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COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
First Financial offers a variety of financial instruments including loan commitments and letters of 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 non-performance by the counterparty was represented by the contractual amounts of those instruments. First Financial adopted ASC 326 and therefore 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. First Financial had $17.0 million and $18.4 million of reserves for unfunded commitments recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets at September 30, 2023 and December 31, 2022, respectively.

First Financial had commitments to extend credit, including overdraft lending lines, of $4.5 billion at September 30, 2023 and $4.4 billion at December 31, 2022. As of September 30, 2023, commitments with a fixed interest rate totaled $111.5 million while commitments with variable interest rates totaled $4.4 billion. At December 31, 2022, commitments with a fixed interest rate totaled $126.3 million while commitments with variable interest rates totaled $4.2 billion. First Financial's fixed rate commitments have interest rates ranging from 0.00% to 21.00% at both September 30, 2023 and December 31, 2022 and have maturities ranging from less than one year to 31.1 years at September 30, 2023 and maturities ranging from less than one year to 31.6 years at December 31, 2022.

Loan commitments. Loan commitments are agreements to extend credit to a client, absent any violation of conditions established in the commitment agreement.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments will expire without being fully 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.

The following table presents by type First Financial's active loan balances and related obligations to extend credit:
September 30, 2023December 31, 2022
(dollars in thousands)Unfunded commitmentLoan balanceUnfunded commitmentLoan balance
Commercial & industrial$1,945,253 $3,420,873 $1,833,977 $3,410,272 
Lease financing0399,9736,842236,124
Construction real estate605,920578,824689,015512,050
Commercial real estate-investor116,3433,059,422107,2053,094,064
Commercial real estate-owner28,840933,23248,208958,695
Residential real estate104,9461,293,47074,0891,092,265
Home equity954,536743,991903,459733,791
Installment25,657160,64816,073209,895
Credit card232,25256,386225,86451,815
Total$4,013,747 $10,646,819 $3,904,732 $10,298,971 

Letters of credit. Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party.  First Financial’s letters of credit consist of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services.  The risk to First Financial arises from its obligation to make payment in the event of the client's contractual default to produce the contracted good or service to a third party.  First Financial issued letters of credit aggregating $32.4 million and $31.5 million at September 30, 2023 and December 31, 2022, respectively. Management conducts regular reviews of these instruments on an individual client basis.

Risk participation agreements. First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amount of $318.1 million and $379.3 million at September 30, 2023 and December 31, 2022, respectively.

Affordable housing projects and other tax credit investments. First Financial is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation or community revitalization projects. These investments are included in Accrued interest and other assets in the Consolidated Balance Sheets, with any unfunded commitments included in Accrued interest and other liabilities in the Consolidated Balance Sheets. As of September 30, 2023, First Financial expects to recover its remaining investments through the use of the tax credits that are generated by the investments.

The following table summarizes First Financial's investments in affordable housing projects and other tax credit investments.
(Dollars in thousands)September 30, 2023December 31, 2022
InvestmentAccounting MethodInvestmentUnfunded commitmentInvestmentUnfunded commitment
LIHTCProportional amortization$135,187 $74,149 $126,537 $70,690 
HTCEquity19,798 14,784 17,108 11,955 
NMTCEquity2,192 0 2,944 0 
Renewable energyEquity24,085 12,982 11,851 1,689 
Total$181,262 $101,915 $158,440 $84,334 

The following table summarizes First Financial's amortization expense and tax benefit recognized in affordable housing projects and other tax credit investments.
Three months ended
September 30, 2023September 30, 2022
(Dollars in thousands)
Amortization expense (1)
Tax expense (benefit) recognized (2)
Amortization expense (1)
Tax expense (benefit) recognized (2)
LIHTC$3,455 $(3,434)$3,211 $(2,757)
HTC0 (80)0 (80)
NMTC104 (53)104 (53)
Renewable energy0 0 17,108 (18,881)
Total$3,559 $(3,567)$20,423 $(21,771)
Nine months ended
September 30, 2023September 30, 2022
(Dollars in thousands)
Amortization expense (1)
Tax expense (benefit) recognized (2)
Amortization expense (1)
Tax expense (benefit) recognized (2)
LIHTC$10,520 $(10,411)$9,311 $(8,551)
HTC0 (239)0 (239)
NMTC311 (158)311 (158)
Renewable energy0 0 17,108 (18,881)
Total$10,831 $(10,808)$26,730 $(27,829)
(1) The amortization expense for the LIHTC investments is included in income tax expense. The amortization expense for the HTC, NMTC, and Renewable energy tax credits is included in other noninterest expense.
(2) All of the tax benefits recognized are included in Income tax expense. The tax benefit recognized for the HTC, NMTC, and Renewable energy investments primarily reflects the tax credits generated from the investments and excludes the net tax expense (benefit) and deferred tax liability of the investments’ income (loss).
Contingencies/Litigation. First Financial and its subsidiaries are engaged in various matters of litigation 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. No legal settlement expenses were accrued or paid in the three or nine months ended September 30, 2023 or in the three months ended September 30, 2022. However, during the nine months ended September 30, 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
September 30, 2023. Reserves are established for these various matters of litigation when appropriate under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel. First Financial had no reserves related to litigation matters as of September 30, 2023 or December 31, 2022.