to pay dividends in excess of the regulatory limit, which is equal to the net income of the current year through the dividend date combined with the Bank's retained net income from the two preceding years. As of December 31, 2022, First Financial's subsidiaries had retained earnings of $801.2 million, of which $219.3 million was available for distribution to First Financial without prior regulatory approval.

**4. Investment Securities**

During the year ended December 31, 2022, proceeds on the sale of $277.1 million of AFS securities resulted in gains of $1.0 million and losses of $1.6 million. During the year ended December 31, 2021, proceeds on the sale of $375.3 million of AFS securities resulted in gains of $6.8 million and losses of $7.6 million. During the year ended December 31, 2020, proceeds on the sale of $117.8 million of AFS securities resulted in gains of $0.9 million and losses of $0.8 million. The impact to income tax expense from these sales was insignificant in all three years.

In 2022 and 2021, there were no reclassifications of HTM securities to AFS securities.

The carrying value of investment securities pledged as collateral to secure public deposits, repurchase agreements and for other purposes as required by law totaled $1.5 billion at both December 31, 2022 and December 31, 2021.

The following is a summary of HTM and AFS investment securities as of December 31, 2022:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Held-to-maturity | Held-to-maturity | Held-to-maturity | Held-to-maturity | Available-for-sale | Available-for-sale | Available-for-sale | Available-for-sale |
| *(Dollars in thousands)* | Amortized<br>cost | Unrecognized<br>gain | Unrecognized<br>loss | Fair<br>value | Amortized<br>cost | Unrealized<br>gain | Unrealized<br>loss | Fair<br>value |
| U.S. Treasuries | $0 | $0 | $0 | $0 | $37312 | $0 | $(4616) | $32696 |
| Securities of U.S. government agencies and corporations | 0 | 0 | 0 | 0 | 80382 | 0 | (13914) | 66468 |
| Mortgage-backed securities - residential | 0 | 0 | 0 | 0 | 747478 | 47 | (97462) | 650063 |
| Mortgage-backed securities - commercial | 35363 | 0 | (4114) | 31249 | 676934 | 2 | (47374) | 629562 |
| Collateralized mortgage obligations | 9280 | 0 | (827) | 8453 | 538970 | 181 | (61439) | 477712 |
| Obligations of state and other political subdivisions | 8128 | 105 | (201) | 8032 | 832066 | 565 | (124168) | 708463 |
| Asset-backed securities | 0 | 0 | 0 | 0 | 772261 | 39 | (60975) | 711325 |
| Other securities | 31250 | 0 | (2499) | 28751 | 142015 | 0 | (8656) | 133359 |
| &nbsp;&nbsp;&nbsp;**Total** | $84021 | $105 | $(7641) | $76485 | $3827418 | $834 | $(418604) | $3409648 |

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**54 First Financial Bancorp** 2022 Annual Report

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The following is a summary of HTM and AFS investment securities as of December 31, 2021:

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Held-to-maturity | Held-to-maturity | Held-to-maturity | Held-to-maturity | Available-for-sale | Available-for-sale | Available-for-sale | Available-for-sale |
| *(Dollars in thousands)* | Amortized<br>cost | Unrecognized<br>gain | Unrecognized<br>loss | Fair<br>value | Amortized<br>cost | Unrealized<br>gain | Unrealized<br>loss | Fair<br>value |
| U.S. Treasuries | $0 | $0 | $0 | $0 | $34961 | $4 | $(189) | $34776 |
| Securities of U.S. government agencies and corporations | 0 | 0 | 0 | 0 | 78998 | 248 | (129) | 79117 |
| Mortgage-backed securities - residential | 0 | 0 | 0 | 0 | 728050 | 6635 | (10548) | 724137 |
| Mortgage-backed securities - commercial | 46362 | 651 | 0 | 47013 | 729948 | 4294 | (2352) | 731890 |
| Collateralized mortgage obligations | 11882 | 221 | 0 | 12103 | 696258 | 7979 | (6497) | 697740 |
| Obligations of state and other political subdivisions | 8926 | 915 | 0 | 9841 | 1058735 | 35591 | (8594) | 1085732 |
| Asset-backed securities | 0 | 0 | 0 | 0 | 720638 | 1521 | (2578) | 719581 |
| Other securities | 31250 | 176 | (485) | 30941 | 133001 | 2114 | (242) | 134873 |
| &nbsp;&nbsp;&nbsp;**Total** | $98420 | $1963 | $(485) | $99898 | $4180589 | $58386 | $(31129) | $4207846 |

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The following table provides a summary of investment securities by contractual maturity as of December 31, 2022, except for residential and commercial mortgage-backed securities, collateralized mortgage obligations and asset-backed securities, which are shown as single totals, due to the unpredictability of the timing in principal repayments:

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| | | | | |
|:---|:---|:---|:---|:---|
| | Held-to-maturity | Held-to-maturity | Available-for-sale | Available-for-sale |
| *(Dollars in thousands)* | Amortized<br>cost | Fair<br>value | Amortized<br>cost | Fair<br>value |
| Due in one year or less | $0 | $0 | $8230 | $8125 |
| Due after one year through five years | 2584 | 2662 | 93629 | 89551 |
| Due after five years through ten years | 34920 | 32410 | 292581 | 255143 |
| Due after ten years | 1874 | 1711 | 697335 | 588167 |
| Mortgage-backed securities - residential | 0 | 0 | 747478 | 650063 |
| Mortgage-backed securities - commercial | 35363 | 31249 | 676934 | 629562 |
| Collateralized mortgage obligations | 9280 | 8453 | 538970 | 477712 |
| Asset-backed securities | 0 | 0 | 772261 | 711325 |
| &nbsp;&nbsp;&nbsp;**Total** | $84021 | $76485 | $3827418 | $3409648 |

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Unrealized gains and losses on debt securities are generally due to fluctuations in current market yields relative to the yields of the securities at their amortized cost. All AFS securities with unrealized losses are reviewed quarterly to determine if any impairment exists, requiring a write-down to fair value. For AFS securities in an unrealized loss position, the Company first assesses whether it intends to sell or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For debt securities available-for-sale in an unrealized loss position that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis.

First Financial does not intend to sell, and it is not more likely than not that the Company will be required to sell, debt securities temporarily impaired prior to maturity or recovery of the recorded value. Additionally, based on the Company's credit assessment of AFS securities in an unrealized loss position, the Company recorded no reserves on investment securities for the twelve months ended December 31, 2022 or 2021.

**First Financial Bancorp** 2022 Annual Report **55**

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**Notes to Consolidated Financial Statements**

As of December 31, 2022, the Company's investment securities portfolio consisted of 1,251 securities, of which 891 were in an unrealized loss position. As of December 31, 2021, the Company's investment securities portfolio consisted of 1,418 securities, of which 327 were in an unrealized loss position.

Certain HTM debt securities owned by First Financial are issued by U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as "risk free," and have a long history of zero credit loss. The remainder of the Company's HTM securities are debt obligations of public and private corporations with no credit issues, as well as non-agency collateralized mortgage obligations and obligations of state and other political subdivisions which currently carry ratings no lower than A+. There were no HTM securities on nonaccrual status or past due as of December 31, 2022, or 2021. The Company did not record an allowance for credit losses for these securities as of December 31, 2022 or 2021.

The following tables provide the fair value and gross unrealized losses on investment securities in an unrealized loss position for which an allowance for credit losses was not recorded, aggregated by investment category and the length of time the individual securities have been in a continuous loss position:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
| | Less than 12 months | Less than 12 months | 12 months or more | 12 months or more | Total | Total |
| *(Dollars in thousands)* | Fair<br>value | Unrealized<br>loss | Fair<br>value | Unrealized<br>loss | Fair<br>value | Unrealized<br>loss |
| U.S. Treasuries | $2383 | $(46) | $30313 | $(4570) | $32696 | $(4616) |
| Securities of U.S. government agencies and corporations | 0 | 0 | 66468 | (13914) | 66468 | (13914) |
| Mortgage-backed securities - residential | 195972 | (10413) | 443415 | (87049) | 639387 | (97462) |
| Mortgage-backed securities - commercial | 457863 | (21020) | 189123 | (30468) | 646986 | (51488) |
| Collateralized mortgage obligations | 205456 | (13059) | 271377 | (49207) | 476833 | (62266) |
| Obligations of state and other political subdivisions | 301073 | (31397) | 368673 | (92972) | 669746 | (124369) |
| Asset-backed securities | 250946 | (9410) | 422090 | (51565) | 673036 | (60975) |
| Other securities | 125344 | (7283) | 31629 | (3872) | 156973 | (11155) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $1539037 | $(92628) | $1823088 | $(333617) | $3362125 | $(426245) |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| | Less than 12 months | Less than 12 months | 12 months or more | 12 months or more | Total | Total |
| *(Dollars in thousands)* | Fair<br>value | Unrealized<br>loss | Fair<br>value | Unrealized<br>loss | Fair<br>value | Unrealized<br>loss |
| U.S. Treasuries | $24755 | $(190) | $0 | $0 | $24755 | $(190) |
| Securities of U.S. Government agencies and corporations | 17382 | (128) | 0 | 0 | 17382 | (128) |
| Mortgage-backed securities - residential | 459098 | (8375) | 78090 | (2173) | 537188 | (10548) |
| Mortgage-backed securities - commercial | 205520 | (2149) | 13818 | (203) | 219338 | (2352) |
| Collateralized mortgage obligations | 369318 | (6110) | 12485 | (387) | 381803 | (6497) |
| Obligations of state and other political subdivisions | 380735 | (7543) | 55568 | (1051) | 436303 | (8594) |
| Asset-backed securities | 482118 | (2578) | 0 | 0 | 482118 | (2578) |
| Other securities | 31896 | (354) | 11877 | (373) | 43773 | (727) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $1970822 | $(27427) | $171838 | $(4187) | $2142660 | $(31614) |

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For further detail on the fair value of investment securities, see Note 23 – Fair Value Disclosures.

**56 First Financial Bancorp** 2022 Annual Report

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**5. Loans and Leases**

First Financial offers clients a variety of commercial and consumer loan and lease products with various interest rates and payment terms. Commercial loan categories include C&I, CRE, construction real estate and lease financing. Consumer loan categories include residential real estate, home equity, installment and credit card.

Lending activities are primarily concentrated in states where the Bank operates banking centers (Ohio, Indiana, Kentucky and Illinois). First Financial also offers two nationwide lending platforms, one that provides equipment and leasehold improvement financing for franchisees in the quick service and casual dining restaurant sector and another that provides loans that are secured by commissions and cash collateral accounts to insurance agents and brokers.

In accordance with the CARES Act and the 2021 Consolidated Appropriations Act, First Financial participated in offering PPP loans to its customers. These loans provide a direct incentive for small businesses to keep their workers on the payroll and to maintain their operations during the COVID-19 pandemic. PPP loans are eligible to be forgiven provided certain conditions are met. As of December 31, 2022, First Financial had $3.0 million in PPP loans, net of unearned fees of $0.1 million. As of December 31, 2021, First Financial had $55.6 million in PPP loans, net of unearned income of $2.6 million.

**Credit quality.** To facilitate the monitoring of credit quality for commercial loans, First Financial utilizes the following categories of credit grades:

*Pass* - Higher quality loans that do not fit any of the other categories described below.

*Special Mention* - First Financial assigns a special mention rating to loans and leases with potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in First Financial's credit position at some future date.

*Substandard* - First Financial assigns a substandard rating to loans or leases that are inadequately protected by the current sound financial worth and paying capacity of the borrower or the collateral pledged, if any. Substandard loans and leases have well-defined weaknesses that jeopardize repayment of the debt. Substandard loans and leases are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not addressed.

*Doubtful* - First Financial assigns a doubtful rating to loans and leases with all of the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.

The credit grades previously described are derived from standard regulatory rating definitions and are assigned upon initial approval of credit to borrowers and updated periodically thereafter.

First Financial considers repayment performance to be the best indicator of credit quality for consumer loans. Consumer loans that have principal and interest payments that are past due by 90 days or more are generally classified as nonperforming. Additionally, consumer loans that have been modified in a TDR are classified as nonperforming.

**First Financial Bancorp** 2022 Annual Report **57**

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**Notes to Consolidated Financial Statements**

The following table sets forth the Company's loan portfolio at December 31, 2022 by risk attribute and origination date:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Term Total | Revolving | Total |
| **Commercial & industrial** | **Commercial & industrial** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $879836 | $561890 | $348123 | $209758 | $112282 | $206656 | $2318545 | $971080 | $3289625 |
| &nbsp;&nbsp;&nbsp;Special mention | 2740 | 13821 | 4125 | 14047 | 8523 | 5544 | 48800 | 18055 | 66855 |
| &nbsp;&nbsp;&nbsp;Substandard | 2335 | 5176 | 11886 | 8016 | 3331 | 13812 | 44556 | 9236 | 53792 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $884911 | $580887 | $364134 | $231821 | $124136 | $226012 | $2411901 | $998371 | $3410272 |
| **Lease financing** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $167035 | $25638 | $13705 | $12797 | $9402 | $2930 | $231507 | $0 | $231507 |
| &nbsp;&nbsp;&nbsp;Special mention | 0 | 0 | 70 | 0 | 0 | 0 | 70 | 0 | 70 |
| &nbsp;&nbsp;&nbsp;Substandard | 4363 | 0 | 0 | 164 | 11 | 9 | 4547 | 0 | 4547 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $171398 | $25638 | $13775 | $12961 | $9413 | $2939 | $236124 | $0 | $236124 |
| **Construction real estate** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $89116 | $276639 | $96823 | $4902 | $390 | $353 | $468223 | $23266 | $491489 |
| &nbsp;&nbsp;&nbsp;Special mention | 0 | 14395 | 0 | 0 | 6166 | 0 | 20561 | 0 | 20561 |
| &nbsp;&nbsp;&nbsp;Substandard | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $89116 | $291034 | $96823 | $4902 | $6556 | $353 | $488784 | $23266 | $512050 |
| **Commercial real estate - investor** | **Commercial real estate - investor** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $643174 | $470085 | $301510 | $719699 | $300772 | $508639 | $2943879 | $26153 | $2970032 |
| &nbsp;&nbsp;&nbsp;Special mention | 0 | 13090 | 23111 | 9297 | 26079 | 13804 | 85381 | 861 | 86242 |
| &nbsp;&nbsp;&nbsp;Substandard | 0 | 6950 | 6 | 4025 | 17178 | 9631 | 37790 | 0 | 37790 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $643174 | $490125 | $324627 | $733021 | $344029 | $532074 | $3067050 | $27014 | $3094064 |
| **Commercial real estate - owner** | **Commercial real estate - owner** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $165411 | $155041 | $170587 | $101137 | $112063 | $211377 | $915616 | $11125 | $926741 |
| &nbsp;&nbsp;&nbsp;Special mention | 0 | 0 | 0 | 1479 | 0 | 14040 | 15519 | 0 | 15519 |
| &nbsp;&nbsp;&nbsp;Substandard | 0 | 525 | 844 | 5114 | 3501 | 6451 | 16435 | 0 | 16435 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $165411 | $155566 | $171431 | $107730 | $115564 | $231868 | $947570 | $11125 | $958695 |
| **Residential real estate** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $320676 | $274816 | $205948 | $110745 | $51583 | $114642 | $1078410 | $0 | $1078410 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 414 | 1615 | 1286 | 2554 | 1755 | 6231 | 13855 | 0 | 13855 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $321090 | $276431 | $207234 | $113299 | $53338 | $120873 | $1092265 | $0 | $1092265 |
| **Home equity** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $26411 | $33414 | $38226 | $11733 | $8051 | $24985 | $142820 | $585712 | $728532 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 5 | 136 | 298 | 78 | 104 | 430 | 1051 | 4208 | 5259 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $26416 | $33550 | $38524 | $11811 | $8155 | $25415 | $143871 | $589920 | $733791 |
| **Installment** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $100256 | $38694 | $7244 | $3915 | $2861 | $3242 | $156212 | $51854 | $208066 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 650 | 794 | 18 | 6 | 20 | 42 | 1530 | 299 | 1829 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $100906 | $39488 | $7262 | $3921 | $2881 | $3284 | $157742 | $52153 | $209895 |
| **Credit cards** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $51287 | $51287 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 528 | 528 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $51815 | $51815 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Grand Total** | $2402422 | $1892719 | $1223810 | $1219466 | $664072 | $1142818 | $8545307 | $1753664 | $10298971 |

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**58 First Financial Bancorp** 2022 Annual Report

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The following table sets forth the Company's loan portfolio at December 31, 2021 by risk attribute and origination date:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | 2021 | 2020 | 2019 | 2018 | 2017 | Prior | Term Total | Revolving | Total |
| **Commercial & industrial** | **Commercial & industrial** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $711198 | $442064 | $339507 | $164273 | $119580 | $154835 | $1931457 | $700246 | $2631703 |
| &nbsp;&nbsp;&nbsp;Special mention | 389 | 4867 | 5993 | 16057 | 6511 | 4918 | 38735 | 21505 | 60240 |
| &nbsp;&nbsp;&nbsp;Substandard | 2220 | 434 | 2843 | 1224 | 12640 | 1465 | 20826 | 7259 | 28085 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $713807 | $447365 | $348343 | $181554 | $138731 | $161218 | $1991018 | $729010 | $2720028 |
| **Lease financing** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $31697 | $21536 | $19095 | $15494 | $6821 | $4765 | $99408 | $0 | $99408 |
| &nbsp;&nbsp;&nbsp;Special mention | 0 | 10216 | 0 | 0 | 0 | 0 | 10216 | 0 | 10216 |
| &nbsp;&nbsp;&nbsp;Substandard | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $31697 | $31752 | $19095 | $15494 | $6821 | $4765 | $109624 | $0 | $109624 |
| **Construction real estate** | **Construction real estate** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $95991 | $200421 | $96726 | $15886 | $317 | $12719 | $422060 | $18299 | $440359 |
| &nbsp;&nbsp;&nbsp;Special mention | 0 | 6531 | 0 | 9004 | 0 | 0 | 15535 | 0 | 15535 |
| &nbsp;&nbsp;&nbsp;Substandard | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $95991 | $206952 | $96726 | $24890 | $317 | $12719 | $437595 | $18299 | $455894 |
| **Commercial real estate - investor** | **Commercial real estate - investor** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $537183 | $379217 | $944915 | $367946 | $294147 | $434641 | $2958049 | $66579 | $3024628 |
| &nbsp;&nbsp;&nbsp;Special mention | 0 | 7479 | 18136 | 18006 | 15566 | 34153 | 93340 | 0 | 93340 |
| &nbsp;&nbsp;&nbsp;Substandard | 1616 | 6 | 21312 | 6628 | 6918 | 307 | 36787 | 0 | 36787 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $538799 | $386702 | $984363 | $392580 | $316631 | $469101 | $3088176 | $66579 | $3154755 |
| **Commercial real estate - owner** | **Commercial real estate - owner** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Pass | $204291 | $184564 | $121150 | $135463 | $119489 | $259504 | $1024461 | $7565 | $1032026 |
| &nbsp;&nbsp;&nbsp;Special mention | 970 | 2283 | 2262 | 3751 | 1381 | 5512 | 16159 | 0 | 16159 |
| &nbsp;&nbsp;&nbsp;Substandard | 162 | 727 | 6541 | 12513 | 1730 | 1963 | 23636 | 38 | 23674 |
| &nbsp;&nbsp;&nbsp;Doubtful | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $205423 | $187574 | $129953 | $151727 | $122600 | $266979 | $1064256 | $7603 | $1071859 |
| **Residential real estate** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $258537 | $230699 | $138239 | $64310 | $34606 | $162924 | $889315 | $0 | $889315 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 236 | 970 | 1193 | 598 | 339 | 3418 | 6754 | 0 | 6754 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $258773 | $231669 | $139432 | $64908 | $34945 | $166342 | $896069 | $0 | $896069 |
| **Home equity** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $42298 | $45638 | $14713 | $11221 | $7603 | $30588 | $152061 | $553245 | $705306 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 72 | 161 | 44 | 67 | 56 | 234 | 634 | 2459 | 3093 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $42370 | $45799 | $14757 | $11288 | $7659 | $30822 | $152695 | $555704 | $708399 |
| **Installment** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $58209 | $12768 | $8213 | $5541 | $3925 | $2201 | $90857 | $28353 | $119210 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 6 | 61 | 32 | 9 | 1 | 56 | 165 | 79 | 244 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $58215 | $12829 | $8245 | $5550 | $3926 | $2257 | $91022 | $28432 | $119454 |
| **Credit cards** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Performing | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $51772 | $51772 |
| &nbsp;&nbsp;&nbsp;Nonperforming | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 445 | 445 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $52217 | $52217 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Grand Total** | $1945075 | $1550642 | $1740914 | $847991 | $631630 | $1114203 | $7830455 | $1457844 | $9288299 |

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**Delinquency.** Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment.

**First Financial Bancorp** 2022 Annual Report **59**

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**Notes to Consolidated Financial Statements**

Loan delinquency, including nonaccrual loans, was as follows:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | As of December 31, 2022 | As of December 31, 2022 | As of December 31, 2022 | As of December 31, 2022 | As of December 31, 2022 | As of December 31, 2022 | As of December 31, 2022 |
| *(Dollars in thousands)* | 30 – 59<br>days<br>past due | 60 – 89<br>days<br>past due | > 90 days<br>past due | Total<br>past<br>due | Current | Total | > 90 days<br>past due<br>and still<br>accruing |
| **Loans** |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial & industrial | $5375 | $72 | $501 | $5948 | $3404324 | $3410272 | $0 |
| &nbsp;&nbsp;&nbsp;Lease financing | 5212 | 1052 | 843 | 7107 | 229017 | 236124 | 742 |
| &nbsp;&nbsp;&nbsp;Construction real estate | 0 | 0 | 0 | 0 | 512050 | 512050 | 0 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-investor | 0 | 0 | 0 | 0 | 3094064 | 3094064 | 0 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-owner | 26 | 5216 | 44 | 5286 | 953409 | 958695 | 0 |
| &nbsp;&nbsp;&nbsp;Residential real estate | 4254 | 2074 | 3260 | 9588 | 1082677 | 1092265 | 0 |
| &nbsp;&nbsp;&nbsp;Home equity | 1725 | 729 | 1209 | 3663 | 730128 | 733791 | 0 |
| &nbsp;&nbsp;&nbsp;Installment | 874 | 490 | 414 | 1778 | 208117 | 209895 | 0 |
| &nbsp;&nbsp;&nbsp;Credit card | 261 | 150 | 116 | 527 | 51288 | 51815 | 115 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $17727 | $9783 | $6387 | $33897 | $10265074 | $10298971 | $857 |

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | As of December 31, 2021 | As of December 31, 2021 | As of December 31, 2021 | As of December 31, 2021 | As of December 31, 2021 | As of December 31, 2021 | As of December 31, 2021 |
| *(Dollars in thousands)* | 30 - 59<br>days<br>past due | 60 - 89<br>days<br>past due | > 90 days<br>past due | Total<br>past<br>due | Current | Total | > 90 days<br>past due and still accruing |
| **Loans** |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial & industrial | $303 | $2006 | $2775 | $5084 | $2714944 | $2720028 | $0 |
| &nbsp;&nbsp;&nbsp;Lease financing | 93 | 0 | 0 | 93 | 109531 | 109624 | 0 |
| &nbsp;&nbsp;&nbsp;Construction real estate | 0 | 0 | 0 | 0 | 455894 | 455894 | 0 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-investor | 89 | 42 | 6409 | 6540 | 3148215 | 3154755 | 0 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-owner | 56 | 2207 | 637 | 2900 | 1068959 | 1071859 | 0 |
| &nbsp;&nbsp;&nbsp;Residential real estate | 4379 | 262 | 2114 | 6755 | 889314 | 896069 | 0 |
| &nbsp;&nbsp;&nbsp;Home equity | 1214 | 692 | 1186 | 3092 | 705307 | 708399 | 0 |
| &nbsp;&nbsp;&nbsp;Installment | 162 | 37 | 45 | 244 | 119210 | 119454 | 0 |
| &nbsp;&nbsp;&nbsp;Credit card | 223 | 134 | 137 | 494 | 51723 | 52217 | 137 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $6519 | $5380 | $13303 | $25202 | $9263097 | $9288299 | $137 |

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**Nonaccrual.** Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful or when principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to the continued failure to adhere to contractual payment terms by the borrower, coupled with other pertinent factors. When a loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued but unpaid interest is reversed. Any payments received while a loan is on nonaccrual status are applied as a reduction to the carrying value of the loan. A loan classified as nonaccrual may return to accrual status if none of the principal and interest is due and unpaid, and the Bank expects repayment of the remaining contractual principal and interest.

**Troubled debt restructurings.** A loan modification is considered a TDR when the borrower is experiencing financial difficulty and concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. The most common types of modifications include interest rate reductions, bankruptcies, maturity extensions and modifications to principal amortization, including interest-only structures. Modified terms are dependent upon the financial position and needs of the individual borrower. If the modification agreement is violated, the loan is managed by the Company's credit administration group for resolution, which may result in foreclosure in the case of real estate.

TDRs are generally classified as nonaccrual for a minimum period of six months and may qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement.

First Financial had 134 TDRs totaling $21.0 million at December 31, 2022, including $11.0 million of loans on accrual status and $10.0 million of loans classified as nonaccrual. First Financial had no commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs, and the ACL included reserves of $5.0 million related to TDRs

**60 First Financial Bancorp** 2022 Annual Report

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as of December 31, 2022. For the year ended December 31, 2022, First Financial charged off $3.2 million for the portion of TDRs determined to be uncollectible. Additionally, as of December 31, 2022, approximately $5.6 million of the accruing TDRs have been performing in accordance with the restructured terms for more than one year.

First Financial had 150 TDRs totaling $27.6 million at December 31, 2021, including $11.6 million of loans on accrual status and $16.0 million of loans classified as nonaccrual. First Financial had $0.2 million of commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs and the ACL included reserves of $6.3 million related to TDRs as of December 31, 2021. For the year ended December 31, 2021, First Financial charged off $1.7 million for the portion of TDRs determined to be uncollectible. Additionally, as of December 31, 2021, approximately $5.0 million of the accruing TDRs have been performing in accordance with the restructured terms for more than one year.

First Financial had 155 TDRs totaling $21.8 million at December 31, 2020, including $7.1 million of loans on accrual status and $14.7 million of loans classified as nonaccrual. First Financial had $0.3 million of commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs. Additionally, First Financial charged off $1.7 million for the portion of TDRs determined to be uncollectible for the year ended December 31, 2020.

The following table provides information on loan modifications classified as TDRs during the years ended December 31, 2022, 2021 and 2020:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | Years ended December 31, | Years ended December 31, | Years ended December 31, | Years ended December 31, | Years ended December 31, | Years ended December 31, | Years ended December 31, | Years ended December 31, | Years ended December 31, |
| | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 |
| *(Dollars in thousands)* | Number of loans | Pre-modification loan balance | Period end balance | Number of loans | Pre-modification loan balance | Period end balance | Number of loans | Pre-modification loan balance | Period end balance |
| Commercial & industrial | 6 | $10049 | $8825 | 7 | $9311 | $8039 | 8 | $14984 | $14984 |
| Construction <br>real estate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Commercial <br>real estate | 2 | 6337 | 3115 | 8 | 16850 | 9807 | 0 | 0 | 0 |
| Residential <br>real estate | 15 | 1376 | 1317 | 17 | 1585 | 1553 | 24 | 1953 | 1847 |
| Home equity | 1 | 32 | 32 | 2 | 30 | 30 | 11 | 351 | 349 |
| Installment | 1 | 1 | 1 | 1 | 0 | 0 | 2 | 35 | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | 25 | $17795 | $13290 | 35 | $27776 | $19429 | 45 | $17323 | $17202 |

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The following table provides information on how TDRs were modified during the years ended December 31, 2022, 2021 and 2020:

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| | | | |
|:---|:---|:---|:---|
| | Years Ended December 31, | Years Ended December 31, | Years Ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Extended maturities | $3346 | $0 | $0 |
| Adjusted interest rates | 3106 | 0 | 0 |
| Combination of rate and maturity changes | 0 | 0 | 0 |
| Forbearance | 4477 | 7328 | 4759 |
| Bankruptcies | 90 | 6723 | 678 |
| Other <sup>(1)</sup> | 2271 | 5378 | 11765 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $13290 | $19429 | $17202 |

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<sup>(1)</sup> Other includes covenant modifications and other concessions or combination of concessions that do not consist of interest rate adjustments, forbearance, bankruptcy and maturity extensions.

First Financial considers repayment performance as an indication of the effectiveness of the Company's loan modifications. Borrowers that are 90 days or more past due on any principal or interest payments, or who prematurely terminate a restructured loan agreement without paying off the contractual principal balance, are considered to be in payment default of the terms of the TDR agreement.

**First Financial Bancorp** 2022 Annual Report **61**

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**Notes to Consolidated Financial Statements**

For the twelve months ended December 31, 2022, there were two TDRs with a balance of $0.2 million for which there was a payment default during the period that occurred within twelve months of the loan modification. For the twelve months ended December 31, 2021 and 2020, there was one TDR with an insignificant balance for which there was a payment default during the period that occurred within twelve months of the loan modification.

As stated in the CARES Act and subsequently modified by the Consolidated Appropriations Act, loan modifications in response to COVID-19 executed on loans that were not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020 and the January 1, 2022 are not required to be reported as a TDR.

As of December 31, 2022, the Company's loan portfolio included no active loan modifications made under the guidance of the CARES Act that were not classified as TDR. As of December 31, 2021, the Company's loan portfolio included $16.5 million of active loan modifications made under the guidance of the CARES Act that were not classified as TDR. These modifications were comprised of two commercial loans making interest only payments.

As of December 31, 2020, the Company's loan portfolio included $320.2 million of active loan modifications made under the guidance of the CARES Act that were not classified as TDR. These modifications included $291.5 million of borrowers making interest only payments at year end, and full principal and interest deferrals of $28.7 million. Active modifications as of December 31, 2020 were primarily hotel and franchise loans, which were $186.2 million and $44.3 million respectively as of December 31, 2020, or 58.2% and 13.8% of the total active modifications at December 31, 2020. As of December 31, 2020, the Company's loan portfolio included 90 commercial loans with balances of $312.5 million and 53 consumer loans with balances of $7.7 million that were modified in response to COVID-19 that were not considered TDRs.

**Nonperforming loans.** Loans classified as nonaccrual and loans modified as TDRs are considered nonperforming. The following table provides information on nonperforming loans as of December 31:

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | 2020 | 2020 | 2020 |
| *(Dollars in thousands)* | Nonaccrual loans with a related ACL | Nonaccrual loans with no related ACL | Total nonaccrual | Nonaccrual loans with a related ACL | Nonaccrual loans with no related ACL | Total nonaccrual | Nonaccrual loans with a related ACL | Nonaccrual loans with no related ACL | Total nonaccrual |
| **Nonaccrual loans** <sup>(1)</sup> |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial & industrial | $6692 | $1550 | $8242 | $11077 | $6285 | $17362 | $18711 | $10519 | $29230 |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease financing | 0 | 178 | 178 | 0 | 203 | 203 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Construction real estate | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial real estate | 5216 | 570 | 5786 | 17716 | 1796 | 19512 | 6957 | 27725 | 34682 |
| &nbsp;&nbsp;&nbsp;&nbsp;Residential real estate | 0 | 10691 | 10691 | 0 | 8305 | 8305 | 251 | 11350 | 11601 |
| &nbsp;&nbsp;&nbsp;&nbsp;Home equity | 0 | 3123 | 3123 | 0 | 2922 | 2922 | 0 | 5076 | 5076 |
| &nbsp;&nbsp;&nbsp;&nbsp;Installment | 0 | 603 | 603 | 0 | 88 | 88 | 0 | 163 | 163 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total nonaccrual loans** | $11908 | $16715 | $28623 | $28793 | $19599 | $48392 | $25919 | $54833 | $80752 |
| **Interest income effect** |  |  |  |  |  |  | 2022 | 2021 | 2020 |
| &nbsp;&nbsp;&nbsp;Gross amount of interest that would have been recorded under original terms | &nbsp;&nbsp;&nbsp;Gross amount of interest that would have been recorded under original terms | &nbsp;&nbsp;&nbsp;Gross amount of interest that would have been recorded under original terms | &nbsp;&nbsp;&nbsp;Gross amount of interest that would have been recorded under original terms |  |  |  | $3247 | $5132 | $5892 |
| &nbsp;&nbsp;&nbsp;Interest included in income | &nbsp;&nbsp;&nbsp;Interest included in income |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Nonaccrual loans |  |  |  |  |  |  | 1134 | 1618 | 1636 |
| &nbsp;&nbsp;&nbsp;&nbsp;Troubled debt restructurings | &nbsp;&nbsp;&nbsp;&nbsp;Troubled debt restructurings |  |  |  |  |  | 424 | 314 | 426 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest included in income | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest included in income |  |  |  |  |  | 1558 | 1932 | 2062 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net impact on interest income** | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net impact on interest income** |  |  |  |  |  | $1689 | $3200 | $3830 |
| **Commitments outstanding to borrowers with nonaccrual loans** | **Commitments outstanding to borrowers with nonaccrual loans** |  |  |  |  |  | $0 | $0 | $0 |

---

<sup>(1)</sup> Nonaccrual loans include nonaccrual TDRs of $10.0 million, $16.0 million and $14.7 million as of December 31, 2022, 2021 and 2020, respectively.

First Financial individually reviews all nonperforming loan relationships greater than $250,000 to determine if an individually evaluated allowance is necessary based on the borrower's overall financial condition, resources and payment record, support

**62 First Financial Bancorp** 2022 Annual Report

------

from guarantors and the realizable value of any collateral. Individually evaluated allowances are based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.

A loan is considered to be collateral dependent when the borrower is experiencing financial difficulty and the repayment is expected to be provided substantially through the operation or sale of collateral. The following table presents the amortized cost basis of collateral dependent loans by class of loan.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
| | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral |
| *(Dollar in thousands)* | Business assets |  | Commercial real estate | Equipment | Land | Residential real estate | Other | Total |
| **Class of loan** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial & industrial | $8205 |  | $0 | $0 | $0 | $0 | $37 | $8242 |
| &nbsp;&nbsp;&nbsp;Lease financing | 0 |  | 0 | 178 | 0 | 0 | 0 | 178 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-investor | 0 |  | 353 | 0 | 0 | 22 | 0 | 375 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-owner | 0 |  | 3399 | 1893 | 119 | 0 | 0 | 5411 |
| &nbsp;&nbsp;&nbsp;Residential real estate | 0 |  | 0 | 0 | 0 | 10691 | 0 | 10691 |
| &nbsp;&nbsp;&nbsp;Home equity | 0 |  | 0 | 0 | 0 | 3123 | 0 | 3123 |
| &nbsp;&nbsp;Installment | 0 |  | 0 | 0 | 0 | 0 | 603 | 603 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $8205 | 8205000 | $3752 | $2071 | $119 | $13836 | $640 | $28623 |
|  | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
|  | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral | Type of Collateral |
| *(Dollar in thousands)* | Business assets |  | Commercial real estate | Equipment | Land | Residential real estate | Other | Total |
| **Class of loan** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial & industrial | $13171 |  | $15 | $833 | $0 | $0 | $3343 | $17362 |
| &nbsp;&nbsp;&nbsp;Lease financing | 0 |  | 0 | 203 | 0 | 0 | 0 | 203 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-investor | 0 |  | 6362 | 0 | 0 | 422 | 0 | 6784 |
| &nbsp;&nbsp;&nbsp;Commercial real estate-owner | 0 |  | 6673 | 5937 | 38 | 80 | 0 | 12728 |
| &nbsp;&nbsp;&nbsp;Residential real estate | 0 |  | 0 | 0 | 0 | 8305 | 0 | 8305 |
| &nbsp;&nbsp;&nbsp;Home equity | 0 |  | 0 | 0 | 0 | 2922 | 0 | 2922 |
| &nbsp;&nbsp;Installment | 0 |  | 0 | 0 | 0 | 0 | 88 | 88 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $13171 |  | $13050 | $6973 | $38 | $11729 | $3431 | $48392 |

---

**Lease financing - Lessor.** First Financial originates both sales-type and direct financing leases, and the Company manages and reviews lease residuals in accordance with its credit policies. Payments are generally fixed. However, in some agreements, lease payments may be indexed to a rate or index. Sales-type lease contracts contain the ability to purchase the underlying equipment at lease maturity and profit or loss is recognized at lease commencement. Direct financing leases are generally three to five years in length and may be extended at maturity, however, early cancellation may result in a fee to the borrower. For direct financing leases, the net unearned income is deferred and amortized over the life of the lease.

Effective December 31, 2021, First Financial acquired Summit Funding Group, Inc., which is a full-service equipment leasing company. In conjunction with this acquisition, First Financial acquired $41.9 million of financing leases, which were included in Loans and leases on the Consolidated Balance Sheets. For further detail on the acquisition, see Note 24 - Business Combinations.

The components of the Company's net investments in direct financing and sales-type leases, which are included in Lease financing on the Consolidated Balance Sheets are as follows:

**First Financial Bancorp** 2022 Annual Report **63**

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**Notes to Consolidated Financial Statements**

---

| | | |
|:---|:---|:---|
| *(Dollar in thousands)* | December 31, 2022 | December 31, 2021 |
| Direct financing leases |  |  |
| &nbsp;&nbsp;Lease receivables | $35081 | $49843 |
| &nbsp;&nbsp;Unguaranteed residual values | 16058 | 19714 |
| Sales-type leases |  |  |
| &nbsp;&nbsp;Lease receivables | 184985 | 40067 |
| &nbsp;&nbsp;Unguaranteed residual values | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total net investment in direct financing and sales-type leases** | $236124 | $109624 |

---

Interest income for direct financing and sales-type leases was $11.8 million, $2.7 million and $3.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The remaining maturities of lease receivables were as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)* | Direct financing and Sales-type |
| 2023 | $56640 |
| 2024 | 46366 |
| 2025 | 39495 |
| 2026 | 37877 |
| 2027 | 31826 |
| Thereafter | 37512 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total lease payments | 249716 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: unearned interest income | (29650) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net lease receivables** | $220066 |

---

**OREO.** OREO is comprised of properties acquired by the Company primarily through the loan foreclosure or repossession process, that result in partial or total satisfaction of problem loans.

Changes in OREO were as follows:

---

| | | | |
|:---|:---|:---|:---|
| | Years ended December 31, | Years ended December 31, | Years ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Balance at beginning of year | $98 | $1287 | $2033 |
| Additions |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial | 0 | 98 | 510 |
| &nbsp;&nbsp;&nbsp;Residential | 327 | 0 | 507 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total additions | 327 | 98 | 1017 |
| Disposals |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial | (98) | (947) | (217) |
| &nbsp;&nbsp;&nbsp;Residential | (94) | (331) | (1859) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total disposals | (192) | (1278) | (2076) |
| Valuation adjustments |  |  |  |
| &nbsp;&nbsp;&nbsp;Commercial | 0 | (9) | 448 |
| &nbsp;&nbsp;&nbsp;Residential | (42) | 0 | (135) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total valuation adjustments | (42) | (9) | 313 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Balance at end of year** | $191 | $98 | $1287 |

---

**64 First Financial Bancorp** 2022 Annual Report

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**6. Allowance for Credit Losses**

**Allowance for credit losses - loans and leases.** The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. First Financial's policy is to charge-off all or a portion of a loan when, in management's opinion, it is unlikely to collect the principal amount owed in full either through payments from the borrower or a guarantor or from the liquidation of collateral. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Accrued interest receivable on loans and leases, which totaled $47.5 million and $29.5 million as of December 31, 2022 and December 31, 2021, respectively, is excluded from the estimate of credit losses.

Management estimates the allowance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the Qualitative Framework.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company has identified the following portfolio segments and measures the ACL using the following methods:

*Commercial and industrial* **–** C&I loans include revolving lines of credit and term loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, leasehold improvements or other projects. C&I loans are generally underwritten individually and secured with the assets of the Company and/or the personal guarantee of the business owners. C&I loans also include ABL, equipment and leasehold improvement financing for franchisees in the quick service and casual dining restaurant sector and commission-based loans to insurance agents and brokers. ABL transactions typically involve larger commercial clients and are secured by specific assets, such as inventory, accounts receivable, machinery and equipment. In the franchise lending space, First Financial focuses on a limited number of restaurant concepts that have sound economics, low closure rates and strong brand awareness within specified local, regional or national markets. Within the insurance lending platform, First Financial serves insurance agents and brokers that are looking to maximize their book-of-business value and grow their agency business.

Current period default rates are utilized in the modeling of the ACL for C&I loans, and are adjusted for forecasted changes in the treasury term spread and market volatility index. Changes in current period defaults or forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

*Lease financing* **–** Lease financing consists of lease transactions for the acquisition of both new and used business equipment for commercial clients. Lease products may include tax leases, finance leases, lease lines of credit and interim funding. The credit underwriting for lease transactions includes detailed analysis of the lessee's industry and business model, nature of the equipment, equipment resale values, historical and projected cash flow analysis, secondary sources of repayment and guarantor, in addition to other considerations.

The ACL model for leases sources expected default rates from the C&I portfolio model. Therefore, changes in forecasted expectations for the treasury term spread and market volatility index could result in volatility in the Company's ACL in future periods.

*Construction real estate* **–** Real estate construction loans are term loans to individuals, companies or developers used for the construction or development of a commercial or residential property for which repayment will be generated by the sale or permanent financing of the property. Generally, these loans are for construction projects that have been pre-sold, pre-leased or have secured permanent financing, as well as loans to real estate companies with significant equity invested in the project. An independent credit team underwrites construction real estate loans, which are managed by experienced lending officers and monitored through the construction phase by a centralized funding desk that manages loan disbursements.

The construction ACL model is adjusted for forecasted changes in rental vacancy rates in the Bank's geographic footprint and the housing price index. Changes in forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

**First Financial Bancorp** 2022 Annual Report **65**

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**Notes to Consolidated Financial Statements**

*Commercial real estate - owner & investor* **–** Commercial real estate loans consist of term loans secured by a mortgage lien on real estate properties such as apartment buildings, office and industrial buildings and retail shopping centers. Additionally, the Company's franchise lending activities discussed in the "Commercial and Industrial" section often include the financing of real estate in addition to equipment. The credit underwriting for both owner-occupied and investor income producing real estate loans includes detailed market analysis, historical and projected cash flow analysis, appropriate equity margins, assessment of lessees and lessors, environmental risks and the type, age, condition and location of real estate, among other factors.

First Financial models owner-occupied and investor CRE separately when determining the ACL. For owner occupied CRE, current period default rates are utilized in the modeling, and are adjusted for forecasted changes in the BAA bond spread, national rental vacancy rates and the consumer confidence index. Current period default rates are also utilized in the modeling of investor CRE loans, and are adjusted for forecasted changes in the BAA bond spread, multifamily building permits within the Bank's geographic footprint, and national rental vacancy rates. Changes in current period defaults and forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

*Residential real estate* **–** Residential real estate loans represent loans to consumers for the financing of a residence. These loans generally have a 15 to 30 year term and a fixed interest rate, but may have a shorter term to maturity with an adjustable interest rate. In most cases, these loans are extended to borrowers to finance their primary residence. First Financial sells residential real estate loan originations into the secondary market on both servicing retained and servicing released bases. Residential real estate loans are generally underwritten to secondary market lending standards, utilizing underwriting processes that rely on empirical data to assess credit risk as well as analysis of the borrower's ability to repay their obligations, credit history, the amount of any down payment and the market value or other characteristics of the property. First Financial also offers a residential mortgage product that features similar borrower credit characteristics but a more streamlined underwriting process than typically required to sell to government-sponsored enterprises and thus is retained on the Consolidated Balance Sheets.

The residential real estate ACL model is adjusted for forecasted changes in the housing price index, housing starts within the Bank's geographic footprint and national single-family existing home sales. Changes in forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

*Home equity* **–** Home equity lending includes both home equity loans and revolving lines of credit secured by a first or second lien on the borrower's residence. Home equity lending underwriting considerations include the borrower's credit history as well as to debt-to-income and loan-to-value policy limits.

The home equity ACL model is adjusted for forecasted changes in the consumer credit growth rate within the Bank's geographic footprint and the working-age labor participation rate. Changes in forecasted expectations for these economic variables could result in volatility in the Company's ACL in future periods.

*Installment* – Installment lending consists of consumer loans not secured by real estate, including loans secured by automobiles and unsecured personal loans.

The ACL model for installment loans sources expected default rates from the residential real estate and home equity portfolio models and is paired with installment specific LGD rates. Changes in forecasted expectations for the consumer credit growth rate within the Bank's geographic footprint, the working-age labor participation rate, the housing price index, housing starts within the Bank's geographic footprint and national existing single-family existing home sales could result in volatility in the Company's ACL in future periods.

*Credit card* – Credit card lending consists of secured and unsecured revolving lines of credit to consumer and business customers. Credit card lines are generally available for an indefinite period of time as long as the borrower's credit characteristics do not materially or adversely change, but lines are unconditionally cancellable by the Company at any time.

The ACL model for credit card loans sources expected default rates from the residential real estate and home equity portfolio models and is paired with credit card specific LGD rates. Changes in forecasted expectations for the consumer credit growth rate within the Bank's geographic footprint, the working-age labor participation rate, the housing price index, housing starts within the Bank's geographic footprint and national existing single-family existing home sales could result in volatility in the Company's ACL in future periods.

The Company utilized the Moody's December baseline forecast as its R&S forecast in the quantitative model. For reasonableness, the Company also considered the impact to the model from alternative, more adverse economic forecasts, slower prepayment speeds and increased default rates. These alternative analyses were utilized to inform the Company's

**66 First Financial Bancorp** 2022 Annual Report

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qualitative adjustments. Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future credit stress, such as franchise, hotel and investor commercial real estate lending when making qualitative adjustments to the ACL model.

First Financial's ACL is influenced by loan volumes, risk rating migration or delinquency status, and other conditions impacting loss expectations, such as reasonable and supportable forecasts of economic conditions. For the twelve months ended December 31, 2022, the ACL was relatively stable as strong loan growth and slower prepayment speeds offset the impact from stable credit quality. For the twelve months ended, December 31, 2021, the ACL declined due to improvements in economic forecasts and the Company's improved credit outlook.

Changes in the allowance by loan category as of December 31 were as follows:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 | 2022 |
| *(Dollars in thousands)* | Commercial & industrial | Lease financing | Construction real estate | Commercial real estate | Residential real estate | Home equity | Installment | Credit card | Total |
| **Allowance for credit losses** |  |  |  |  |  |  |  |  |  |
| Balance at beginning of year | $44052 | $1633 | $11874 | $53420 | $6225 | $9643 | $1097 | $4048 | $131992 |
| Purchase accounting ACL for PCD | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Provision for credit losses | 3221 | 2041 | 1653 | (12951) | 6509 | 2066 | 5232 | (1040) | 6731 |
| Gross charge-offs | (5899) | (152) | 0 | (3667) | (224) | (160) | (1549) | (907) | (12558) |
| Recoveries | 939 | 49 | 0 | 4304 | 174 | 898 | 165 | 283 | 6812 |
| &nbsp;&nbsp;&nbsp;Total net charge-offs | (4960) | (103) | 0 | 637 | (50) | 738 | (1384) | (624) | (5746) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Ending allowance for credit losses** | $42313 | $3571 | $13527 | $41106 | $12684 | $12447 | $4945 | $2384 | $132977 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | 2021 | 2021 | 2021 | 2021 | 2021 | 2021 | 2021 | 2021 | 2021 |
| *(Dollars in thousands)* | Commercial & industrial | Lease financing | Construction real estate | Commercial real estate | Residential real estate | Home equity | Installment | Credit card | Total |
| **Allowance for credit losses** |  |  |  |  |  |  |  |  |  |
| Beginning balance, prior to adoption of ASC 326 | $51454 | $995 | $21736 | $76795 | $8560 | $11869 | $1215 | $3055 | $175679 |
| Purchase accounting ACL for PCD | 0 | 17 | 0 | 0 | 0 | 0 | 0 | 0 | 17 |
| Provision for credit losses | 6606 | 621 | (8367) | (14689) | (2436) | (2376) | 65 | 1552 | (19024) |
| Gross charge-offs | (15620) | 0 | (1498) | (13471) | (127) | (1073) | (334) | (780) | (32903) |
| Recoveries | 1612 | 0 | 3 | 4785 | 228 | 1223 | 151 | 221 | 8223 |
| &nbsp;&nbsp;&nbsp;Total net charge-offs | (14008) | 0 | (1495) | (8686) | 101 | 150 | (183) | (559) | (24680) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Ending allowance for credit losses** | $44052 | $1633 | $11874 | $53420 | $6225 | $9643 | $1097 | $4048 | $131992 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 |
| *(Dollars in thousands)* | Commercial & industrial | Lease financing | Construction real estate | Commercial real estate | Residential real estate | Home equity | Installment | Credit card | Total |
| **Allowance for credit losses** |  |  |  |  |  |  |  |  |  |
| Beginning balance, prior to adoption of ASC 326 | $18584 | $971 | $2381 | $23579 | $5299 | $4787 | $392 | $1657 | $57650 |
| Impact of adopting ASC 326 | 9901 | 118 | 11579 | 24118 | 5490 | 8430 | 801 | 1068 | 61505 |
| Provision for credit losses | 25407 | 758 | 7759 | 38936 | (2122) | (939) | 12 | 985 | 70796 |
| Gross charge-offs | (5345) | (852) | 0 | (12100) | (488) | (1541) | (148) | (885) | (21359) |
| Recoveries | 2907 | 0 | 17 | 2262 | 381 | 1132 | 158 | 230 | 7087 |
| &nbsp;&nbsp;&nbsp;Total net charge-offs | (2438) | (852) | 17 | (9838) | (107) | (409) | 10 | (655) | (14272) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Ending allowance for credit losses** | $51454 | $995 | $21736 | $76795 | $8560 | $11869 | $1215 | $3055 | $175679 |

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**Allowance for credit losses - unfunded commitments.** First Financial estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the Company's ACL methodology for loans and leases.

First Financial determined the adequacy of this reserve based upon an evaluation of the unfunded credit facilities, which included consideration of historical commitment utilization experience, credit risk ratings and historical loss rates, consistent with the Company's ACL methodology at the time.

**First Financial Bancorp** 2022 Annual Report **67**

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**Notes to Consolidated Financial Statements**

The ACL on unfunded commitments was $18.4 million as of December 31, 2022 and $13.4 million as of December 31, 2021. Due to the adoption of ASC 326, First Financial recorded $12.2 million in the ACL on unfunded commitments effective January 1, 2020. Additionally, First Financial recorded $5.0 million and $0.9 million of provision expense related to the ACL on unfunded commitments for the twelve months ended December 31, 2022 and 2021, respectively, and a provision recapture of $0.2 million for the twelve months ended December 31, 2020.

**7. Premises and Equipment**

Premises and equipment at December 31 were as follows:

---

| | | |
|:---|:---|:---|
| *(Dollars in thousands)* | 2022 | 2021 |
| Land and land improvements | $49016 | $49402 |
| Buildings | 157620 | 155337 |
| Furniture and fixtures | 69855 | 70847 |
| Leasehold improvements | 32515 | 30190 |
| Construction in progress | 5644 | 8145 |
|  | 314650 | 313921 |
| Less: Accumulated depreciation and amortization | 125570 | 120881 |
| **Total** | $189080 | $193040 |

---

Depreciation expense recorded on premises and equipment in 2022, 2021 and 2020 was $12.9 million, $14.1 million and $15.4 million, respectively.

**8. Leases - Lessee**

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. For contracts where First Financial is a lessee, substantially all of those agreements are for real estate property for branches, ATM locations and office space.

Substantially all of the Company's leases are classified as operating leases, under Accounting Topic 842, operating lease agreements are required to be recognized on the Consolidated Balance Sheets as a ROU asset and a corresponding lease liability. The Company's right to use an asset over the life of a lease is recorded as a "right of use" asset in Accrued interest and other assets on the Consolidated Balance Sheet and was $54.3 million and $57.2 million at December 31, 2022 and 2021, respectively. Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives received. First Financial recorded a $64.5 million and $67.6 million lease liability in Accrued interest and other liabilities on the Consolidated Balance Sheet at December 31, 2022 and 2021, respectively.

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

Leases with an initial term of 12 months or less are not recorded on the balance sheet and First Financial recognizes lease expense for these leases on a straight-line basis over the term of the lease. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or more. The exercise of renewal options on operating leases is at the Company's sole discretion, and certain leases may include options to purchase the leased property. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the ROU asset and lease liability. First Financial does not enter into lease agreements which contain material residual value guarantees or material restrictive covenants.

Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements and leases generally also include real estate taxes and common area maintenance charges in the annual rental payments.

**68 First Financial Bancorp** 2022 Annual Report

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The components of lease expense for the years ended December 31, 2022, 2021 and 2020 were as follows:

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| Operating lease cost | $7626 | $7425 | $7897 |
| Short-term lease cost | 8 | 108 | 142 |
| Variable lease cost | 2827 | 2621 | 2532 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total operating lease cost** | $10461 | $10154 | $10571 |

---

Future minimum commitments due under these lease agreements as of December 31, 2022 are as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)* | Operating leases |
| 2023 | $7681 |
| 2024 | 7321 |
| 2025 | 7011 |
| 2026 | 6736 |
| 2027 | 6164 |
| Thereafter | 46808 |
| &nbsp;&nbsp;&nbsp;Total lease payments | 81721 |
| &nbsp;&nbsp;&nbsp;Less: imputed interest | (17244) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $64477 |

---

The weighted average lease term and discount rate for the Company's operating leases were as follows:

---

| | | | |
|:---|:---|:---|:---|
| | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| **Operating leases** |  |  |  |
| &nbsp;&nbsp;&nbsp;Weighted-average remaining lease term | 13.1 years | 13.9 years | 15.1 years |
| &nbsp;&nbsp;&nbsp;Weighted-average discount rate | 3.29% | 3.25% | 3.07% |

---

Supplemental cash information at year end related to leases was as follows:

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| **Cash paid for amounts included in the measurement of lease liabilities** | **Cash paid for amounts included in the measurement of lease liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Operating cash flows from operating leases | $7824 | $6860 | $8196 |
| **ROU assets obtained in exchange for lease obligations** | **ROU assets obtained in exchange for lease obligations** |  |  |
| &nbsp;&nbsp;&nbsp;Operating leases | 4730 | 6076 | 9725 |

---

**9. Operating Leases - Lessor**

First Financial provides financing for various types of equipment through a operating leasing arrangements. Operating leases are carried at cost less accumulated depreciation in the Consolidated Balance Sheets. Operating leases were $91.7 million and $60.8 million at December 31, 2022 and December 31, 2021, respectively, net of accumulated depreciation of $35.0 million and $25.5 million at December 31, 2022 and December 31, 2021, respectively. The Company recorded lease income of $24.5 million related to lease payments for operating leases in leasing business income in the Consolidated Statement of Income for the twelve months ended December 31, 2022, respectively. Depreciation expense related to operating lease equipment was $20.4 million for the twelve months ended December 31, 2022, respectively.

First Financial performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable. First Financial recognized no impairment losses associated with operating lease assets for the twelve months ended December 31, 2022. Recognized impairment losses, if any, would be recorded in Leasing business income in the Consolidated Statements of Income.

**First Financial Bancorp** 2022 Annual Report **69**

------

The future lease payments receivable from operating leases as of December 31, 2022 are as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)* | Undiscounted cash flows |
| 2023 | $27334 |
| 2024 | 21422 |
| 2025 | 13149 |
| 2026 | 7122 |
| 2027 | 1912 |
| Thereafter | 1271 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total operating lease payments** | $72210 |

---

**10. Goodwill and Other Intangible Assets**

**Goodwill.** Assets and liabilities acquired in a business combination are recorded at their estimated fair values as of the acquisition date. The excess of the purchase price of the acquisition over the fair value of net assets acquired is recorded as goodwill.

Changes in the carrying amount of goodwill for the years ended December 31, 2022, 2021 and 2020 are shown below.

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Balance at beginning of year | $1000749 | $937771 | $937771 |
| Goodwill resulting from business combinations | 758 | 62978 | 0 |
| &nbsp;&nbsp;&nbsp;**Balance at end of year** | $1001507 | $1000749 | $937771 |

---

In December 2021, First Financial recorded $63.0 million of goodwill resulting from the acquisition of Summit Funding Group, Inc. During 2022, First Financial recorded adjustments of $0.8 million to goodwill from the Summit merger. First Financial recorded its final adjustments to goodwill related to the Summit merger in the fourth quarter of 2022. For further detail on various mergers or acquisitions, see Note 24 - Business Combinations.

Goodwill is evaluated for impairment on an annual basis as of October 1 of each year, or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. First Financial performed its most recent annual qualitative impairment test as of October 1, 2022 and no impairment was indicated. As of December 31, 2022, no events or changes in circumstances indicated that the fair value of the reporting unit was below its carrying value.

**Other intangible assets.** Other intangible assets consist primarily of core deposit, customer list, mortgage servicing rights and other miscellaneous intangibles, such as purchase commissions, non-compete agreements and trade name intangibles.

Core deposit intangibles represent the estimated fair value of acquired customer deposit relationships on the date of acquisition and are amortized on an accelerated basis over their estimated useful lives. First Financial's core deposit intangibles have an estimated weighted average remaining life of 5.3 years.

First Financial recorded a customer list intangible asset in conjunction with the Summit acquisition to account for the obligation or advantage on the part of either the Company or the customer to continue the pre-existing relationship subsequent to the merger. The Summit customer list intangible asset is being amortized on a straight-line basis over its estimated useful life of 12 years and was $27.6 million and $30.1 million at December 31, 2022 and December 31, 2021, respectively. Additionally, First Financial recorded a customer list intangible asset in conjunction with the Bannockburn acquisition which is being amortized on a straight-line basis over its estimated useful life of 11 years and was $27.5 million and $31.1 million at December 31, 2022 and December 31, 2021, respectively.

Mortgage servicing rights are servicing fees First Financial receives from selling fixed and adjustable-rate residential mortgage loans where it retains servicing responsibilities. In those sales, First Financial provided to the investors certain standard representations and warranties; however, the investors have no recourse to the Company's other assets for failure of debtors to pay when due. First Financial receives servicing fees based on a percentage of the outstanding balance. Mortgage servicing

**70 First Financial Bancorp** 2022 Annual Report

------

rights are measured at fair value with changes in fair value reported in other noninterest income in the Consolidated Statements of Income.

The gross carrying amount and accumulated amortization of other intangible assets were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 |
|  | Gross<br>carrying<br>amount | Accumulated<br>amortization | Gross<br>carrying<br>amount | Accumulated<br>amortization |
| Amortized intangible assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Core deposit intangibles | $41750 | $(26488) | $45256 | $(26911) |
| &nbsp;&nbsp;&nbsp;Customer list | 69563 | (14457) | 69563 | (8362) |
| &nbsp;&nbsp;&nbsp;Other | 14079 | (7064) | 14589 | (5237) |
| Unamortized intangible assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage servicing rights | 16536 | 0 | 15469 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $141928 | $(48009) | $144877 | $(40510) |

---

Amortization expense recognized on intangible assets for 2022, 2021 and 2020 was $11.2 million, $9.8 million and $11.1 million, respectively. The estimated amortization expense of intangible assets for the next five years is as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)* | Intangible amortization |
| 2023 | $10538 |
| 2024 | 9195 |
| 2025 | 9147 |
| 2026 | 9094 |
| 2027 | 9053 |

---

**11. Deposits**

Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2022 and 2021 were $165.1 million and $195.6 million, respectively.

Scheduled maturities of all time deposits for the next five years were as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)* | Time deposits |
| 2023 | $1320011 |
| 2024 | 293775 |
| 2025 | 37093 |
| 2026 | 37881 |
| 2027 | 11768 |
| Thereafter | 177 |
| &nbsp;&nbsp;&nbsp;Total | $1700705 |

---

**First Financial Bancorp** 2022 Annual Report **71**

------

**Notes to Consolidated Financial Statements**

**12. Borrowings**

Short-term borrowings, or borrowings that mature in less than one year, on the Consolidated Balance Sheets include repurchase agreements utilized for corporate sweep accounts with cash management account agreements in place, federal funds purchased, overnight advances from the FHLB and a short-term line of credit.

The following is a summary of short-term borrowings for the last three years:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | 2022 | 2022 | 2021 | 2021 | 2020 | 2020 |
| *(Dollars in thousands)* | Amount | Rate | Amount | Rate | Amount | Rate |
| At December 31, |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal funds purchased and securities sold under agreements to repurchase | $0 | 0.00% | $51203 | 0.01% | $166594 | 0.05% |
| &nbsp;&nbsp;&nbsp;FHLB borrowings | 1130000 | 4.58% | 225000 | 0.18% | 0 | 0.00% |
| &nbsp;&nbsp;&nbsp;Other short-term borrowings | 157156 | 4.33% | 20000 | 1.90% | 0 | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $1287156 | 4.55% | $296203 | 0.27% | $166594 | 0.05% |
| Average for the year |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal funds purchased and securities sold under agreements to repurchase | $29526 | 1.42% | $160967 | 0.07% | $149036 | 0.26% |
| &nbsp;&nbsp;&nbsp;FHLB borrowings | 672928 | 2.37% | 43371 | 0.20% | 441867 | 1.37% |
| &nbsp;&nbsp;&nbsp;Other short-term borrowings | 115041 | 2.38% | 165 | 1.92% | 0 | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $817495 | 2.34% | $204503 | 0.10% | $590903 | 1.09% |

---

All repurchase agreements are subject to terms and conditions agreed to by the Bank and the client. To secure its liability to the client, the Bank is authorized to sell or repurchase U.S. Treasury, government agency and mortgage-backed securities. As of December 31, 2022, the Bank had no securities sold under agreements to repurchase. As of December 31, 2021 the Bank had $51.3 million of securities sold under agreements to repurchase.

First Financial had outstanding FHLB advances included in short-term borrowings of $1.1 billion as of December 31, 2022 and $225.0 million outstanding short-term FHLB advances as of December 31, 2021. Additionally, at December 31, 2022, other short-term borrowings included $157.2 million of collateral owed by counterparty banks to First Financial.

First Financial also has a $40.0 million short-term credit facility with an unaffiliated bank that matures in December, 2023, which is included in short-term borrowings. This facility has a variable interest rate and provides First Financial additional liquidity, if needed, for various corporate activities including the repurchase of First Financial common stock and the payment of dividends to shareholders. As of December 31, 2022, First Financial had no outstanding balance and as of December 31, 2021, First Financial had an outstanding balance of $20.0 million. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality and capital levels, and First Financial was in compliance with all covenants associated with this facility as of December 31, 2022. This credit facility also required First Financial to pledge as collateral the Bank's common stock where the lender is granted a security interest in this collateral.

**72 First Financial Bancorp** 2022 Annual Report

------

The following is a summary of First Financial's long-term debt:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | 2022 | 2022 | 2021 | 2021 |
| *(Dollars in thousands)*  | Amount | Average Rate | Amount | Average Rate |
| &nbsp;&nbsp;Subordinated debt | $313705 | 5.48% | $313248 | 4.86% |
| &nbsp;&nbsp;Unamortized debt issuance costs | (1998) | n/a | (2384) | n/a |
| &nbsp;&nbsp;Capital lease liability | 1698 | 3.82% | 1781 | 3.81% |
| &nbsp;&nbsp;Capital loan with municipality | 775 | 0.00% | 775 | 0.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;Subtotal | 314180 | 5.50% | 313420 | 4.88% |
| Acquired in Summit acquisition |  |  |  |  |
| &nbsp;&nbsp;Bank lines of credit | 0 | 0.00% | 23030 | 2.77% |
| &nbsp;&nbsp;Notes issued in conjunction with acquisition of property and equipment | 32492 | 4.44% | 73382 | 4.09% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total notes payable acquired in Summit acquisition | 32492 | 4.44% | 96412 | 3.77% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total long-term debt** | $346672 | 5.40% | $409832 | 4.62% |

---

As of December 31, 2022, First Financial's long-term debt matures as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)*  | Long-term debt |
| 2023 | $6898 |
| 2024 | 12408 |
| 2025 | 4169 |
| 2026 | 6201 |
| 2027 | 2173 |
| Thereafter | 314823 |
| &nbsp;&nbsp;&nbsp;**Total** | $346672 |

---

In April 2020, First Financial issued $150.0 million of fixed to floating rate subordinated notes. The subordinated notes have an initial fixed interest rate of 5.25% to, but excluding, May 15, 2025, payable semi-annually in arrears. From, and including, May 15, 2025, the interest rate on the subordinated notes will reset quarterly to a floating rate per annum equal to a benchmark rate, which is expected to be the then-current three-month term SOFR, plus 509 basis points, payable quarterly in arrears. The subordinated notes mature on May 15, 2030. These notes are redeemable by the Company in whole or in part beginning with the interest payment date of May 15, 2025.

In 2015, First Financial issued $120.0 million of subordinated notes, which have a fixed interest rate of 5.13% payable semiannually and mature in August 2025. These notes are not redeemable by the Company or callable by the holders of the notes prior to maturity. In addition, First Financial acquired $49.5 million of variable rate subordinated notes in the MSFG merger that were issued to previously formed trusts in exchange for the trust proceeds. Interest on the acquired subordinated notes is payable quarterly, in arrears, and the Company has the option to defer interest payments for a period not to exceed 20 consecutive quarters. These acquired subordinated notes mature 30 years after the date of original issuance and may be called at par following the 5 year anniversary of issuance. First Financial also acquired $8.4 million of 6.00% fixed rate private placement subordinated debt in conjunction with the MSFG merger that was issued in 2015 and matured in 2025. These notes were redeemable by the Company at par following the 5 year anniversary of issuance. These subordinated notes were redeemed by the Company in the first quarter of 2021. The subordinated notes are treated as Tier 2 capital for regulatory capital purposes and are included in Long-term debt on the Consolidated Balance Sheets.

Additionally, in conjunction with the acquisition of Summit, First Financial assumed $96.4 million in outstanding long-term borrowings at December 31, 2021. These outstanding long-term borrowings consisted of $23.0 million of lines of credit with other banks utilized to operate the business and carried an average interest rate of 2.77%. These lines of credit were paid off in January 2022. Acquired long-term borrowings also included $32.5 million and $73.4 million of term notes, both with and without recourse, with an average interest rate of 4.44% and 4.09% at December 31, 2022 and 2021, respectively. These term notes were used to finance Summit's equity investment in the purchase of equipment to be leased to customers.

**First Financial Bancorp** 2022 Annual Report **73**

------

**Notes to Consolidated Financial Statements**

FHLB advances, both short-term and long-term, must be collateralized with qualifying assets, typically certain commercial and residential real estate loans, as well as certain government and agency securities. For ease of borrowing execution, First Financial utilizes a blanket collateral agreement with the FHLB, and at December 31, 2022, had collateral pledged with a book value of $6.0 billion.

**13. Derivatives**

First Financial uses certain derivative instruments, including rate caps, floors, swaps and foreign exchange contracts, to meet the operating needs of its clients while managing the interest and currency rate risk associated with certain transactions. First Financial may also utilize interest rate swaps to manage the interest rate risk profile of the Company. Interest rate payments are exchanged with counterparties, based on the notional amount as established in the interest rate agreement. As only interest rate payments are exchanged, the cash requirements and credit risk associated with interest rate swaps are significantly less than the notional amount and the Company's credit risk exposure is limited to the market value of the instruments. First Financial does not use derivatives for speculative purposes.

First Financial manages this market value credit risk through counterparty credit policies including a review of total derivative notional position to total assets, total credit exposure to total capital and counterparty credit exposure risk.

For discussion of First Financial's accounting for derivative instruments, see Note 1 – Summary of Significant Accounting Policies.

**Client derivatives.** First Financial utilizes interest rate swaps as a means to offer commercial borrowers fixed rate funding while providing the Company with floating rate assets.

At December 31, 2022, for interest rate derivatives, the Company had a total counterparty notional amount outstanding of $2.2 billion, spread among six counterparties, with an estimated fair value of $145.8 million. At December 31, 2021, the Company had interest rate derivatives with a total counterparty notional amount outstanding of $2.4 billion, spread among six counterparties, with an estimated fair value of $74.2 million.

First Financial monitors its derivative credit exposure to borrowers by monitoring the creditworthiness of the related loan

customers through the Company's normal credit review processes. Additionally, the Company's ACL Committee monitors

derivative credit risk exposure associated with problem loans through the Company's ACL committee. First Financial considers the market value of a derivative instrument to be part of the carrying value of the related loan for these purposes as the borrower is contractually obligated to pay First Financial this amount in the event the derivative contract is terminated.

In connection with its use of derivative instruments, First Financial and its counterparties may be required to post cash collateral to offset the market position of the derivative instruments. First Financial maintains the right to offset these derivative positions with the collateral posted against them by or with the relevant counterparties.

**Foreign Exchange Contracts.** First Financial may enter into foreign exchange derivative contracts for the benefit of commercial customers to hedge their exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from interest rate derivative contracts, First Financial also enters into foreign exchange contracts with major financial institutions to economically hedge a substantial portion of the exposure from client driven foreign exchange activity. These derivatives are classified as free-standing instruments with the revaluation gain or loss recorded in Foreign exchange income in the Consolidated Statements of Income. At December 31, 2022, the Company had total counterparty notional amount outstanding of $7.7 billion spread among five counterparties, with an estimated fair value of $17.3 million related to foreign exchange contracts, which is included in Accrued interest and other liabilities in the Consolidated Balance Sheets. At December 31, 2021, the Company had total counterparty notional amounts outstanding of $6.4 billion spread among four counterparties, with an estimated fair value of $15.2 million.

In connection with its use of foreign exchange contracts, First Financial and its counterparties may be required to post cash collateral to offset the market position of the derivative instruments. First Financial maintains the right to offset these derivative positions with the collateral posted against them by or with the relevant counterparties.

**74 First Financial Bancorp** 2022 Annual Report

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The following table details the location and amounts of client derivatives and foreign exchange contracts recognized in the Consolidated Balance Sheets:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| | | | Estimated fair value | Estimated fair value | | Estimated fair value | Estimated fair value |
| *(Dollars in thousands)* | Balance<br>Sheet Classification | Notional<br>amount | Gain | Loss | Notional<br>amount | Gain | Loss |
| Client derivatives-instruments associated with loans | Client derivatives-instruments associated with loans |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Matched interest rate swaps with borrower | Accrued interest and other assets and other liabilities | $2206351 | $5057 | $(147759) | $2430587 | $84694 | $(7508) |
| &nbsp;&nbsp;&nbsp;Matched interest rate swaps with counterparty | Accrued interest and other liabilities | 2206351 | 147759 | (5057) | 2430587 | 7508 | (84701) |
| Foreign exchange contracts |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Matched foreign exchange contracts with customers | Accrued interest and other assets | 7734395 | 111078 | (93804) | 6423085 | 67988 | (52780) |
| &nbsp;&nbsp;&nbsp;Matched foreign exchange contracts with counterparty | Accrued interest and other liabilities | 7681006 | 93804 | (111078) | 6399432 | 52780 | (67988) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** |  | $19828103 | $357698 | $(357698) | $17683691 | $212970 | $(212977) |

---

The following table discloses the gross and net amounts of client derivatives and foreign exchange contracts recognized in the Consolidated Balance Sheets:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| *(Dollars in thousands)* | Gross amounts of recognized liabilities | Gross amounts offset in the Consolidated Balance Sheets | Net amounts of (assets)/liabilities presented in the Consolidated Balance Sheets | Gross amounts of recognized liabilities | Gross amounts offset in the Consolidated Balance Sheets | Net amounts of (assets)/liabilities presented in the Consolidated Balance Sheets |
| Client derivatives |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Matched interest rate swaps | $152816 | $(314048) | $(161232) | $92209 | $(149647) | $(57438) |
| &nbsp;&nbsp;Foreign exchange contracts with counterparty | 204882 | (101945) | 102937 | 120768 | (56443) | 64325 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total** | $357698 | $(415993) | $(58295) | $212977 | $(206090) | $6887 |

---

The following table details the derivative financial instruments, the average remaining maturities and the weighted-average interest rates being paid and received by First Financial at December 31, 2022:

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* | Notional<br>amount | Average<br>maturity<br>(years) | Fair<br>value |
| Client derivatives-interest rate contracts |  |  |  |
| &nbsp;&nbsp;&nbsp;Receive fixed, matched interest rate swaps with borrower | $2206351 | 5.3 | $(142702) |
| &nbsp;&nbsp;&nbsp;Pay fixed, matched interest rate swaps with counterparty | 2206351 | 5.3 | 142702 |
| Client derivatives-foreign exchange contracts |  |  |  |
| &nbsp;&nbsp;&nbsp;Foreign exchange contracts - pay USD | 7734395 | 0.7 | 17274 |
| &nbsp;&nbsp;&nbsp;Foreign exchange contracts - receive USD | 7681006 | 0.7 | (17274) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total client derivatives** | $19828103 | 1.7 | $0 |

---

**Credit derivatives.** In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation agreements with counterparties whereby First Financial assumes a portion of the credit exposure associated with an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make payments to the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with the counterparty. The total notional value of these agreements totaled $379.3 million as of December 31, 2022 and $362.8 million as of December 31, 2021. The fair value of these agreements recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets was immaterial at December 31, 2022 and $0.1 million at December 31, 2021.

**First Financial Bancorp** 2022 Annual Report **75**

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**Notes to Consolidated Financial Statements**

**Mortgage Derivatives.** First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans to third party investors, which are considered derivatives. When borrowers secure an IRLC with First Financial and the loans are intended to be sold, First Financial will enter into forward commitments for the future delivery of the loans to third party investors in order to hedge against the effect of changes in interest rates impacting IRLCs and and loans held for sale. At December 31, 2022, the notional amount of the IRLCs was $12.0 million and the notional amount of forward commitments was $15.3 million. As of December 31, 2021, the notional amount of IRLCs was $45.0 million and the notional amount of forward commitments was $62.5 million. The fair value of these agreements was $4.3 million at December 31, 2022 and $3.3 million at December 31, 2021 and was recorded in Accrued interest and other assets on the Consolidated Balance Sheets.

**14. Commitments and Contingencies**

First Financial offers a variety of financial instruments including letters of credit and outstanding commitments to extend credit to assist clients in meeting their requirement for liquidity and credit enhancement. GAAP does not require these financial instruments to be recorded in the Consolidated Financial Statements.

First Financial utilizes the same credit policies in issuing commitments and conditional obligations as it does for credit instruments recorded on the Consolidated Balance Sheets. First Financial's exposure to credit loss in the event of nonperformance by the counterparty is represented by the contractual amounts of those instruments. First Financial estimates credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company in accordance with ASC 326. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated useful life consistent with the Company's ACL methodology for loans and leases. Adjustments to the reserve for unfunded commitments are recorded in Provision for credit losses - unfunded commitments in the Consolidated Statements of Income. First Financial had $18.4 million and $13.4 million of reserves for unfunded commitments recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets as of December 31, 2022 and 2021.

**Loan commitments.** Loan commitments are agreements to extend credit to a client absent any violation of conditions established in the commitment agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by First Financial upon extension of credit, is based on management's credit evaluation of the client. The collateral held varies, but may include securities, real estate, inventory, plant or equipment. First Financial had commitments outstanding to extend credit, totaling $4.4 billion and $4.0 billion at December 31, 2022 and 2021, respectively. As of December 31, 2022, loan commitments with a fixed interest rate totaled $126.3 million while commitments with variable interest rates totaled $4.2 billion. At December 31, 2021, loan commitments with a fixed interest rate totaled $129.2 million while commitments with variable interest rates totaled $3.8 billion. The fixed rate loan commitments have interest rates ranging from 0.00% to 21.00% for both December 31, 2022 and 2021 and have maturities ranging from less than 1 year to 31.6 years for December 31, 2022 and less than 1 year to 30.9 years for December 31, 2021.

**76 First Financial Bancorp** 2022 Annual Report

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The following table presents by type First Financial's loan balances and contractual obligations to extend credit:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 |
| *(dollars in thousands)* | Unfunded commitment | Loan balance | Unfunded commitment | Loan balance |
| Commercial & industrial | $1833977 | $3410272 | $1545995 | $2720028 |
| Lease financing | 6842 | 236124 | 18037 | 109624 |
| Construction real estate | 689015 | 512050 | 484038 | 455894 |
| Commercial real estate-investor | 107205 | 3094064 | 65660 | 3154755 |
| Commercial real estate-owner | 48208 | 958695 | 29824 | 1071859 |
| Residential real estate | 74089 | 1092265 | 50043 | 896069 |
| Home equity | 903459 | 733791 | 822343 | 708399 |
| Installment | 16073 | 209895 | 15985 | 119454 |
| Credit card | 225864 | 51815 | 217006 | 52217 |
| &nbsp;&nbsp;&nbsp;**Total** | $3904732 | $10298971 | $3248931 | $9288299 |

---

**Letters of credit.** Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party. First Financial's letters of credit consist of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services. The risk to First Financial arises from its obligation to make payment in the event of the client's contractual default to produce the contracted good or service to a third party. First Financial has issued letters of credit aggregating $31.5 million and $41.1 million at December 31, 2022, and 2021, respectively. Management conducts regular reviews of these instruments on an individual client basis.

**Risk participation agreements.** First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amount of $379.3 million and $362.8 million at December 31, 2022 and 2021, respectively.

**Affordable housing projects and other tax credit investments.** First Financial is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation or community revitalization projects. These investments are included in Accrued interest and other assets in the Consolidated Balance Sheets, with any unfunded commitments included in Accrued interest and other liabilities in the Consolidated Balance Sheets. As of December 31, 2022, First Financial expects to recover its remaining investments through the use of the tax credits that are generated by the investments.

The following table summarizes First Financial's investments in affordable housing projects and other tax credit investments.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| *(Dollars in thousands)* | *(Dollars in thousands)* | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 |
| Investment | Accounting Method | Investment | Unfunded commitment | Investment | Unfunded commitment |
| LIHTC | Proportional amortization | $126537 | $70690 | $108974 | $57341 |
| HTC | Equity | 17108 | 11955 | 2581 | 56 |
| NMTC | Equity | 2944 | 0 | 3895 | 0 |
| Renewable energy | Equity | 11851 | 1689 | 18585 | 15114 |
| &nbsp;&nbsp;Total |  | $158440 | $84334 | $134035 | $72511 |

---

The following tables summarize First Financial's amortization expense and tax benefit recognized in affordable housing projects and other tax credit investments.

**First Financial Bancorp** 2022 Annual Report **77**

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**Notes to Consolidated Financial Statements**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Twelve months ended | Twelve months ended | Twelve months ended | Twelve months ended | Twelve months ended | Twelve months ended |
| | December 31, 2022 | December 31, 2022 | December 31, 2021 | December 31, 2021 | December 31, 2020 | December 31, 2020 |
| *(Dollars in thousands)* | Amortization expense <sup>(1)</sup> | Tax expense (benefit) recognized <sup>(2)</sup> | Amortization expense <sup>(1)</sup> | Tax expense (benefit) recognized <sup>(2)</sup> | Amortization expense <sup>(1)</sup> | Tax expense (benefit) recognized <sup>(2)</sup> |
| LIHTC | $11929 | $(11088) | $8894 | $(8581) | $8076 | $(7629) |
| HTC | 0 | (319) | 1116 | (263) | 474 | (563) |
| NMTC | 415 | (210) | 210 | (210) | 175 | (175) |
| Renewable energy | 23411 | (25473) | 11467 | (12216) | 4756 | (4777) |
| &nbsp;&nbsp;Total | $35755 | $(37090) | $21687 | $(21270) | $13481 | $(13144) |
| &nbsp;&nbsp;(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense. | &nbsp;&nbsp;(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense. | &nbsp;&nbsp;(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense. | &nbsp;&nbsp;(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense. | &nbsp;&nbsp;(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense. | &nbsp;&nbsp;(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense. | &nbsp;&nbsp;(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense. |
| &nbsp;&nbsp;(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments' income (loss). | &nbsp;&nbsp;(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments' income (loss). | &nbsp;&nbsp;(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments' income (loss). | &nbsp;&nbsp;(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments' income (loss). | &nbsp;&nbsp;(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments' income (loss). | &nbsp;&nbsp;(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments' income (loss). | &nbsp;&nbsp;(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments' income (loss). |

---

**Contingencies/Litigation.** First Financial and its subsidiaries are engaged in various matters of litigation from time to time, and have a number of unresolved claims pending.

Like many banks, First Financial has been the subject of lawsuits relating to overdraft fees. This type of litigation is time consuming and expensive in large part due to the amount of data to be sorted and disclosed, in some cases going back multiple years. During the second and fourth quarters of 2021, First Financial determined that it was in its best interest to settle lawsuits in the states of Indiana and Ohio and have signed settlement agreements that were presented to the court for approval. As such, First Financial recorded legal settlement expenses of $7.1 million, which were recorded in Other noninterest expenses in the Consolidated Statements of Income during 2021. For year ended December 31, 2022, legal settlement expenses of $3.3 million were paid.

Additionally, as part of the ordinary course of business, First Financial and its subsidiaries are parties to other litigation, including claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral, foreclosure interests that are incidental to our regular business activities and other matters. While the ultimate liability with respect to these litigation matters and claims cannot be determined at this time, First Financial believes that damages, if any, and other amounts relating to pending matters are not probable or cannot be reasonably estimated as of December 31, 2022. Reserves are established for these various matters of litigation, when appropriate, under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel. First Financial had no reserves related to litigation matters as of December 31, 2022 or December 31, 2021.

**15. Related Party Transactions**

Outstanding balance of loans to directors, executive officers, principal holders of First Financial's common stock and certain related persons were as follows:

---

| | |
|:---|:---|
| *(Dollars in thousands)* | 2022 |
| Beginning balance | $3482 |
| Additions | 2539 |
| Deductions | (403) |
| &nbsp;&nbsp;&nbsp;**Ending balance** | $5618 |
| &nbsp;&nbsp;&nbsp;**Loans 90 days or more past due** | $0 |

---

Related parties of First Financial, as defined for inclusion in the table above, were clients of, and had transactions with, subsidiaries of First Financial during the periods noted. Similar transactions with related parties may be expected in future periods.

**78 First Financial Bancorp** 2022 Annual Report

------

**16. Income Taxes**

Income tax expense consisted of the following components:

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Current expense |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | $24307 | $21397 | $34632 |
| &nbsp;&nbsp;&nbsp;State | 3308 | 2289 | 2349 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total current expense** | 27615 | 23686 | 36981 |
| Deferred expense (benefit) |  |  |  |
| &nbsp;&nbsp;&nbsp;Federal | (4399) | 10944 | (8624) |
| &nbsp;&nbsp;&nbsp;State | 894 | 1143 | 244 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total deferred expense (benefit)** | (3505) | 12087 | (8380) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Income tax expense** | $24110 | $35773 | $28601 |

---

The difference between the federal income tax rates applied to income before income taxes and the effective rates were due to the following:

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Income taxes computed at federal statutory rate (21%) on income before income taxes | $50762 | $50596 | $38726 |
| Benefit from tax-exempt income | (5743) | (5613) | (5901) |
| Tax credits | (37331) | (21561) | (13064) |
| Basis reduction on tax credit | 2761 | 1346 | 657 |
| Tax expense (benefit) of equity compensation | (154) | (243) | 340 |
| State income taxes, net of federal tax benefit | 3320 | 2711 | 2049 |
| Affordable housing investments | 9341 | 7194 | 6635 |
| Other | 1154 | 1343 | (841) |
| &nbsp;&nbsp;&nbsp;**Income tax expense** | $24110 | $35773 | $28601 |

---

**First Financial Bancorp** 2022 Annual Report **79**

------

**Notes to Consolidated Financial Statements**

The major components of the temporary differences that gave rise to deferred tax assets and liabilities at December 31, 2022, and 2021, were as follows:

---

| | | |
|:---|:---|:---|
| *(Dollars in thousands)* | 2022 | 2021 |
| Deferred tax assets |  |  |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses | $30464 | $29754 |
| &nbsp;&nbsp;&nbsp;Deferred compensation | 346 | 292 |
| &nbsp;&nbsp;&nbsp;Postretirement benefits other than pension liability | 636 | 652 |
| &nbsp;&nbsp;&nbsp;Accrued stock-based compensation | 2216 | 1836 |
| &nbsp;&nbsp;&nbsp;Interest on nonaccrual loans | 406 | 442 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 7454 | 7286 |
| &nbsp;&nbsp;Net unrealized losses on investment securities | 92072 | 0 |
| &nbsp;&nbsp;&nbsp;State net operating loss | 1152 | 1746 |
| &nbsp;&nbsp;&nbsp;Leasing liability | 15308 | 15794 |
| &nbsp;&nbsp;&nbsp;Reserve for unfunded commitments | 4254 | 3049 |
| &nbsp;&nbsp;&nbsp;Other | 516 | 565 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total deferred tax assets** | 154824 | 61416 |
| Deferred tax liabilities |  |  |
| &nbsp;&nbsp;&nbsp;Tax depreciation in excess of book depreciation | (7172) | (9117) |
| &nbsp;&nbsp;&nbsp;FHLB and FRB stock | (3912) | (3836) |
| &nbsp;&nbsp;&nbsp;Mortgage-servicing rights | (3825) | (3518) |
| &nbsp;&nbsp;&nbsp;Leasing activities | (12829) | (10860) |
| &nbsp;&nbsp;&nbsp;Retirement obligation | (10197) | (13754) |
| &nbsp;&nbsp;&nbsp;Intangible assets | (18462) | (16081) |
| &nbsp;&nbsp;&nbsp;Deferred loan fees and costs | (1638) | (933) |
| &nbsp;&nbsp;&nbsp;Prepaid expenses | (645) | (680) |
| &nbsp;&nbsp;&nbsp;Limited partnership investments | (312) | (2957) |
| &nbsp;&nbsp;&nbsp;Fair value adjustments on business combinations | (6736) | (6900) |
| &nbsp;&nbsp;&nbsp;Net unrealized gains on investment securities | 0 | (5791) |
| &nbsp;&nbsp;&nbsp;Foreign exchange deferred income | 0 | (428) |
| &nbsp;&nbsp;&nbsp;ASU 2016-01 unrealized gain/loss-equity securities | (2237) | (2339) |
| &nbsp;&nbsp;&nbsp;Right of use assets | (12911) | (13390) |
| &nbsp;&nbsp;&nbsp;Other | (3653) | (2426) |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total deferred tax liabilities** | (84529) | (93010) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total net deferred tax asset (liability)** | $70295 | $(31594) |

---

At December 31, 2022 and 2021, the Company had a state net operating loss carryforward from MSFG of $1.5 million and $2.3 million. This carryforward begins to expire in 2026. The Company expects to fully utilize this net operating loss and, therefore, a valuation allowance was not required at December 31, 2022 and 2021. The acquired MSFG state net operating loss is subject to IRC Section 382 and is limited annually.

The realization of the Company's deferred tax assets is dependent upon the Company's ability to generate taxable income in future periods and the reversal of deferred tax liabilities during the same period. The Company has evaluated the available evidence supporting the realization of its deferred tax assets and determined it is more likely than not that the assets will be realized and thus no valuation allowance was recorded at December 31, 2022 and 2021.

The Bank's retained earnings at December 31, 2022 and 2021 included base-year bad debt reserves of $16.1 million. Base-year reserves are subject to recapture in the event the Bank redeems its stock, makes distributions in excess of current and accumulated earnings and profits (as calculated for federal income tax purposes), loses its "bank" status or liquidates. The

**80 First Financial Bancorp** 2022 Annual Report

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Bank has no intention of meeting any of the criteria for recapture. Accordingly, a deferred income tax liability of $3.4 million has not been recorded.

At December 31, 2022, 2021 and 2020, First Financial had $1.9 million of unrecognized tax benefits, as determined in FASB ASC Topic 740-10, Income Taxes, that, if recognized, would favorably affect the effective income tax rate in future periods. A progression of gross unrecognized tax benefits as of December 31, 2022, 2021 and 2020 is as follows:

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Balance at beginning of year | $2386 | $2386 | $3006 |
| Settlements | 0 | 0 | (620) |
| &nbsp;&nbsp;&nbsp;Balance at end of year | $2386 | $2386 | $2386 |

---

The unrecognized tax benefits relate to state income tax exposures where First Financial believes it is likely that, upon examination, a state may take a position contrary to the position taken by the Company. The Company believes that resolution regarding our uncertain tax positions is reasonably possible within the next twelve months and could result in full, partial or no recognition of the benefit. First Financial recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. At December 31, 2022, 2021 and 2020, the Company had no interest or penalties recorded.

First Financial and its subsidiaries are subject to U.S. federal income tax as well as state and local income tax in several jurisdictions. Tax years prior to 2019 have been closed and are no longer subject to U.S. federal income tax examinations. Tax years 2019 through 2022 remain open to examination by the federal taxing authority. With limited exception, First Financial is no longer subject to state and local income tax examinations for years prior to 2018.

**17. Employee Benefit Plans**

**Pension plan.** First Financial sponsors a non-contributory defined benefit pension plan covering substantially all employees and uses a December 31 measurement date for the plan. Plan assets were primarily invested in fixed income and equity mutual funds. The pension plan does not directly own any shares of First Financial common stock or any other First Financial security or product.

The investment objective of the Plan is to structure the assets to mirror the liabilities of the Plan, with the fixed income component matching the identified near and long-term plan distributions and the equity component generating growth of capital to meet other future Plan liabilities. The determination of the overall expected long-term return on plan assets was based on the composition of plan assets and long-term asset class return estimates developed by the Plan advisor, as well as a consensus of estimates from similarly managed portfolios of expected future returns.

First Financial recorded expense related to its pension plan of $2.0 million for 2022, $3.4 million for 2021 and $2.5 million for 2020. The components of net periodic benefit cost other than the service cost component are included in Other noninterest expense while service costs are recorded as a component Salaries and employee benefits in the Consolidated Statements of Income.

First Financial made no cash contributions to the pension plan in 2022, 2021 or 2020 and does not expect to make any contributions in 2023.

**First Financial Bancorp** 2022 Annual Report **81**

------

**Notes to Consolidated Financial Statements**

The following tables set forth information concerning amounts recognized in First Financial's Consolidated Balance Sheets and Consolidated Statements of Income related to the Company's pension plan:

---

| | | |
|:---|:---|:---|
| | December 31, | December 31, |
| *(Dollars in thousands)* | 2022 | 2021 |
| **Change in benefit obligation** |  |  |
| Benefit obligation at beginning of year | $93271 | $87494 |
| Service cost | 9065 | 9128 |
| Interest cost | 2585 | 2157 |
| Actuarial (gain) loss | (16655) | 2588 |
| Benefits paid, excluding settlement | (8260) | (8096) |
| &nbsp;&nbsp;&nbsp;**Benefit obligation at end of year** | 80006 | 93271 |
| **Change in plan assets** |  |  |
| Fair value of plan assets at beginning of year | 163382 | 155704 |
| Actual return on plan assets | (21673) | 15774 |
| Benefits paid, excluding settlement | (8260) | (8096) |
| &nbsp;&nbsp;&nbsp;**Fair value of plan assets at end of year** | 133449 | 163382 |
| **Amounts recognized in the Consolidated Balance Sheets** |  |  |
| Assets | 53443 | 70111 |
| Liabilities | 0 | 0 |
| &nbsp;&nbsp;&nbsp;**Net amount recognized** | $53443 | $70111 |
| **Amounts recognized in accumulated other comprehensive income (loss)** |  |  |
| Net actuarial loss | $41628 | $27264 |
| Net prior service cost | 32 | (270) |
| Deferred tax assets | (9637) | (6148) |
| &nbsp;&nbsp;&nbsp;**Net amount recognized** | $32023 | $20846 |
| **Change in accumulated other comprehensive income (loss)** | $11177 | $(4066) |
| **Accumulated benefit obligation** | $79236 | $92316 |

---

The change in the defined benefit obligations for the period was a result of the liabilities generating gains due to a large negative change in the interest crediting rate as well as an increase in the discount rate.

**82 First Financial Bancorp** 2022 Annual Report

------

The components of net periodic benefit cost are shown in the table that follows:

---

| | | | |
|:---|:---|:---|:---|
| | December 31, | December 31, | December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| Service cost | $9065 | $9128 | $7932 |
| Interest cost | 2585 | 2157 | 2455 |
| Expected return on assets | (10982) | (10118) | (9824) |
| Amortization of prior service cost | (302) | (413) | (413) |
| Recognized net actuarial loss | 1636 | 2611 | 2334 |
| &nbsp;&nbsp;&nbsp;**Net periodic benefit (income) cost** | 2002 | 3365 | 2484 |
| **Other changes recognized in accumulated other comprehensive income (loss)** | **Other changes recognized in accumulated other comprehensive income (loss)** |  |  |
| Net actuarial (gain) loss | 16001 | (3068) | (2001) |
| Prior service cost | 0 | 0 | 0 |
| Amortization of prior service cost | 302 | 413 | 413 |
| Amortization of gain | (1636) | (2611) | (2334) |
| &nbsp;&nbsp;&nbsp;**Total recognized in accumulated other comprehensive income (loss)** | 14667 | (5266) | (3922) |
| &nbsp;&nbsp;&nbsp;**Total recognized in net periodic benefit cost and accumulated other comprehensive income (loss)** | $16669 | $(1901) | $(1438) |

---

The pension plan assumptions are shown in the table that follows:

---

| | | | |
|:---|:---|:---|:---|
| | December 31, | December 31, | December 31, |
| | 2022 | 2021 | 2020 |
| **Benefit obligations** |  |  |  |
| Discount rate | 5.50% | 2.89% | 2.55% |
| Rate of compensation increase | 3.50% | 3.50% | 3.50% |
| Weighted average interest crediting rate | 5.20% | 2.58% | 2.14% |
| **Net periodic benefit cost** |  |  |  |
| Discount rate | 2.89% | 2.55% | 3.33% |
| Expected return on plan assets | 7.25% | 7.25% | 7.25% |
| Rate of compensation increase | 3.50% | 3.50% | 3.50% |
| Weighted average interest crediting rate | 2.58% | 2.14% | 2.82% |

---

The fair value of the plan assets as of December 31, 2022 by asset category is shown in the table that follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Fair Value Measurements | Fair Value Measurements | Fair Value Measurements | Fair Value Measurements |
| *(Dollars in thousands)* | Total | Quoted Prices in <br>Active Markets <br>for <br>Identical Assets <br>(Level 1) | Significant<br>Observable<br>Inputs<br>(Level 2) | Significant<br>Unobservable<br>Inputs<br>(Level 3) |
| **Asset Category** |  |  |  |  |
| Cash | $158 | $158 | $0 | $0 |
| U. S. Government agencies | 4602 | 0 | 4602 | 0 |
| Fixed income mutual funds | 47234 | 47234 | 0 | 0 |
| Equity mutual funds | 67316 | 67316 | 0 | 0 |
| &nbsp;&nbsp;**Total assets in fair value hierarchy** | 119310 | 114708 | 4602 | 0 |
| Collective trusts | 14139 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;**Investments at fair value** | $133449 | $114708 | $4602 | $0 |

---

**First Financial Bancorp** 2022 Annual Report **83**

------

**Notes to Consolidated Financial Statements**

The fair value of the plan assets as of December 31, 2021 by asset category is shown in the table that follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Fair Value Measurements | Fair Value Measurements | Fair Value Measurements | Fair Value Measurements |
| *(Dollars in thousands)* | Total | Quoted Prices in <br>Active Markets <br>for <br>Identical Assets <br>(Level 1) | Significant<br>Observable<br>Inputs<br>(Level 2) | Significant<br>Unobservable<br>Inputs<br>(Level 3) |
| **Asset Category** |  |  |  |  |
| Cash | $122 | $122 | $0 | $0 |
| U. S. Government agencies | 3535 | 0 | 3535 | 0 |
| Fixed income mutual funds | 63526 | 63526 | 0 | 0 |
| Equity mutual funds | 83000 | 83000 | 0 | 0 |
| &nbsp;&nbsp;**Total assets in fair value hierarchy** | 150183 | 146648 | 3535 | 0 |
| Collective trusts | 13199 | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;**Investments at fair value** | $163382 | $146648 | $3535 | $0 |

---

The pension plan utilizes values provided by third-party pricing vendors to price investment securities in accordance with the fair value hierarchy of the Fair Value Topic and reviews the pricing methodologies utilized by the pricing vendors to ensure that the fair value determination is consistent with the applicable accounting guidance.

The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement. The following methods, assumptions and valuation techniques were used by First Financial to measure the financial assets in the Company's pension plan.

**U.S. Government and Government Agency Securities.** These securities are valued using matrix pricing models developed by a third party and consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. Matrix pricing is widely used to value securities without solely

relying on quoted market prices for specific securities (Level 2).

**Mutual funds.** Mutual funds held by the pension plan are open-end mutual funds that are registered with the U.S. Securities and Exchange Commission and are valued at the daily closing price as reported by the fund. These funds are required to publish their daily net asset value and to transact at that price. The mutual funds held by the Plan are deemed to be actively traded (Level 1).

**Collective trusts.** The collective trusts are alternative investments valued at the net asset value of units of the collective trusts. The net asset value is used as a practical expedient to estimate fair value and is priced quarterly on a month lag. This practical expedient would not be used if it is determined to be probable that the fund will sell the investment for an amount different from the reported net asset value. Participant transactions (purchases and sales) may occur daily. If the plan initiates a full redemption of the collective trusts, the issuer reserves the right to require 12 months notification in order to ensure that securities liquidations will be carried out in an orderly business manner.

Investments measured at fair value using net asset value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in the hierarchy tables for such investments are intended to permit reconciliation to the fair value of plan assets at the end of the year.

See Note 23 – Fair Value Disclosures for further information related to the framework for measuring fair value and the fair value hierarchy.

**84 First Financial Bancorp** 2022 Annual Report

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The following benefit payments, which reflect expected future service, are expected to be paid:

---

| | |
|:---|:---|
| *(Dollars in thousands)* | Expected benefit payments |
| 2023 | $5810 |
| 2024 | 6310 |
| 2025 | 7056 |
| 2026 | 6994 |
| 2027 | 8497 |
| Thereafter | 46009 |

---

**401(k) plan.** First Financial sponsors a defined contribution 401(k) plan which covers substantially all employees. Employees may contribute up to 50.0% of their earnings into the plan, not to exceed applicable limitations prescribed by the Internal Revenue Service. First Financial's contributions to the 401(k) plan are discretionary. The Company made no contributions to the 401(k) plan during the years ended December 31, 2022, 2021 or 2020.

**18. Revenue Recognition**

The majority of the Company's revenues come from sources that are outside of the scope of ASU 2014-09, Revenue from Contracts with Customers. Income sources that are outside of this standard include income earned on loans, leases, securities, derivatives and foreign exchange. The Company's services that fall within the scope of ASU 2014-09 are presented within Noninterest income and are recognized as revenue when the Company satisfies its obligation to the customer. Services within the scope of this guidance include service charges on deposits, trust and wealth management fees, bankcard income, gain/loss on the sale of OREO and investment brokerage fees.

**Service charges on deposit accounts.** The Company earns revenues from its deposit customers for transaction-based fees, account maintenance fees and overdraft fees. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Similarly, overdraft fees are recognized at the point in time that the overdraft occurs as this corresponds with the Company's performance obligation. Service charges on deposit accounts are withdrawn from the customer's deposit account.

**Trust and wealth management fees.** Trust and wealth management fees are primarily asset-based, but can also include flat fees based upon a specific service rendered, such as tax preparation services. The Company's performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fees. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and wealth management customers. The Company's performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, as incurred.

Trust and wealth management fees also includes brokerage revenue. Brokerage revenue represents fees from investment brokerage services provided to customers by a third party provider. The Company receives commissions from the third-party service provider on a monthly basis based upon customer activity for the month. The fees are recognized monthly and a receivable is recorded until commissions are paid the following month. Because the Company (i) acts as an agent in arranging the relationship between the customer and the third-party service provider and (ii) does not control the services rendered to the customers, investment brokerage fees are presented net of related costs.

**Bankcard income.** The Company earns interchange fees from cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized concurrent with the transaction processing services provided to the cardholder. Interchange income is presented on the Consolidated Statements of Income net of expenses. Gross interchange income for 2022 was $29.5 million, and was partially offset by $15.1 million of expenses within Noninterest income. Gross interchange income for 2021 was $27.9 million, and was partially offset by $13.6 million of expenses within Noninterest income, while gross interchange income for 2020 was $23.9 million, and was partially offset by $12.2 million of expenses within Noninterest income.

**First Financial Bancorp** 2022 Annual Report **85**

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**Other.** Other noninterest income includes other recurring revenue streams such as transaction fees, safe deposit rental income, insurance commissions, merchant referral income and gain (loss) on sale of OREO. Transaction fees primarily include check printing sales commissions, collection fees and wire transfer fees which arise from in-branch transactions. Safe deposit rental income arises from fees charged to the customer on an annual basis and recognized upon receipt of payment. Insurance commissions are agent commissions earned by the Company and earned upon the effective date of the bound coverage. Merchant referral income is associated with a program whereby the Company receives a share of processing revenue that is generated from clients that were referred by First Financial to the service provider. Revenue is recognized at the time when the transaction occurs.

The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of the executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectibility of the transaction price is probable. Once these criteria are met, the OREO asset is removed and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer.

**19. Accumulated Other Comprehensive Income (Loss)**

Shareholders' equity is affected by transactions and valuations of asset and liability positions that require adjustments to accumulated other comprehensive income (loss). The related tax effects allocated to other comprehensive income and accumulated other comprehensive income (loss) are as follows:

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 | December 31, 2022 |
| | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total accumulated<br>other comprehensive income (loss) | Total accumulated<br>other comprehensive income (loss) | Total accumulated<br>other comprehensive income (loss) |
| *(Dollars in thousands)* | Prior to<br>reclass | Reclass<br>from | Pre-tax | Tax effect | Net of tax | Beginning balance | Net activity | Ending balance |
| Unrealized gain (loss) on debt securities | $(444257) | $569 | $(444826) | $97863 | $(346963) | $21038 | $(346963) | $(325925) |
| Retirement obligation | (16000) | (1334) | (14666) | 3489 | (11177) | (20846) | (11177) | (32023) |
| Foreign currency translation | (90) | 0 | (90) | 0 | (90) | (625) | (90) | (715) |
| &nbsp;&nbsp;&nbsp;**Total** | $(460347) | $(765) | $(459582) | $101352 | $(358230) | $(433) | $(358230) | $(358663) |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 | December 31, 2021 |
| | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total accumulated other<br>comprehensive income (loss) | Total accumulated other<br>comprehensive income (loss) | Total accumulated other<br>comprehensive income (loss) |
| *(Dollars in thousands)* | Prior to<br>reclass | Reclass<br>from | Pre-tax | Tax-effect | Net of tax | Beginning Balance | Net Activity | Ending Balance |
| Unrealized gain (loss) on debt securities | $(67759) | $(759) | $(67000) | $14462 | $(52538) | $73576 | $(52538) | $21038 |
| Retirement obligation | 3068 | (2198) | 5266 | (1200) | 4066 | (24912) | 4066 | (20846) |
| Foreign currency translation | (625) | 0 | (625) | 0 | (625) | 0 | (625) | (625) |
| &nbsp;&nbsp;&nbsp;**Total** | $(65316) | $(2957) | $(62359) | $13262 | $(49097) | $48664 | $(49097) | $(433) |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | December 31, 2020 | December 31, 2020 | December 31, 2020 | December 31, 2020 | December 31, 2020 | December 31, 2020 | December 31, 2020 | December 31, 2020 |
| | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total other comprehensive income (loss) | Total accumulated other<br>comprehensive income (loss) | Total accumulated other<br>comprehensive income (loss) | Total accumulated other<br>comprehensive income (loss) |
| *(Dollars in thousands)* | Prior to<br>reclass | Reclass<br>from | Pre-tax | Tax-effect | Net of tax | Beginning Balance | Net Activity | Ending Balance |
| Unrealized gain (loss) on debt securities | $36643 | $(4563) | $41206 | $(8894) | $32312 | $41264 | $32312 | $73576 |
| Retirement obligation | 2001 | (1921) | 3922 | (893) | 3029 | (27941) | 3029 | (24912) |
| &nbsp;&nbsp;&nbsp;**Total** | $38644 | $(6484) | $45128 | $(9787) | $35341 | $13323 | $35341 | $48664 |

---

**86 First Financial Bancorp** 2022 Annual Report

------

The following table details the activity reclassified from accumulated other comprehensive income into income during the period:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Amount Reclassified from Accumulated Other Comprehensive Income <sup>(1)</sup> | Amount Reclassified from Accumulated Other Comprehensive Income <sup>(1)</sup> | Amount Reclassified from Accumulated Other Comprehensive Income <sup>(1)</sup> | |
| | December 31, | December 31, | December 31, | |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 | Affected Line Item in the Consolidated Statements of Income |
| Realized gains and losses on securities available-for-sale | $569 | $(759) | $(4563) | Net gain (loss) on sales/transfers of investment securities |
| Defined benefit pension plan |  |  |  |  |
| &nbsp;&nbsp;Amortization of prior service cost <sup>(2)</sup> | 302 | 413 | 413 | Other noninterest expense |
| &nbsp;&nbsp;Recognized net actuarial loss <sup>(2)</sup> | (1636) | (2611) | (2334) | Other noninterest expense |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization and settlement charges of defined benefit pension items | (1334) | (2198) | (1921) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total reclassifications for the period, before tax** | $(765) | $(2957) | $(6484) |  |

---

<sup>(1)</sup> Negative amounts are debits to profit/loss.

<sup>(2)</sup> Included in the computation of net periodic pension cost (see Note 17 - Employee Benefit Plans for additional details).

**20. Capital**

**Risk-based capital.** First Financial and its subsidiary, First Financial Bank, are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate regulatory action.

The Board of Governors of the Federal Reserve System approved Basel III in order to strengthen the regulatory capital framework for all banking organizations, subject to a phase-in period for certain provisions. Basel III established and defined quantitative measures to ensure capital adequacy. These measures require First Financial to maintain minimum amounts and ratios of Common equity Tier 1 capital, Total and Tier 1 capital to risk-weighted assets and Tier 1 capital to average assets (Leverage ratio).

Basel III includes a minimum ratio of Common equity Tier 1 capital to risk-weighted assets of 7.0% and a fully phased-in capital conservation buffer of 2.5% of risk-weighted assets. Further, the minimum ratio of Tier 1 capital to risk-weighted assets is 8.5% and all banks are subject to a 4.0% minimum leverage ratio, while the required Total risk-based capital ratio is 10.50%. Failure to maintain the required Common equity Tier 1 capital will result in potential restrictions on a bank's ability to pay dividends, repurchase stock and pay discretionary compensation to its employees. The capital requirements also provide strict eligibility criteria for regulatory capital instruments and change the method for calculating risk-weighted assets in an effort to better identify riskier assets, such as highly volatile commercial real estate and nonaccrual loans.

As of December 31, 2022, First Financial met all capital adequacy requirements to which it was subject. To be categorized as well-capitalized, First Financial must maintain minimum Total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios as set forth in the table that follows. The Company's most recent regulatory notifications categorized First Financial as "well-capitalized" under the regulatory framework for prompt corrective action. There have been no conditions or events since those notifications that management believes have changed the Company's categorization. Total regulatory capital exceeded the minimum requirement by $406.0 million on a consolidated basis at December 31, 2022.

**First Financial Bancorp** 2022 Annual Report **87**

------

**Notes to Consolidated Financial Statements**

The following tables present the actual and required capital amounts and ratios as of December 31, 2022 and 2021 under the Basel III Capital Rules. Capital levels required to be considered "well capitalized" are based upon prompt corrective action regulations, as reflected in the Basel III Capital Rules.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Actual | Actual | Minimum capital<br>required - Basel III | Minimum capital<br>required - Basel III | PCA requirement to be<br>considered well<br>capitalized | PCA requirement to be<br>considered well<br>capitalized |
| *(Dollars in thousands)* | Capital<br>amount | Ratio | Capital<br>amount | Ratio | Capital<br>amount | Ratio |
| **December 31, 2022** |  |  |  |  |  |  |
| Common equity tier 1 capital to risk-weighted assets | Common equity tier 1 capital to risk-weighted assets | Common equity tier 1 capital to risk-weighted assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | $1399420 | 10.83% | $904626 | 7.00% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1581328 | 12.26% | 903244 | 7.00% | $838726 | 6.50% |
| Tier 1 capital to risk-weighted assets | Tier 1 capital to risk-weighted assets |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | 1443698 | 11.17% | 1098475 | 8.50% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1581900 | 12.26% | 1096796 | 8.50% | 1032278 | 8.00% |
| Total capital to risk-weighted assets | Total capital to risk-weighted assets |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | 1762971 | 13.64% | 1356939 | 10.50% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1640671 | 12.71% | 1354865 | 10.50% | 1290348 | 10.00% |
| Leverage |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | 1443698 | 8.89% | 649636 | 4.00% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1581900 | 9.76% | 648607 | 4.00% | 810759 | 5.00% |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | Actual | Actual | Minimum capital<br>required - Basel III | Minimum capital<br>required - Basel III | PCA requirement to be<br>considered well<br>capitalized | PCA requirement to be<br>considered well<br>capitalized |
| *(Dollars in thousands)* | Capital<br>amount | Ratio | Capital<br>amount | Ratio | Capital<br>amount | Ratio |
| **December 31, 2021** |  |  |  |  |  |  |
| Common equity tier 1 capital to risk-weighted assets | Common equity tier 1 capital to risk-weighted assets | Common equity tier 1 capital to risk-weighted assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | $1262789 | 10.85% | $814954 | 7.00% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1513175 | 13.02% | 813731 | 7.00% | $755607 | 6.50% |
| Tier 1 capital to risk-weighted assets | Tier 1 capital to risk-weighted assets |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | 1306571 | 11.22% | 989587 | 8.50% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1513708 | 13.02% | 988102 | 8.50% | 929978 | 8.00% |
| Total capital to risk-weighted assets | Total capital to risk-weighted assets |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | 1642549 | 14.11% | 1222431 | 10.50% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1589570 | 13.67% | 1220597 | 10.50% | 1162473 | 10.00% |
| Leverage |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Consolidated | 1306571 | 8.70% | 600410 | 4.00% | N/A | N/A |
| &nbsp;&nbsp;&nbsp;First Financial Bank | 1513708 | 10.10% | 599578 | 4.00% | 749472 | 5.00% |

---

**Share repurchases.** Effective January 2022, First Financial's board of directors approved a stock repurchase plan (the 2022 Repurchase Plan), replacing the 2020 Repurchase Plan which became effective in January 2021. The 2022 Repurchase Plan continues for two years and authorizes the purchase of up to 5,000,000 shares of the Company's common stock and will expire in December 2023. First Financial did not repurchase any shares under the 2022 plan during 2022.

**88 First Financial Bancorp** 2022 Annual Report

------

The 2020 Repurchase Plan replaced the plan that expired on December 31, 2020 (the 2019 Repurchase Plan). Under the 2020 Repurchase Plan, First Financial repurchased 4,633,355 shares at an average market price of $23.33 during 2021. Under the 2019 Repurchase Plan, First Financial repurchased 880,000 shares at an average market price of $18.96 during 2020.

**21. Stock Options and Awards**

First Financial follows the provisions of FASB ASC Topic 718, Compensation-Stock Compensation, which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation expense over the service period for all awards expected to vest. First Financial recorded share-based compensation expense within salaries and employee benefits on the Consolidated Statements of Income of $13.4 million, $9.6 million and $7.7 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to stock options and restricted stock awards. Total unrecognized compensation cost related to non-vested share-based compensation was $15.6 million at December 31, 2022 and is expected to be recognized over a weighted average period of 1.95 years.

As of December 31, 2022, First Financial had two active stock-based compensation plans, the Amended and Restated 2012 Stock Plan and the 2020 Stock Plan. New awards may only be granted from the 2020 Stock Plan. At December 31, 2022, there were 2,951,070 shares available for issuance under the 2020 Stock Plan.

In April 2018, in conjunction with the MSFG merger, First Financial assumed existing MSFG stock options, which were converted into options to purchase 83,551 shares of First Financial common stock. The converted MSFG options remain subject to all of the terms and conditions of the plan and grant agreements under which the MSFG Stock Options were originally issued. The assumed options were exercisable at the time of the merger and remain outstanding for 10 years after the initial grant date with all options expiring at the end of the exercise period. At December 31, 2022, 4,855 options were outstanding under the Plan, all of which expire on or before April 10, 2023.

First Financial utilizes the Black-Scholes valuation model to determine the fair value of stock options granted. In addition to the stock option strike price, the Black-Scholes valuation model incorporates the following assumptions: the expected dividend yield based on historical dividend payouts; the expected stock price volatility based on the historical volatility of Company stock for a period approximating the expected life of the options; the risk-free rate based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option; and the expected option life represented by the period of time the options are expected to be outstanding, and is based on historical trends. No new options were granted in 2022, 2021 or 2020.

Stock option activity for the year ended December 31, 2022, is summarized as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| *(Dollars in thousands, except share and per share data)* | Number of shares | Weighted<br>average exercise price | Weighted average<br>remaining contractual life | Aggregate intrinsic value |
| Outstanding at beginning of year | 20515 | $10.98 |  |  |
| Granted | 0 | 0.00 |  |  |
| Exercised | (15660) | 11.32 |  |  |
| Forfeited or expired | 0 | 0.00 |  |  |
| **Outstanding at end of year** | 4855 | $9.86 | 0.27 years | $70 |
| **Exercisable at end of year** | 4855 | $9.86 | 0.27 years | $70 |

---

The intrinsic value of stock options is defined as the difference between the current market value and the exercise price. First Financial uses treasury shares purchased under the Company's share repurchase program to satisfy share-based exercises.

---

| | | | |
|:---|:---|:---|:---|
| | 2022 | 2021 | 2020 |
| Total intrinsic value of options exercised | $208 | $114 | $86 |
| Cash received from exercises | $177 | $64 | $72 |
| Tax benefit from exercises | $3095 | $2229 | $1776 |

---

**First Financial Bancorp** 2022 Annual Report **89**

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**Notes to Consolidated Financial Statements**

Restricted stock awards are recorded at fair value as of the grant date as a component of shareholders' equity and amortized on a straight-line basis to salaries and benefits expense over the specified vesting periods, which is currently three years for employees and one year for non-employee directors. The vesting of these awards for employees and non-employee directors may require a service period to be met, and certain awards may also require performance measures to be met.

Activity in restricted stock for the previous three years ended December 31 is summarized as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | 2022 | 2022 | 2021 | 2021 | 2020 | 2020 |
| | Number of shares | Weighted<br> average<br>grant date<br>fair value | Number of shares | Weighted<br> average<br>grant date<br>fair value | Number of shares | Weighted<br> average<br>grant date<br>fair value |
| Nonvested at beginning of year | 839733 | $22.30 | 763283 | $22.04 | 530569 | $27.19 |
| Granted | 945193 | 23.57 | 539020 | 22.69 | 503311 | 18.62 |
| Vested | (407386) | 28.05 | (386848) | 22.24 | (233828) | 26.07 |
| Forfeited | (148194) | 18.40 | (75722) | 22.86 | (36769) | 23.79 |
| &nbsp;&nbsp;&nbsp;**Nonvested at end of year** | 1229346 | $21.28 | 839733 | $22.30 | 763283 | $22.04 |

---

The fair value of restricted stock is determined based on the number of shares granted and the quoted price of First Financial's common stock. The fair value of restricted stock vested during 2022, 2021 and 2020 was $11.4 million, $8.6 million and $6.1 million, respectively.

**22. Earnings per Common Share**

The following table sets forth the computation of basic and diluted earnings per share:

---

| | | | |
|:---|:---|:---|:---|
| *(Dollars in thousands, except share and per share data)* | 2022 | 2021 | 2020 |
| **Numerator** |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $217612 | $205160 | $155810 |
| **Denominator** |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic earnings per common share - weighted average shares | 93528712 | 95034690 | 97363952 |
| &nbsp;&nbsp;&nbsp;Effect of dilutive securities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Employee stock awards | 1058139 | 862695 | 729146 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted earnings per common share - adjusted weighted average shares | 94586851 | 95897385 | 98093098 |
| Earnings per share available to common shareholders |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $2.33 | $2.16 | $1.60 |
| &nbsp;&nbsp;&nbsp;Diluted | $2.30 | $2.14 | $1.59 |

---

Stock options and warrants with exercise prices greater than the average market price of the common shares are excluded from the computation of net income per diluted share, as they would be antidilutive. Using the end of period price of the Company's common shares, there were no antidilutive options at December 31, 2022, 2021, or 2020.

As of December 31, 2022, 2021, and 2020, First Financial was authorized to issue 10,000,000 preferred shares; however, no preferred shares were issued or outstanding.

**23. Fair Value Disclosures**

The fair value framework as disclosed in the Fair Value Topic includes a hierarchy which focuses on prioritizing the inputs used in valuation techniques. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), a lower priority to observable inputs other than quoted prices in active markets for identical assets

and liabilities (Level 2) and the lowest priority to unobservable inputs (Level 3). When determining the fair value measurements for assets and liabilities, First Financial looks to active markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are not traded in active markets, First Financial looks to observable market data for similar assets and liabilities and classifies such items as Level 2. Certain assets and liabilities are not actively traded in observable markets and First Financial must use alternative techniques, based on unobservable inputs, to determine the fair value and classifies such items as Level 3. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement.

The estimated fair values of First Financial's financial instruments not measured at fair value on a recurring or nonrecurring basis in the consolidated financial statements were as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Carrying | Estimated fair value | Estimated fair value | Estimated fair value | Estimated fair value |
| *(Dollars in thousands)* | value | Total | Level 1 | Level 2 | Level 3 |
| **December 31, 2022** |  |  |  |  |  |
| **Financial assets** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and short-term investments | $595683 | $595683 | $595683 | $0 | $0 |
| &nbsp;&nbsp;&nbsp;Investment securities held-to-maturity | 84021 | 76485 | 0 | 76485 | 0 |
| &nbsp;&nbsp;&nbsp;Other investments | 143160 | 143160 | 1171 | 132853 | 9136 |
| &nbsp;&nbsp;&nbsp;Loans and leases | 10165994 | 9916353 | 0 | 0 | 9916353 |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable | 63721 | 63721 | 0 | 16233 | 47488 |
| **Financial liabilities** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 12701177 | 12670747 | 0 | 12670747 | 0 |
| &nbsp;&nbsp;&nbsp;Short-term borrowings | 1287156 | 1287156 | 1287156 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Long-term debt | 346672 | 348041 | 0 | 348041 | 0 |
| &nbsp;&nbsp;&nbsp;Accrued interest payable | 11150 | 11150 | 3835 | 7315 | 0 |

---

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Carrying | Estimated Fair Value | Estimated Fair Value | Estimated Fair Value | Estimated Fair Value |
| *(Dollars in thousands)* | Value | Total | Level 1 | Level 2 | Level 3 |
| **December 31, 2021** |  |  |  |  |  |
| **Financial assets** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and short-term investments | $434842 | $434842 | $434842 | $0 | $0 |
| &nbsp;&nbsp;&nbsp;Investment securities held-to-maturity | 98420 | 99898 | 0 | 99898 | 0 |
| &nbsp;&nbsp;&nbsp;Other investments | 102971 | 102971 | 1331 | 92025 | 9615 |
| &nbsp;&nbsp;&nbsp;Loans and leases | 9156307 | 9172111 | 0 | 0 | 9172111 |
| &nbsp;&nbsp;&nbsp;Accrued interest receivable | 44627 | 44627 | 0 | 15170 | 29457 |
| **Financial liabilities** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Deposits | 12871954 | 12869567 | 0 | 12869567 | 0 |
| &nbsp;&nbsp;&nbsp;Short-term borrowings | 296203 | 296203 | 296203 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Long-term debt | 409832 | 411569 | 0 | 411569 | 0 |
| &nbsp;&nbsp;&nbsp;Accrued interest payable | 4498 | 4498 | 0 | 4498 | 0 |

---

The following methods, assumptions and valuation techniques were used by First Financial to measure different financial assets and liabilities at fair value on a recurring or nonrecurring basis.

**Investment securities.** Investment securities classified as available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar investment securities. First Financial compiles prices from various sources who may apply such techniques as matrix pricing to determine the value of identical or similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value

investment securities without relying exclusively on quoted prices for the specific investment securities but rather relying on the investment securities' relationship to other benchmark quoted investment securities. Any investment securities not valued based upon the methods previously described are considered Level 3.

First Financial utilizes values provided by third-party pricing vendors to price the investment securities portfolio in accordance with the fair value hierarchy of the Fair Value Topic and reviews the pricing methodologies utilized by the pricing vendors to ensure that the fair value determination is consistent with the applicable accounting guidance. First Financial's pricing process includes a series of quality assurance activities where prices are compared to recent market conditions, historical prices and other independent pricing services. Further, the Company periodically validates the fair value of a sample of securities in the portfolio by comparing the fair values to prices from other independent sources for the same or similar securities. First Financial analyzes unusual or significant variances, conducts additional research with the pricing vendor, and if necessary, takes appropriate action based on its findings. The results of the quality assurance process are incorporated into the selection of pricing providers by the portfolio manager.

**Loans held for sale.** The fair value of the Company's residential mortgage loans held for sale is determined on a recurring basis based on quoted prices for similar loans in active markets, and therefore, is classified as Level 2 in the fair value hierarchy.

**Derivatives.** The fair values of derivative instruments are based primarily on a net present value calculation of the cash flows related to the interest rate swaps and foreign exchange contracts at the reporting date, using primarily observable market inputs such as interest rate yield curves and currency exchange rates, which represents the cost to terminate the swap if First Financial should choose to do so. Additionally, First Financial utilizes an internally-developed model to value the credit risk component of derivative assets and liabilities, which is recorded as an adjustment to the fair value of the derivative asset or liability on the reporting date. Derivative instruments are classified as Level 2 in the fair value hierarchy.

**Collateral dependent loans.** Collateral dependent loans carried at fair value have been partially charged-off or receive specific allocations of the allowance for credit losses. For collateral dependent loans, fair value is generally based on real estate appraisals, a calculation of enterprise value or a valuation of business assets including equipment, inventory and accounts receivable. These loans had a principal amount of $11.9 million and $28.8 million at December 31, 2022 and December 31, 2021, respectively, with a valuation allowance of $3.7 million and $9.7 million at December 31, 2022 and December 31, 2021, respectively.

The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed third-party appraiser (Level 3). These appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales approach and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Collateral is then adjusted or discounted based on management's historical knowledge, changes in market conditions from the time of the valuation, and management's expertise and knowledge of the client and the client's business, resulting in a Level 3 fair value classification. Collateral dependent loans are evaluated on a quarterly basis for additional write-downs and are adjusted accordingly.

Enterprise value is defined as imputed value for the entire underlying business. To determine an appropriate range of enterprise value, FFB relies on a standardized set of valuation methodologies that take into account future projected cash flows, market based multiples as well as asset values. Valuations involve both quantitative and qualitative considerations and professional judgments concerning differences in financial and operating characteristics in addition to other factors that may impact values over time (Level 3).

The value of business equipment is based on an outside appraisal, if deemed significant, or the net book value on the applicable borrower financial statements. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3).

The fair value of collateral dependent loans is measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income.

**OREO.** Assets acquired through loan foreclosure are recorded at fair value less costs to sell, with any difference between the fair value of the property and the carrying value of the loan recorded as a charge-off establishing a new cost basis. Subsequent changes in value are reported as adjustments to the carrying amount and are recorded in noninterest expense. The carrying value of OREO is not re-measured to fair value on a recurring basis, but is subject to fair value adjustments when the carrying

value differs from the fair value, less estimated selling costs. Fair value is based on recent real estate appraisals and is updated at least annually. The Company classifies OREO in level 3 of the fair value hierarchy.

The financial assets and liabilities measured at fair value on a recurring basis in the consolidated financial statements, were as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Fair Value Measurements Using | Fair Value Measurements Using | Fair Value Measurements Using | Assets/Liabilities |
| *(Dollars in thousands)* | Level 1 | Level 2 | Level 3 | at Fair Value |
| **December 31, 2022** |  |  |  |  |
| **Assets** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Investment securities available-for-sale | $32696 | $3341096 | $35856 | $3409648 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 0 | 7918 | 0 | 7918 |
| &nbsp;&nbsp;&nbsp;Interest rate derivative contracts | 0 | 152846 | 0 | 152846 |
| &nbsp;&nbsp;&nbsp;Foreign exchange derivative contracts | 0 | 204882 | 0 | 204882 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $32696 | $3706742 | $35856 | $3775294 |
| **Liabilities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest rate derivative contracts | $0 | $153119 | $0 | $153119 |
| &nbsp;&nbsp;&nbsp;Foreign exchange derivative contracts | 0 | 204882 | 0 | 204882 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $0 | $358001 | $0 | $358001 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | Fair Value Measurements Using | Fair Value Measurements Using | Fair Value Measurements Using | Assets/Liabilities |
| *(Dollars in thousands)* | Level 1 | Level 2 | Level 3 | at Fair Value |
| **December 31, 2021** |  |  |  |  |
| **Assets** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Investment securities available-for-sale | $34776 | $4134889 | $38181 | $4207846 |
| &nbsp;&nbsp;&nbsp;Loans held for sale | 0 | 29482 | 0 | 29482 |
| &nbsp;&nbsp;&nbsp;Interest rate derivative contracts | 0 | 92328 | 0 | 92328 |
| Foreign exchange derivative contracts | 0 | 120768 | 0 | 120768 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $34776 | $4377467 | $38181 | $4450424 |
| **Liabilities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest rate derivative contracts | $0 | $92444 | $0 | $92444 |
| &nbsp;&nbsp;&nbsp;Foreign exchange derivative contracts | 0 | 120768 | 0 | 120768 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total** | $0 | $213212 | $0 | $213212 |

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The following table presents a reconciliation for certain AFS securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2022, 2021 and 2020.

---

| | | | |
|:---|:---|:---|:---|
| *(dollars in thousands)* | December 31, 2022 | December 31, 2021 | December 31, 2020 |
| Beginning balance | $38181 | $40575 | $9190 |
| &nbsp;&nbsp;&nbsp;Accretion (amortization) | (56) | (38) | 1 |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in fair value | 45 | 44 | (17) |
| &nbsp;&nbsp;&nbsp;Purchases (settlements) | (2313) | (2400) | 31401 |
| &nbsp;&nbsp;&nbsp;&nbsp;Ending balance | $35857 | $38181 | $40575 |

---

Certain financial assets and liabilities are measured at fair value on a nonrecurring basis. Adjustments to the fair market value of these assets usually result from the application of fair value accounting or write-downs of individual assets. The following

table summarizes financial assets and liabilities measured at fair value on a nonrecurring basis:

---

| | | | |
|:---|:---|:---|:---|
| | Fair Value Measurements Using | Fair Value Measurements Using | Fair Value Measurements Using |
| *(Dollars in thousands)* | Level 1 | Level 2 | Level 3 |
| **December 31, 2022** |  |  |  |
| **Assets** |  |  |  |
| &nbsp;&nbsp;&nbsp;Collateral dependent loans |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial | $0 | $0 | $4240 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial real estate | 0 | 0 | 4015 |
| &nbsp;&nbsp;&nbsp;OREO | 0 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;Operating leases | 0 | 0 | 0 |

---

---

| | | | |
|:---|:---|:---|:---|
| | Fair Value Measurements Using | Fair Value Measurements Using | Fair Value Measurements Using |
| *(Dollars in thousands)* | Level 1 | Level 2 | Level 3 |
| **December 31, 2021** |  |  |  |
| **Assets** |  |  |  |
| &nbsp;&nbsp;&nbsp;Collateral dependent loans |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial | $0 | $0 | $4449 |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial real estate | 0 | 0 | 14618 |
| &nbsp;&nbsp;&nbsp;OREO | 0 | 0 | 0 |

---

**Fair value option.** First Financial may elect to report most financial instruments and certain other items at fair value on an instrument-by instrument basis with changes in fair value reported in net income. After the initial adoption, the election is made at the acquisition of an eligible financial asset, financial liability, or firm commitment or when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made.

The Company elected the fair value option for residential mortgage loans held for sale. This election allows for a more effective offset of the changes in fair values of the loans held for sale and the derivative financial instruments used to financially hedge them without having to apply complex hedge accounting requirements. The fair value of the Company's residential mortgage loans held for sale was determined based on quoted prices for similar loans in active markets.

The aggregate fair value of the Company's residential mortgage loans held for sale as of December 31, 2022 and 2021 was $7.9 million and $29.5 million, respectively. The aggregate unpaid principal balance of the Company's residential mortgage loans held for sale as of December 31, 2022 and 2021 was $7.5 million and $27.2 million, respectively. The resulting difference between the aggregate fair value and the aggregate remaining principal balance for loans for which the fair value option has been elected was $0.4 million and $2.3 million as of December 31, 2022 and 2021, respectively.

Changes in the estimated fair value of residential mortgage loans held for sale are reported as a component of Net gain from sales of loans in the Company's Consolidated Statements of Income. For the years ended December 31, 2022 and 2021, the change in fair value of the Company's residential mortgage loans held for sale was a net loss of $1.9 million and $3.3 million, respectively.

**24. Business Combination**

On December 31, 2021, the Company completed its acquisition of Summit Funding Group, Inc. and its subsidiaries. Summit is a privately held, full service, equipment financing company that originates, purchases, sells and services equipment leases to commercial businesses in the United States and Canada. Upon completion of the transaction, Summit became a subsidiary of the Bank and continues to operate as Summit Funding Group, taking advantage of its existing brand recognition within the equipment financing industry. Operating results related to the Summit acquisition were immaterial to 2021 consolidated financial statements but are included in the Consolidated Statements of Income for the year ended December 31, 2022.

Pursuant to the purchase agreement, First Financial agreed to acquire all of the issued and outstanding equity securities of Summit for aggregate consideration of approximately $127.1 million consisting of $113.5 million in cash and $10.0 million of First Financial common stock, and a $3.6 million earn-out payment. Pursuant to the purchase agreement, the "earn-out"

**90 First Financial Bancorp** 2022 Annual Report

------

payments are payable annually for each of the five years following the closing of the acquisition, contingent upon the results of Summit's operations. First Financial incurred expenses related to the Summit acquisition of $0.6 million and $2.6 million during the years ended December 31, 2022 and 2021, respectively.

The Summit transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed were $185.8 million and $122.5 million, respectively, and included $41.9 million of financing leases and $75.3 million of operating leases. These present value measurements were subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values become available. The measurement period ended in December 2022. Goodwill arising from the Summit acquisition was $63.7 million and reflects the business's high growth potential and the expectation that the acquisition will provide additional revenue growth with the expansion of the Bank's leasing business. The goodwill is not deductible for income tax purposes as the transaction was accounted for as a tax-free exchange. For further detail, see Note 10 – Goodwill and Other Intangible Assets.

The following table provides the purchase price calculation as of the acquisition date, identifiable assets purchased and liabilities assumed at their estimated fair value.

---

| | |
|:---|:---|
| *(Dollars in thousands)* | Summit |
| **Purchase consideration** |  |
| Cash consideration | $102994 |
| Liabilities paid with cash concurrent with close | 10487 |
| Stock consideration | 10000 |
| Earn out | 3606 |
| &nbsp;&nbsp;&nbsp;Total purchase consideration | 127087 |
| **Assets acquired** |  |
| Cash | 4413 |
| Finance leases | 41894 |
| Premises and equipment | 707 |
| Operating leases | 75309 |
| Intangible assets | 34585 |
| Other assets | 28927 |
| &nbsp;&nbsp;&nbsp;Total assets acquired | 185835 |
| **Liabilities assumed** |  |
| Long-term borrowings | 96511 |
| Other liabilities | 25973 |
| &nbsp;&nbsp;&nbsp;Total liabilities assumed | 122484 |
| Net identifiable assets | 63351 |
| &nbsp;&nbsp;&nbsp;**Goodwill** | $63736 |

---

**First Financial Bancorp** 2022 Annual Report **91**

------

**Notes to Consolidated Financial Statements**

**25. First Financial Bancorp. (Parent Company Only) Financial Information**

**Balance Sheets**

---

| | | |
|:---|:---|:---|
| | December 31, | December 31, |
| *(Dollars in thousands)* | 2022 | 2021 |
| **Assets** |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $91013 | $49746 |
| &nbsp;&nbsp;&nbsp;Investment securities | 1681 | 1836 |
| &nbsp;&nbsp;&nbsp;Subordinated notes from subsidiaries | 7500 | 7500 |
| &nbsp;&nbsp;&nbsp;Investment in subsidiaries |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commercial bank | 2161338 | 2447095 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-banks | 11246 | 10417 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total investment in subsidiaries | 2172584 | 2457512 |
| &nbsp;&nbsp;&nbsp;Premises and equipment | 283 | 1311 |
| &nbsp;&nbsp;&nbsp;Other assets | 86355 | 77132 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total assets** | $2359416 | $2595037 |
| **Liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Short-term borrowings | $0 | $20000 |
| &nbsp;&nbsp;&nbsp;Subordinated notes | 311707 | 310864 |
| &nbsp;&nbsp;&nbsp;Dividends payable | 1271 | 1042 |
| &nbsp;&nbsp;&nbsp;Other liabilities | 5065 | 4189 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities** | 318043 | 336095 |
| **Shareholders' equity** | 2041373 | 2258942 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total liabilities and shareholders' equity** | $2359416 | $2595037 |

---

**92 First Financial Bancorp** 2022 Annual Report

------

**Statements of Income and Comprehensive Income (Loss)**

---

| | | | |
|:---|:---|:---|:---|
| | Years Ended December 31, | Years Ended December 31, | Years Ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| **Income** |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | $37 | $34 | $27 |
| &nbsp;&nbsp;&nbsp;Noninterest income | 13 | 215 | 0 |
| &nbsp;&nbsp;&nbsp;Net gain (loss) on equity securities | (156) | 448 | 272 |
| &nbsp;&nbsp;&nbsp;Dividends from subsidiaries | 171900 | 202000 | 81725 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total income** | 171794 | 202697 | 82024 |
| **Expenses** |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense | 16624 | 15900 | 14172 |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | 13547 | 9784 | 8004 |
| &nbsp;&nbsp;&nbsp;Professional services | 256 | 2343 | 1160 |
| &nbsp;&nbsp;&nbsp;Other | 5581 | 5186 | 5163 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total expenses** | 36008 | 33213 | 28499 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Income before income taxes and equity in undistributed net earnings of subsidiaries** | 135786 | 169484 | 53525 |
| Income tax expense (benefit) | (8523) | (7787) | (6145) |
| Equity in undistributed earnings (loss) of subsidiaries | 73303 | 27889 | 96140 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net income** | $217612 | $205160 | $155810 |
| **Comprehensive income (loss)** | $(140618) | $156063 | $191151 |

---

**First Financial Bancorp** 2022 Annual Report **93**

------

**Notes to Consolidated Financial Statements**

**Statements of Cash Flows**

---

| | | | |
|:---|:---|:---|:---|
| | Years Ended December 31, | Years Ended December 31, | Years Ended December 31, |
| *(Dollars in thousands)* | 2022 | 2021 | 2020 |
| **Operating activities** |  |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $217612 | $205160 | $155810 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities | &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operating activities |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Equity in undistributed (earnings) loss of subsidiaries | (73303) | (27889) | (96140) |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 860 | 859 | 712 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 13379 | 9635 | 7678 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized (gain) loss on equity securities | 156 | (448) | (272) |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes | (475) | (224) | (158) |
| &nbsp;&nbsp;&nbsp;&nbsp;(Decrease) increase in dividends payable | 229 | 368 | (175) |
| &nbsp;&nbsp;&nbsp;&nbsp;(Decrease) increase in other liabilities | 634 | (751) | (22) |
| &nbsp;&nbsp;&nbsp;&nbsp;Decrease (increase) in other assets | (8748) | (8096) | 8907 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) operating activities | 150344 | 178614 | 76340 |
| **Investing activities** |  |  |  |
| &nbsp;&nbsp;&nbsp;Capital contributions to subsidiaries | 0 | (113152) | 0 |
| &nbsp;&nbsp;&nbsp;Other | 1011 | 0 | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by investing activities | 1011 | (113152) | 0 |
| **Financing activities** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;(Decrease) increase in short-term borrowings | (20000) | 20000 | 0 |
| &nbsp;&nbsp;&nbsp;Proceeds from long-term borrowings | 0 | (10592) | 150000 |
| &nbsp;&nbsp;&nbsp;Cash dividends paid on common stock | (86606) | (87316) | (89691) |
| &nbsp;&nbsp;&nbsp;Purchases of common stock | 0 | (108077) | (16686) |
| &nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options, net of shares purchased | 177 | 64 | 72 |
| &nbsp;&nbsp;&nbsp;Other | (3659) | (2697) | (3002) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by (used in) financing activities | (110088) | (188618) | 40693 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net increase (decrease) in cash** | 41267 | (123156) | 117033 |
| Cash at beginning of year | 49746 | 172902 | 55869 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Cash at end of year** | $91013 | $49746 | $172902 |

---

**94 First Financial Bancorp** 2022 Annual Report

------

Total Return to Shareholders

The following graph compares the five-year cumulative total return to shareholders of First Financial Bancorp common stock with that of companies that comprise the Nasdaq Composite Index and the KBW Regional Bank Index. The KBW Regional Bank Index is comprised of 50 banks headquartered throughout the country and is used frequently by investors when comparing First Financial Bancorp's stock performance to that of other similarly sized institutions. First Financial Bancorp is included in the KBW Regional Bank Index.

The following table assumes $100 invested on December 31, 2017 in First Financial Bancorp, the Nasdaq Composite Index and the KBW Regional Bank Index, and assumes that dividends are reinvested.

**COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN**

**AMONG FIRST FINANCIAL BANCORP, NASDAQ COMPOSITE INDEX**

**AND KBW REGIONAL BANK INDEX**

![ffbc-20221231_g3.jpg](ffbc-20221231_g3.jpg)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| First Financial Bancorp | 100.00 | 92.44 | 102.88 | 75.21 | 108.74 | 112.42 |
| Nasdaq Composite Index | 100.00 | 97.18 | 132.88 | 192.73 | 235.54 | 158.96 |
| KBW Regional Bank Index | 100.00 | 82.51 | 102.20 | 93.33 | 127.53 | 118.71 |

---

**First Financial Bancorp** 2022 Annual Report **95**

## Ex-21

**EXHIBIT 21**

**FIRST FINANCIAL BANCORP. SUBSIDIARIES (as of 12/31/22)**

---

| | |
|:---|:---|
| **Name** | **State of Other Jurisdiction of<br>Incorporation or Organization** |
| First Financial Bank | Ohio |
| &nbsp;&nbsp;&nbsp;First Financial Collateral, Inc. | Indiana |
| &nbsp;&nbsp;&nbsp;First Financial Equipment Finance, LLC | Ohio |
| &nbsp;&nbsp;&nbsp;First Franchise Capital Corporation | Indiana |
| &nbsp;&nbsp;&nbsp;Irwin Home Equity Corporation | Indiana |
| &nbsp;&nbsp;&nbsp;&nbsp;IHE Funding Corp. II | Delaware |
| &nbsp;&nbsp;&nbsp;MSB Investments of Nevada, Inc. | Nevada |
| &nbsp;&nbsp;&nbsp;&nbsp;MSB Holdings of Nevada, Inc. | Nevada |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MSB of Nevada, LLC | Nevada |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First Financial Preferred Capital, Inc. | Ohio |
| &nbsp;&nbsp;&nbsp;Oak Street Holdings Corporation | Delaware |
| &nbsp;&nbsp;&nbsp;&nbsp;Oak Street Funding LLC | Delaware |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oak Street Servicing, LLC | Delaware |
| MainSource Risk Management, Inc. | Nevada |
| MainSource Statutory Trust I | Connecticut |
| MainSource Statutory Trust II | Connecticut |
| MainSource Statutory Trust III | Delaware |
| MainSource Statutory Trust IV | Delaware |
| FCB Bancorp Statutory Trust I | Delaware |
| OSF Insurance Receivables, LLC | Indiana |
| Summit Funding Group, Inc. | Ohio |
| &nbsp;&nbsp;New York Systems Exchange, Inc. | Ohio |
| &nbsp;&nbsp;Summit RFG Corp. | Ohio |
| &nbsp;&nbsp;SFG Titling Co. | Ohio |
| &nbsp;&nbsp;PRC SFG, LLC | Ohio |
| &nbsp;&nbsp;Summit Financial Services, Inc.-Consolidated | Ohio |
| &nbsp;&nbsp;&nbsp;&nbsp;Summit-Northlake Canadian Leasing Corporation | Ohio |
| &nbsp;&nbsp;Summit MFR Leasing II, LLC | Ohio |
| &nbsp;&nbsp;Summit MFR Leasing, LLC | Ohio |
| &nbsp;&nbsp;PRC SFG II, LLC | Ohio |
| &nbsp;&nbsp;Summit Continental Leasing, LLC | Ohio |

---

## Ex-23

**EXHIBIT 23**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in the following Registration Statements of First Financial Bancorp:

Form S-8 No. 338-86781

Form S-3 No. 333-25745

Form S-3 No. 333-156841

Form S-3 No. 333-153751

Form S-8 No. 333-168675

Form S-8 No. 333-188593

Form S-3 ASR No. 333-197771

Form S-8 No. 333-218188

Form S-3 ASR No. 333-219554

Form S-4 No. 333-220583

Form S-3 ASR No. 333-233701

Form S-8 No. 333-238698

Form S-3 ASR No. 333-262089

of our report dated February 24, 2023 relating to the 2022 consolidated financial statements and effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Crowe LLP

Louisville, Kentucky

February 24, 2023

## Exhibit 31.1

**EXHIBIT 31.1**

**CERTIFICATIONS**

I, Archie M. Brown, President and Chief Executive Officer of First Financial Bancorp., certify that:

1. I have reviewed this annual report on Form 10-K of First Financial Bancorp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: | 2/24/2023 | /s/ Archie M. Brown |
| | | Archie M. Brown<br>President and Chief Executive Officer |

---

## Exhibit 31.2

**EXHIBIT 31.2**

**CERTIFICATIONS**

I, James M. Anderson, Executive Vice President and Chief Financial Officer of First Financial Bancorp., certify that:

1. I have reviewed this annual report on Form 10-K of First Financial Bancorp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: | 2/24/2023 | /s/ James M. Anderson |
| | | James M. Anderson<br>Executive Vice President and Chief Financial Officer |

---

## Exhibit 32.1

**EXHIBIT 32.1**

**CERTIFICATION OF PERIODIC FINANCIAL REPORT BY CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Form 10-K for the annual period ended December 31, 2022, of First Financial Bancorp. (the "Company"), as filed with the Securities and Exchange Commission on February 24, 2023 (the "Report"), I, Archie M. Brown, President and Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| |
|:---|
| /s/ Archie M. Brown |
| Archie M. Brown<br>President and Chief Executive Officer |
| February 24, 2023 |

---

## Exhibit 32.2

**EXHIBIT 32.2**

**CERTIFICATION OF PERIODIC FINANCIAL REPORT BY CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Form 10-K for the annual period ended December 31, 2022, of First Financial Bancorp. (the "Company"), as filed with the Securities and Exchange Commission on February 24, 2023 (the "Report"), I, James M. Anderson, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| |
|:---|
| /s/ James M. Anderson |
| James M. Anderson<br>Executive Vice President and Chief Financial Officer |
| February 24, 2023 |

---

<br>