INCOME TAXES

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

 INCOME TAXES

For the second quarter 2018, income tax expense was $9.3 million, resulting in an effective tax rate of 20.4% compared with income tax expense of $11.2 million and an effective tax rate of 33.0% for the comparable period in 2017. For the first six months of 2018, income tax expense was $17.0 million, resulting in an effective tax rate of 20.2% compared with income tax expense of $21.7 million and an effective tax rate of 31.5% for the comparable period in 2017. On December 22, 2017, the Tax Cuts and Jobs Act was signed into law. As a result, First Financial valued its deferred tax assets and liabilities as well as its investments in affordable housing projects utilizing a 21% federal rate during the first half of 2018 compared to a 35% rate in the first half of 2017.

ASU 2016-09, Compensation-Stock Compensation Improvements to Employee Share-Based Payment Accounting, requires the recognition of the income tax effects of share-based awards through the income statement as a component of income tax expense. First Financial recorded a $0.1 million tax benefit as a result of share awards vesting and exercised during the second quarter of 2018 and $0.5 million and $1.2 million for the first six months of 2018 and 2017, respectively. Tax benefits resulting from the vesting and exercise of share awards in the second quarter of 2017 were insignificant.

At both June 30, 2018 and December 31, 2017, First Financial had $2.9 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. The unrecognized tax benefits relate to state income tax exposures from taking tax positions where the Company believes it is likely that, upon examination, a state may take a position contrary to the position taken by First Financial. 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 June 30, 2018 and December 31, 2017, 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 2014 have been closed and are no longer subject to U.S. federal income tax examinations. Tax years 2014 through 2017 remain open to examination by the federal taxing authority.

First Financial is no longer subject to state and local income tax examinations for years prior to 2011.  Tax years 2011 through 2017 remain open to state and local examination in various jurisdictions.