10-Q 1 q2-10qx2015630.htm FORM 10-Q Q2-10Q-2015.6.30
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C.  20549

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended                                           June 30, 2015                                                   

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________

Commission file number 001-34762
 
FIRST FINANCIAL BANCORP.
(Exact name of registrant as specified in its charter)

Ohio
 
31-1042001
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
255 East Fifth Street, Suite 700
Cincinnati, Ohio
 
45202
(Address of principal executive offices)
 
(Zip Code)

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

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   x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes     x        No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x
Accelerated filer o
 
 
Non-accelerated filer o
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of Exchange Act).
Yes  o No   x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class
 
Outstanding at August 6, 2015
Common stock, No par value
 
61,710,870




FIRST FINANCIAL BANCORP.

INDEX


 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




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.

the Act
Private Securities Litigation Reform Act
 
FHLB
Federal Home Loan Bank
ALLL
Allowance for loan and lease losses
 
First Financial
First Financial Bancorp.
ASC
Accounting standards codification
 
First Financial Bank
First Financial Bank, N.A.
ASU
Accounting standards update
 
Form 10-K
First Financial Bancorp. Annual Report on Form 10-K
ATM
Automated teller machine
 
GAAP
U.S. Generally Accepted Accounting Principles
Bank
First Financial Bank, N.A.
 
IRLC
Interest Rate Lock Commitment
Basel III
Basel Committee regulatory capital reforms, Third Basel Accord
 
N/A
Not applicable
BP
basis point
 
NII
Net interest income
Company
First Financial Bancorp.
 
Oak Street
Oak Street Holdings Corporation
EVE
Economic value of equity
 
OREO
Other real estate owned
FASB
Financial Accounting Standards Board
 
SEC
United States Securities and Exchange Commission
FDIC
Federal Deposit Insurance Corporation
 
TDR
Troubled debt restructuring
 
 
 
 
 




PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

 
June 30,
2015
 
December 31,
2014
 
(Unaudited)
 
 
Assets
 
 
 
Cash and due from banks
$
116,318

 
$
110,122

Interest-bearing deposits with other banks
41,027

 
22,630

Investment securities available-for-sale, at market value (cost $962,766 at June 30, 2015 and $849,504 at December 31, 2014)
955,764

 
840,468

Investment securities held-to-maturity (market value $799,796 at June 30, 2015 and $874,749 at December 31, 2014)
791,839

 
867,996

Other investments
53,585

 
52,626

Loans held for sale
21,151

 
11,005

Loans and leases
 
 
 
Commercial
1,315,087

 
1,315,114

Real estate-construction
229,256

 
197,571

Real estate-commercial
2,171,806

 
2,140,667

Real estate-residential
506,391

 
501,894

Installment
43,073

 
47,320

Home equity
463,222

 
458,627

Credit card
39,216

 
38,475

Lease financing
84,723

 
77,567

Total loans and leases
4,852,774

 
4,777,235

Less:  Allowance for loan and lease losses
52,876

 
52,858

Net loans and leases
4,799,898

 
4,724,377

Premises and equipment
139,170

 
141,381

Goodwill
137,739

 
137,739

Other intangibles
7,726

 
8,114

FDIC indemnification asset
20,338

 
22,666

Accrued interest and other assets
298,817

 
278,697

Total assets
$
7,383,372

 
$
7,217,821

 
 
 
 
Liabilities
 

 
 

Deposits
 

 
 

Interest-bearing
$
1,175,219

 
$
1,225,378

Savings
1,947,566

 
1,889,473

Time
1,262,881

 
1,255,364

Total interest-bearing deposits
4,385,666

 
4,370,215

Noninterest-bearing
1,330,149

 
1,285,527

Total deposits
5,715,815

 
5,655,742

Federal funds purchased and securities sold under agreements to repurchase
68,349

 
103,192

Federal Home Loan Bank short-term borrowings
641,700

 
558,200

Total short-term borrowings
710,049

 
661,392

Long-term debt
47,084

 
48,241

Total borrowed funds
757,133

 
709,633

Accrued interest and other liabilities
108,041

 
68,369

Total liabilities
6,580,989

 
6,433,744

 
 
 
 
Shareholders' equity
 

 
 

Common stock - no par value
 

 
 

Authorized - 160,000,000 shares; Issued - 68,730,731 shares in 2015 and 2014
571,501

 
574,643

Retained earnings
369,462

 
352,893

Accumulated other comprehensive loss
(20,715
)
 
(21,409
)
Treasury stock, at cost, 7,022,884 shares in 2015 and 7,274,184 shares in 2014
(117,865
)
 
(122,050
)
Total shareholders' equity
802,383

 
784,077

Total liabilities and shareholders' equity
$
7,383,372

 
$
7,217,821


See Notes to Consolidated Financial Statements.


1


FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Interest income
 
 
 
 
 
 
 
Loans, including fees
$
54,586

 
$
48,877

 
$
109,050

 
$
98,024

Investment securities
 
 
 
 
 
 
 
Taxable
9,281

 
10,355

 
18,889

 
20,792

Tax-exempt
1,139

 
796

 
2,256

 
1,606

Total interest on investment securities
10,420

 
11,151

 
21,145

 
22,398

Other earning assets
(1,162
)
 
(1,301
)
 
(2,343
)
 
(2,707
)
Total interest income
63,844

 
58,727

 
127,852

 
117,715

Interest expense
 

 
 

 
 
 
 
Deposits
4,621

 
3,606

 
9,441

 
6,922

Short-term borrowings
253

 
292

 
556

 
621

Long-term borrowings
296

 
525

 
595

 
1,049

Total interest expense
5,170

 
4,423

 
10,592

 
8,592

Net interest income
58,674

 
54,304

 
117,260

 
109,123

Provision for loan and lease losses
3,070

 
(384
)
 
5,130

 
(1,417
)
Net interest income after provision for loan and lease losses
55,604

 
54,688

 
112,130

 
110,540

Noninterest income
 

 
 

 
 
 
 
Service charges on deposit accounts
4,803

 
5,137

 
9,326

 
9,909

Trust and wealth management fees
3,274

 
3,305

 
6,908

 
7,051

Bankcard income
2,972

 
2,809

 
5,592

 
5,242

Net gains from sales of loans
1,924

 
737

 
3,388

 
1,133

Gains on sales of investment securities
1,094

 
0

 
1,094

 
50

FDIC loss sharing income
(304
)
 
1,108

 
(1,350
)
 
600

Accelerated discount on covered/formerly covered loans
4,094

 
621

 
6,186

 
1,636

Other
3,558

 
2,620

 
7,884

 
4,891

Total noninterest income
21,415

 
16,337

 
39,028

 
30,512

Noninterest expenses
 

 
 

 
 
 
 
Salaries and employee benefits
27,451

 
25,615

 
54,392

 
50,876

Net occupancy
4,380

 
4,505

 
9,385

 
9,804

Furniture and equipment
2,219

 
1,983

 
4,372

 
4,060

Data processing
2,657

 
2,770

 
5,429

 
5,628

Marketing
973

 
830

 
1,861

 
1,616

Communication
558

 
562

 
1,128

 
1,185

Professional services
1,727

 
1,449

 
3,697

 
3,173

State intangible tax
577

 
644

 
1,154

 
1,288

FDIC assessments
1,114

 
1,074

 
2,204

 
2,208

Loss (gain) - other real estate owned
419

 
711

 
893

 
1,162

Loss sharing expense
576

 
1,465

 
877

 
3,034

Other
6,135

 
5,503

 
11,462

 
10,919

Total noninterest expenses
48,786

 
47,111

 
96,854

 
94,953

Income before income taxes
28,233

 
23,914

 
54,304

 
46,099

Income tax expense
9,284

 
7,961

 
17,734

 
15,042

Net income
$
18,949

 
$
15,953

 
$
36,570

 
$
31,057

Net earnings per common share - basic
$
0.31

 
$
0.28

 
$
0.60

 
$
0.54

Net earnings per common share - diluted
$
0.31

 
$
0.28

 
$
0.59

 
$
0.54

Cash dividends declared per share
$
0.16

 
$
0.15

 
$
0.32

 
$
0.30

Average common shares outstanding - basic
61,115,802

 
57,201,494

 
61,064,928

 
57,146,853

Average common shares outstanding - diluted
61,915,294

 
57,951,636

 
61,824,106

 
57,890,268


See Notes to Consolidated Financial Statements.

2



FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
 
2015
 
2014
 
2015
 
2014
Net income
$
18,949

 
$
15,953

 
$
36,570

 
$
31,057

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Unrealized gains (losses) on investment securities arising during the period
(3,778
)
 
6,471

 
1,230

 
10,333

Change in retirement obligation
221

 
237

 
404

 
474

Unrealized gain (loss) on derivatives
(83
)
 
(637
)
 
(899
)
 
(1,094
)
Unrealized gain (loss) on foreign currency exchange
(21
)
 
8

 
(41
)
 
(1
)
Other comprehensive income (loss)
(3,661
)
 
6,079

 
694

 
9,712

Comprehensive income
$
15,288

 
$
22,032

 
$
37,264

 
$
40,769

 
 
 
 
 
 
 
 
                   See Notes to Consolidated Financial Statements.


3


FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands except per share data)
(Unaudited)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
Common Stock
 
Retained
 
Accumulated other comprehensive
 
Treasury stock
 
 
 
Shares
 
Amount
 
Earnings
 
income (loss)
 
Shares
 
Amount
 
Total
Balance at January 1, 2014
68,730,731

 
$
577,076

 
$
324,192

 
$
(31,281
)
 
(11,197,685
)
 
$
(187,826
)
 
$
682,161

Net income
 

 
 
 
31,057

 
 
 
 
 
 
 
31,057

Other comprehensive income (loss)
 
 
 
 
 
 
9,712

 
 
 
 
 
9,712

Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock at $0.30 per share
 
 
 
 
(17,278
)
 
 
 
 
 
 
 
(17,278
)
Purchase of common stock
 
 
 
 
 
 
 
 
(40,255
)
 
(697
)
 
(697
)
Excess tax benefit on share-based compensation
 
 
278

 
 
 
 
 
 
 
 
 
278

Exercise of stock options, net of shares purchased
 
 
(728
)
 
 
 
 
 
34,853

 
582

 
(146
)
Restricted stock awards, net of forfeitures
 
 
(4,337
)
 
 
 
 
 
190,673

 
3,164

 
(1,173
)
Share-based compensation expense
 
 
1,917

 
 
 
 
 
 
 
 
 
1,917

Balance at June 30, 2014
68,730,731

 
$
574,206

 
$
337,971

 
$
(21,569
)
 
(11,012,414
)
 
$
(184,777
)
 
$
705,831

Balance at January 1, 2015
68,730,731

 
$
574,643

 
$
352,587

 
$
(21,409
)
 
(7,274,184
)
 
$
(122,050
)
 
$
783,771

Net income
 
 
 
 
36,570

 
 
 
 
 
 
 
36,570

Other comprehensive income (loss)
 
 
 
 
 
 
694

 
 
 
 
 
694

Cash dividends declared:
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock at $0.32 per share
 
 
 
 
(19,695
)
 
 
 
 
 
 
 
(19,695
)
Excess tax benefit on share-based compensation
 
 
106

 
 
 
 
 
 
 
 
 
106

Exercise of stock options, net of shares purchased
 
 
(174
)
 
 
 
 
 
18,067

 
303

 
129

Restricted stock awards, net of forfeitures
 
 
(5,118
)
 
 
 
 
 
233,233

 
3,882

 
(1,236
)
Share-based compensation expense
 
 
2,044

 
 
 
 
 
 
 
 
 
2,044

Balance at June 30, 2015
68,730,731

 
$
571,501

 
$
369,462

 
$
(20,715
)
 
(7,022,884
)
 
$
(117,865
)
 
$
802,383


See Notes to Consolidated Financial Statements.

4


FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
Six months ended
 
June 30,
 
2015
 
2014
Operating activities
 
 
 
Net income
$
36,570

 
$
31,057

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan and lease losses
5,130

 
(1,417
)
Depreciation and amortization
6,388

 
6,230

Stock-based compensation expense
2,044

 
1,917

Pension expense (income)
(600
)
 
(505
)
Net amortization of premiums/accretion of discounts on investment securities
3,820

 
3,501

Gains on sales of investment securities
(1,094
)
 
(50
)
Originations of loans held for sale
(133,168
)
 
(51,962
)
Net gains from sales of loans held for sale
(3,388
)
 
(1,133
)
Proceeds from sales of loans held for sale
126,045

 
46,479

Deferred income taxes
4,474

 
(4,247
)
Decrease (increase) in interest receivable
(1,097
)
 
(2,141
)
Decrease (increase) in cash surrender value of life insurance
(955
)
 
(865
)
Decrease (increase) in prepaid expenses
(1,624
)
 
(255
)
Decrease (increase) in indemnification asset
2,328

 
14,671

(Decrease) increase in accrued expenses
8,599

 
(5,968
)
(Decrease) increase in interest payable
133

 
(79
)
Other
2,188

 
(16,580
)
Net cash provided by (used in) operating activities
55,793

 
18,653

 
 
 
 
Investing activities
 

 
 

Proceeds from sales of securities available-for-sale
53,518

 
92,573

Proceeds from calls, paydowns and maturities of securities available-for-sale
56,808

 
49,000

Purchases of securities available-for-sale
(224,642
)
 
(100,246
)
Proceeds from calls, paydowns and maturities of securities held-to-maturity
75,311

 
46,379

Purchases of securities held-to-maturity
(1,820
)
 
(111,416
)
Net decrease (increase) in interest-bearing deposits with other banks
(18,397
)
 
(13,407
)
Net decrease (increase) in loans and leases
(84,658
)
 
(76,947
)
Proceeds from disposal of other real estate owned
9,678

 
18,903

Purchases of premises and equipment
(3,964
)
 
(2,570
)
Net cash provided by (used in) investing activities
(138,166
)
 
(97,731
)
 
 
 
 
Financing activities
 

 
 

Net (decrease) increase in total deposits
60,073

 
37,620

Net (decrease) increase in short-term borrowings
48,657

 
65,564

Payments on long-term borrowings
(932
)
 
(1,073
)
Cash dividends paid on common stock
(19,502
)
 
(17,135
)
Treasury stock purchase
0

 
(697
)
Proceeds from exercise of stock options
167

 
61

Excess tax benefit on share-based compensation
106

 
278

Net cash provided by (used in) financing activities
88,569

 
84,618

 
 
 
 
Cash and due from banks
 

 
 

Net increase (decrease) in cash and due from banks
6,196

 
5,540

Cash and due from banks at beginning of period
110,122

 
117,620

Cash and due from banks at end of period
$
116,318

 
$
123,160


See Notes to Consolidated Financial Statements.

5


FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2015
(Unaudited)

NOTE 1:  BASIS OF PRESENTATION

The Consolidated Financial Statements of First Financial Bancorp., a bank holding company, principally serving Ohio, Indiana and Kentucky, include the accounts and operations of First Financial and its wholly-owned subsidiary, First Financial Bank, N.A.  All significant intercompany transactions and accounts have been eliminated in consolidation.  Certain reclassifications of prior periods' amounts, including covered loans and the related allowance for loan and lease losses in the Consolidated Balance Sheets have been made to conform to current year presentation. Such reclassifications had no effect on net earnings.
   
Effective October 1, 2014, the five-year loss sharing coverage period for non-single family assets expired and the majority of the Company’s formerly covered assets were no longer subject to FDIC loss sharing protection. As a result of this expiration, and the insignificant balance of assets that remain subject to FDIC loss sharing protection through October 1, 2019 relative to the Company’s total assets, all covered loans and the related allowance for loan and lease losses, as well as provision for covered loan and lease losses, have been reclassified in the Consolidated Financial Statements, and all credit quality metrics have been updated to include covered and formerly covered assets.

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.  These estimates, assumptions and judgments are inherently subjective and may be susceptible to significant change.  Actual realized amounts could differ materially from these estimates.  

These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and serve to update the Form 10-K for the year ended December 31, 2014.  These interim financial statements may not include all information and notes necessary to constitute a complete set of financial statements under GAAP applicable to annual periods and it is suggested that these interim statements be read in conjunction with the Form 10-K.  Management believes these unaudited consolidated financial statements reflect all adjustments of a normal recurring nature which are necessary for a fair presentation of the results for the interim periods presented.  The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.  The Consolidated Balance Sheet as of December 31, 2014 has been derived from the audited financial statements in the Company’s 2014 Form 10-K.

NOTE 2:  RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

In January 2014, the FASB issued an update (ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects) that permits First Financial to make an accounting policy election to account for its investments in qualified
affordable housing projects using a proportional amortization method if certain conditions are met. Under the proportional
amortization method, First Financial would amortize the initial cost of the investment in proportion to the tax credits and other
tax benefits received and recognize the net investment performance in the income statement as a component of income tax
expense. The amended guidance requires disclosure of the nature of First Financial’s investments in qualified affordable
housing projects, and the effect of the measurement of the investments in qualified affordable housing projects and the related
tax credits on First Financial’s financial position and results of operation. The provisions of this update became effective for the interim reporting period ended March 31, 2015. First Financial made the election to adopt the proportional amortization method during the first quarter 2015 and had $24.4 million of affordable housing commitments as of June 30, 2015. This update did not have a material impact on the Company's Consolidated Financial Statements.

In January 2014, the FASB issued an update (ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure) which clarifies when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be de-recognized and the real estate property recognized. The provisions of this update became effective for the interim reporting period ended March 31, 2015. This update did not have a material impact on the Company's Consolidated Financial Statements.

In April 2014, the FASB issued an update (ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity) which redefines what constitutes a discontinued operation. Under the revised standard, a discontinued operation is a component of an entity or group of components that has been disposed of by sale, disposed of other

6


than by sale or is classified as held for sale, that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results or an acquired business or nonprofit activity that is classified as held for sale on the date of the acquisition. A strategic shift that has or will have a major effect on an entity’s operations and financial results could include the disposal of a major line of business, a major geographic area, a major equity method investment or other major parts of an entity. The new guidance eliminates the criteria prohibiting an entity from reporting a discontinued operation if it has certain continuing cash flows or involvement with the component after the disposal and requires additional disclosures for discontinued operations and new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. The provisions of this update became effective for the interim reporting period ended March 31, 2015. This update did not have a material impact on the Company's Consolidated Financial Statements.

In May 2014, the FASB issued an update (ASU 2014-09, Revenue from Contracts with Customers) which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under the revised standard, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. Certain of the ASU’s provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities, such as sales of property, plant, and equipment; real estate; or intangible assets. The ASU also requires significantly expanded disclosures about revenue recognition. The provisions of ASU 2014-09 become effective for interim and annual reporting periods beginning after December 15, 2017. Early application is not permitted. First Financial is currently evaluating the impact of this update on its Consolidated Financial Statements.

In June 2014, the FASB issued an update (ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures) that requires repurchase-to-maturity transactions to be accounted for as secured borrowings rather than as sales with a forward repurchase commitment and eliminates current guidance on repurchase financings. The ASU requires separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty. If the derecognition criteria are met, the initial transfer will generally be accounted for as a sale and the repurchase agreement will generally be accounted for as a secured borrowing. The ASU requires new disclosures for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings. The ASU also requires new disclosures for transfers of financial assets that are accounted for as sales that involve an agreement with the transferee entered into in contemplation of the initial transfer that result in the transferor retaining substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The provisions of this update became effective for the interim reporting period ended March 31, 2015. This update did not have a material impact on the Company's Consolidated Financial Statements.

In August 2014, the FASB issued an update (ASU 2014-14, Receivables - Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure) that requires a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met: a) the loan has a government guarantee that is not separable from the loan before foreclosure, b) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim and c) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The provisions of this update became effective for the interim reporting period ended March 31, 2015. This update did not have a material impact on the Company's Consolidated Financial Statements.
 
In August 2014, the FASB issued an update (ASU 2014-15, Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern) that requires management perform a going concern evaluation similar to the auditor’s evaluation required by standards issued by the PCAOB and the AICPA. The ASU requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists for both annual and interim reporting periods. If management concludes that substantial doubt about an entity’s ability to continue as a going concern, the notes to the financial statements are required to include a statement that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The provisions of this update become effective for interim and annual periods ending after December 15, 2016. Early adoption is permitted. First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.


7


In April 2015, the FASB issued an update (ASU 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs) that requires debt issuance costs to be presented as a deduction from the corresponding debt liability. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. The provisions of this update are effective for interim and annual periods beginning after December 15, 2015, with early adoption permitted. First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.

In May 2015, the FASB issued an update (ASU 2015-07, Fair Value Measurement: Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share) which will eliminate the requirement to categorize investments whose fair values are measured at net asset value within the fair value hierarchy using the practical expedient. This update will require entities to disclose the fair values of such investments so that financial statement users can reconcile amounts reported in the fair value hierarchy table and the amounts reported on the balance sheet. The provisions of this update become effective for the interim period and annual periods beginning after December 15, 2015, with early adoption permitted. First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.

NOTE 3:  INVESTMENTS

The following is a summary of held-to-maturity and available-for-sale investment securities as of June 30, 2015:
  
 
Held-to-maturity
 
Available-for-sale
(Dollars in thousands)
 
Amortized
cost
 
Unrealized
gain
 
Unrealized
loss
 
Market
value
 
Amortized
cost
 
Unrealized
gain
 
Unrealized
loss
 
Market
value
U.S. Treasuries
 
$
0

 
$
0

 
$
0

 
$
0

 
$
97

 
$
0

 
$
(1
)
 
$
96

Securities of U.S. government agencies and corporations
 
16,401

 
27

 
0

 
16,428

 
8,717

 
109

 
0

 
8,826

Mortgage-backed securities
 
743,849

 
9,773

 
(1,363
)
 
752,259

 
593,021

 
4,098

 
(11,681
)
 
585,438

Obligations of state and other political subdivisions
 
26,788

 
90

 
(544
)
 
26,334

 
71,133

 
1,747

 
(1,567
)
 
71,313

Asset-backed securities
 
0

 
0

 
0

 
0

 
188,448

 
184

 
(313
)
 
188,319

Other securities
 
4,801

 
0

 
(26
)
 
4,775

 
101,350

 
1,572

 
(1,150
)
 
101,772

Total
 
$
791,839

 
$
9,890

 
$
(1,933
)
 
$
799,796

 
$
962,766

 
$
7,710

 
$
(14,712
)
 
$
955,764


The following is a summary of held-to-maturity and available-for-sale investment securities as of December 31, 2014:
  
 
Held-to-maturity
 
Available-for-sale
(Dollars in thousands)
 
Amortized
cost
 
Unrealized
gain
 
Unrealized
loss
 
Market
value
 
Amortized
cost
 
Unrealized
gain
 
Unrealized
loss
 
Market
value
U.S. Treasuries
 
$
0

 
$
0

 
$
0

 
$
0

 
$
97

 
$
0

 
$
0

 
$
97

Securities of U.S. government agencies and corporations
 
17,570

 
24

 
(23
)
 
17,571

 
11,814

 
67

 
(1
)
 
11,880

Mortgage-backed securities
 
801,465

 
7,813

 
(2,064
)
 
807,214

 
611,497

 
4,462

 
(13,211
)
 
602,748

Obligations of state and other political subdivisions
 
44,164

 
1,275

 
(193
)
 
45,246

 
73,649

 
883

 
(947
)
 
73,585

Asset-backed securities
 
0

 
0

 
0

 
0

 
74,784

 
155

 
(103
)
 
74,836

Other securities
 
4,797

 
0

 
(79
)
 
4,718

 
77,663

 
1,193

 
(1,534
)
 
77,322

Total
 
$
867,996

 
$
9,112

 
$
(2,359
)
 
$
874,749

 
$
849,504

 
$
6,760

 
$
(15,796
)
 
$
840,468



8


The following table provides a summary of investment securities by estimated weighted average life as of June 30, 2015. Estimated lives on certain investment securities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Held-to-maturity
 
Available-for-sale
(Dollars in thousands)
Amortized
cost
 
Market
value
 
Amortized
cost
 
Market
value
Due in one year or less
$
1,772

 
$
1,817

 
$
33,027

 
$
33,081

Due after one year through five years
562,598

 
568,772

 
546,342

 
543,189

Due after five years through ten years
227,469

 
229,207

 
314,704

 
310,220

Due after ten years
0

 
0

 
68,693

 
69,274

Total
$
791,839

 
$
799,796

 
$
962,766

 
$
955,764


The following tables provide the fair value and gross unrealized losses on investment securities in an unrealized loss position, aggregated by investment category and the length of time the individual securities have been in a continuous loss position:
 
 
June 30, 2015
 
 
Less than 12 months
 
12 months or more
 
Total
(Dollars in thousands)
 
Fair
value
 
Unrealized
loss
 
Fair
value
 
Unrealized
loss
 
Fair
value
 
Unrealized
loss
Securities of U.S. government agencies and corporations
 
$
97

 
$
(1
)
 
$
0

 
$
0

 
$
97

 
$
(1
)
Mortgage-backed securities
 
253,795

 
(2,745
)
 
277,285

 
(10,299
)
 
531,080

 
(13,044
)
Obligations of state and other political subdivisions
 
11,047

 
(128
)
 
35,828

 
(1,983
)
 
46,875

 
(2,111
)
Asset-backed securities
 
125,079

 
(313
)
 
0

 
0

 
125,079

 
(313
)
Other securities
 
31,012

 
(425
)
 
24,658

 
(751
)
 
55,670

 
(1,176
)
Total
 
$
421,030

 
$
(3,612
)
 
$
337,771

 
$
(13,033
)
 
$
758,801

 
$
(16,645
)

 
 
December 31, 2014
 
 
Less than 12 months
 
12 months or more
 
Total
 
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
(Dollars in thousands)
 
value
 
loss
 
value
 
loss
 
value
 
loss
Securities of U.S. government agencies and corporations
 
$
493

 
$
(1
)
 
$
97

 
$
0

 
$
590

 
$
(1
)
Mortgage-backed securities
 
119,641

 
(420
)
 
428,486

 
(13,780
)
 
548,127

 
(14,200
)
Obligations of state and other political subdivisions
 
12,746

 
(126
)
 
37,516

 
(1,014
)
 
50,262

 
(1,140
)
Asset-backed securities
 
32,045

 
(103
)
 
0

 
0

 
32,045

 
(103
)
Other securities
 
12,831

 
(317
)
 
30,005

 
(1,296
)
 
42,836

 
(1,613
)
Total
 
$
177,756

 
$
(967
)
 
$
496,104

 
$
(16,090
)
 
$
673,860

 
$
(17,057
)

Gains and losses on debt securities are generally due to fluctuations in current market yields relative to the yields of the debt securities at their amortized cost. All securities with unrealized losses are reviewed quarterly to determine if any impairment is considered other than temporary, requiring a write-down to fair value. First Financial considers the percentage loss on a security, duration of the loss, average life or duration of the security, credit rating of the security and payment performance as well as the Company's intent and ability to hold the security to maturity when determining whether any impairment is other than temporary. At this time 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. First Financial had no other than temporary impairment related to its investment securities portfolio as of June 30, 2015 or December 31, 2014.

For further detail on the fair value of investment securities, see Note 14 – Fair Value Disclosures.


9


NOTE 4:  LOANS AND LEASES

First Financial offers clients a variety of commercial and consumer loan and lease products with various interest rates and payment terms. Lending activities are primarily concentrated in Ohio, Indiana and Kentucky, states where the Bank currently operates banking centers. Additionally, First Financial provides equipment and leasehold improvement financing for franchisees in the quick service and casual dining restaurant sector throughout the United States. Commercial loan categories include commercial and industrial (commercial), commercial real estate, construction real estate and lease financing. Consumer loan categories include residential real estate, home equity, installment and credit card.

Purchased impaired loans. Loans accounted for under FASB ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, are referred to as purchased impaired loans. First Financial accounts for the majority of loans acquired in FDIC transactions as purchased impaired loans, except for loans with revolving privileges, which are outside the scope of FASB ASC Topic 310-30, and loans for which cash flows could not be estimated, which are accounted for under the cost recovery method. Purchased impaired loans include loans previously covered under loss sharing agreements as well as loans that remain subject to FDIC loss sharing coverage.

Purchased impaired loans are not classified as nonperforming assets as the loans are considered to be performing under FASB ASC Topic 310-30. Therefore, interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows (accretable difference) is recognized on all purchased impaired loans.

First Financial had purchased impaired loans totaling $215.2 million and $264.9 million, at June 30, 2015 and December 31, 2014, respectively. The outstanding balance of all purchased impaired loans, including all contractual principal, interest, fees and penalties, was $262.4 million and $314.5 million as of June 30, 2015 and December 31, 2014, respectively. These balances exclude contractual interest not yet accrued.

Changes in the carrying amount of accretable difference for purchased impaired loans were as follows:
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
(Dollars in thousands)
 
2015
 
2014
 
2015
 
2014
Balance at beginning of period
 
$
91,988

 
$
131,398

 
$
106,622

 
$
133,671

Reclassification from/(to) nonaccretable difference
 
(548
)
 
8,941

 
(2,124
)
 
22,159

Accretion
 
(5,744
)
 
(8,932
)
 
(12,101
)
 
(18,650
)
Other net activity (1)
 
(6,751
)
 
(3,643
)
 
(13,452
)
 
(9,416
)
Balance at end of period
 
$
78,945

 
$
127,764

 
$
78,945

 
$
127,764

 (1) Includes the impact of loan repayments and charge-offs.

First Financial regularly reviews its forecast of expected cash flows for purchased impaired loans. The Company recognized reclassifications from accretable to nonaccretable difference of $0.5 million for the second quarter of 2015 and $2.1 million during the six months ended June 30, 2015. Conversely, First Financial recognized $8.9 million of reclassifications from nonaccretable to accretable difference during the second quarter of 2014 and $22.2 million during the six months ended June 30, 2014 due to changes in the cash flow expectations related to certain loan pools. These reclassifications can result in impairment and provision expense in the current period or yield adjustments on the related loan pools on a prospective basis.

Covered loans. Loans acquired in FDIC-assisted transactions covered under loss sharing agreements whereby the FDIC will reimburse First Financial for the majority of any losses incurred are referred to as covered loans. Pursuant to the terms of the loss sharing agreements, covered loans are subject to a stated loss threshold whereby the FDIC will reimburse First Financial for 80% of losses up to a stated loss threshold and 95% of losses in excess of the threshold. These loss sharing agreements provide for partial loss protection on single-family, residential loans for a period of ten years and First Financial is required to share any recoveries of previously charged-off amounts for the same time period, on the same pro-rata basis with the FDIC. All other loans are provided loss protection for a period of five years and recoveries of previously charged-off amounts must be shared with the FDIC for an additional three year period, on the same pro-rata basis.

The Company's loss sharing agreements with the FDIC related to non-single family loans expired effective October 1, 2014, and the ten year period of loss protection on all other covered loans and covered OREO expires October 1, 2019. Covered loans totaled $125.8 million as of June 30, 2015 and $135.7 million as of December 31, 2014.


10


Credit Quality. To facilitate the monitoring of credit quality for commercial loans, and for purposes of determining an appropriate allowance for loan and lease losses, 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 of 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 the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. 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 described above, which are derived from standard regulatory rating definitions, 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 also classified as nonperforming.


11


Commercial and consumer credit exposure by risk attribute was as follows:
 
 
As of June 30, 2015
 
 
 
 
Real Estate
 
 
 
 
(Dollars in thousands)
 
Commercial
 
Construction
 
Commercial
 
Leasing
 
Total
Pass
 
$
1,251,098

 
$
227,439

 
$
2,074,954

 
$
83,229

 
$
3,636,720

Special Mention
 
36,515

 
133

 
22,587

 
1,391

 
60,626

Substandard
 
27,474

 
1,684

 
74,265

 
103

 
103,526

Doubtful
 
0

 
0

 
0

 
0

 
0

Total
 
$
1,315,087

 
$
229,256

 
$
2,171,806

 
$
84,723

 
$
3,800,872


(Dollars in thousands)
 
Real Estate
Residential
 
Installment
 
Home Equity
 
Other
 
Total
Performing
 
$
497,164

 
$
42,708

 
$
457,548

 
$
39,216

 
$
1,036,636

Nonperforming
 
9,227

 
365

 
5,674

 
0

 
15,266

Total
 
$
506,391

 
$
43,073

 
$
463,222

 
$
39,216

 
$
1,051,902


 
 
As of December 31, 2014
 
 
 
 
Real Estate
 
 
 
 
(Dollars in thousands)
 
Commercial
 
Construction
 
Commercial
 
Leasing
 
Total
Pass
 
$
1,265,116

 
$
195,787

 
$
2,027,897

 
$
75,839

 
$
3,564,639

Special Mention
 
30,903

 
0

 
25,928

 
1,728

 
58,559

Substandard
 
19,095

 
1,784

 
86,842

 
0

 
107,721

Doubtful
 
0

 
0

 
0

 
0

 
0

Total
 
$
1,315,114

 
$
197,571

 
$
2,140,667

 
$
77,567

 
$
3,730,919


(Dollars in thousands)
 
Real Estate
Residential
 
Installment
 
Home Equity
 
Other
 
Total
Performing
 
$
490,314

 
$
46,806

 
$
452,281

 
$
38,475

 
$
1,027,876

Nonperforming
 
11,580

 
514

 
6,346

 
0

 
18,440

Total
 
$
501,894

 
$
47,320

 
$
458,627

 
$
38,475

 
$
1,046,316



12


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 date of the scheduled payment.

Loan delinquency, including loans classified as nonaccrual, was as follows:
 
 
As of June 30, 2015
(Dollars in thousands)
 
30 – 59
days
past due
 
60 – 89
days
past due
 
> 90 days
past due
 
Total
past
due
 
Current
 
Subtotal
 
Purchased impaired
 
Total
 
> 90 days
past due
and still
accruing
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
66

 
$
330

 
$
2,777

 
$
3,173

 
$
1,300,408

 
$
1,303,581

 
$
11,506

 
$
1,315,087

 
$
0

Real estate - construction
 
18

 
0

 
223

 
241

 
228,245

 
228,486

 
770

 
229,256

 
0

Real estate - commercial
 
2,724

 
6,224

 
17,421

 
26,369

 
2,009,354

 
2,035,723

 
136,083

 
2,171,806

 
0

Real estate - residential
 
91

 
1,069

 
2,251

 
3,411

 
439,456

 
442,867

 
63,524

 
506,391

 
0

Installment
 
193

 
104

 
198

 
495

 
40,315

 
40,810

 
2,263

 
43,073

 
0

Home equity
 
963

 
242

 
3,109

 
4,314

 
457,872

 
462,186

 
1,036

 
463,222

 
0

Other
 
403

 
164

 
70

 
637

 
123,302

 
123,939

 
0

 
123,939

 
70

Total
 
$
4,458

 
$
8,133

 
$
26,049

 
$
38,640

 
$
4,598,952

 
$
4,637,592

 
$
215,182

 
$
4,852,774

 
$
70


 
 
As of December 31, 2014
(Dollars in thousands)
 
30 – 59
days
past due
 
60 – 89
days
past due
 
> 90 days
past due
 
Total
past
due
 
Current
 
Subtotal
 
Purchased impaired
 
Total
 
> 90 days
past due
and still
accruing
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
1,002

 
$
3,647

 
$
2,110

 
$
6,759

 
$
1,290,975

 
$
1,297,734

 
$
17,380

 
$
1,315,114

 
$
0

Real estate - construction
 
276

 
0

 
223

 
499

 
195,773

 
196,272

 
1,299

 
197,571

 
0

Real estate - commercial
 
8,356

 
838

 
13,952

 
23,146

 
1,944,207

 
1,967,353

 
173,314

 
2,140,667

 
0

Real estate - residential
 
1,198

 
344

 
4,224

 
5,766

 
426,908

 
432,674

 
69,220

 
501,894

 
0

Installment
 
133

 
17

 
272

 
422

 
44,235

 
44,657

 
2,663

 
47,320

 
0

Home equity
 
697

 
466

 
4,079

 
5,242

 
452,357

 
457,599

 
1,028

 
458,627

 
0

Other
 
1,133

 
128

 
216

 
1,477

 
114,565

 
116,042

 
0

 
116,042

 
216

Total
 
$
12,795

 
$
5,440

 
$
25,076

 
$
43,311

 
$
4,469,020

 
$
4,512,331

 
$
264,904

 
$
4,777,235

 
$
216


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 such as insufficient collateral value. The accrual of interest income is discontinued, and previously accrued but unpaid interest is reversed when a loan is classified as nonaccrual. Any payments received while a loan is on nonaccrual status 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.

Purchased impaired loans are classified as performing, even though they may be contractually past due, as any nonpayment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or prospective yield adjustments.

Troubled Debt Restructurings. A loan modification is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) 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, 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.


13


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 272 TDRs totaling $34.2 million at June 30, 2015, including $20.1 million on accrual status and $14.1 million classified as nonaccrual. First Financial had an insignificant amount of commitments outstanding to lend additional funds to borrowers whose loan terms have been modified through TDRs at June 30, 2015. At June 30, 2015, the allowance for loan and lease losses included reserves of $3.4 million related to TDRs. For the three and six months ended June 30, 2015, First Financial charged off $1.7 million for the portion of TDRs determined to be uncollectible. Additionally, at June 30, 2015, approximately $8.1 million of accruing TDRs have been performing in accordance with the restructured terms for more than one year.

First Financial had 262 TDRs totaling $28.2 million at December 31, 2014, including $15.9 million of loans on accrual status and $12.3 million classified as nonaccrual. First Financial had an insignificant amount of commitments outstanding to lend additional funds to borrowers whose loan terms had been modified through TDRs. At December 31, 2014, the allowance for loan and lease losses included reserves of $3.7 million related to TDRs. For the year ended December 31, 2014, First Financial charged off $1.0 million for the portion of TDRs determined to be uncollectible. At December 31, 2014, approximately $10.5 million of the accruing TDRs had been performing in accordance with the restructured terms for more than one year.

The following tables provide information on loan modifications classified as TDRs during the three and six months ended June 30, 2015 and 2014:
 
Three months ended
 
June 30, 2015
 
June 30, 2014
(Dollars in thousands)
Number of loans
 
Pre-modification loan balance
 
Period end balance
 
Number of loans
 
Pre-modification loan balance
 
Period end balance
Commercial
14

 
$
1,155

 
$
1,151

 
3

 
$
153

 
$
151

Real estate - construction
0

 
0

 
0

 
0

 
0

 
0

Real estate - commercial
6

 
2,426

 
2,391

 
2

 
295

 
285

Real estate - residential
3

 
362

 
327

 
14

 
844

 
733

Installment
7

 
46

 
46

 
3

 
14

 
13

Home equity
9

 
1,883

 
1,375

 
15

 
512

 
486

Total
39

 
$
5,872

 
$
5,290

 
37

 
$
1,818

 
$
1,668

 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended
 
June 30, 2015
 
June 30, 2014
(Dollars in thousands)
Number of loans
 
Pre-modification loan balance
 
Period end balance
 
Number of loans
 
Pre-modification loan balance
 
Period end balance
Commercial
22

 
$
1,515

 
$
1,510

 
6

 
$
226

 
$
216

Real estate - construction
0

 
0

 
0

 
0

 
0

 
0

Real estate - commercial
12

 
15,340

 
11,734

 
8

 
2,152

 
2,085

Real estate - residential
3

 
362

 
327

 
23

 
1,390

 
1,263

Installment
7

 
46

 
46

 
4

 
17

 
13

Home equity
10

 
2,050

 
1,539

 
23

 
759

 
637

Total
54

 
$
19,313

 
$
15,156

 
64

 
$
4,544

 
$
4,214



14


The following table provides information on how TDRs were modified during the three and six months ended June 30, 2015 and 2014.
 
Three months ended
 
Six months ended
 
June 30,
 
June 30,
(Dollars in thousands)
2015
 
2014
 
2015
 
2014
Extended maturities
$
1,180

 
$
185

 
$
10,661

 
$
826

Adjusted interest rates
0
 
0
 
0

 
289

Combination of rate and maturity changes
1,157
 
50
 
1,219

 
1,271

Forbearance
260
 
252
 
260

 
316

Other (1)
2,693
 
1,181
 
3,016

 
1,512

Total
$
5,290

 
$
1,668

 
$
15,156

 
$
4,214

(1) Includes covenant modifications and other concessions, or combination of concessions, that do not consist of interest rate adjustments, forbearance and maturity extensions