First Financial maintains an overall risk management strategy that incorporates the use of derivative instruments to reduce certain risks related to interest rate, prepayment and foreign currency volatility. Additionally, First Financial holds derivative instruments for the benefit of its commercial customers and for other business purposes. The Company does not enter into unhedged speculative derivative positions. The Company’s interest rate risk management strategy involves modifying the repricing characteristics of certain financial instruments so that changes in interest rates do not adversely affect First Financial’s net interest margin and cash flows. Derivative instruments that the Company may use as part of its interest rate risk management strategy include interest rate caps, floors, swaps, and foreign exchange contracts, to meet the 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 with changes in value reported in Accumulated other comprehensive income (loss).

Interest rate payments are exchanged with counterparties based on the notional amount 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.

Interest rate 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. These derivatives are classified as free-standing instruments with the revaluation gain or loss recorded in Client derivative fees in the Consolidated Statements of Income. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes.

At September 30, 2024, for the interest rate client derivatives, the Company had a total counterparty notional amount outstanding of $2.2 billion, spread among six counterparties, with an estimated fair value of $51.1 million. At December 31, 2023, the Company had interest rate client derivatives with a total counterparty notional amount outstanding of $2.2 billion, spread among six counterparties, with an estimated fair value of $95.7 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 monitors derivative credit risk exposure related to problem loans through its 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 client 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. The Company has risk limits and internal controls in place to help ensure excessive risk is not being taken when providing this service to customers. These controls include a determination of currency volatility and credit equivalent exposure on these contracts. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes. At September 30, 2024, the Company had total counterparty notional amount outstanding of $7.4 billion spread among four counterparties, with an estimated fair value of $4.6 million. At December 31, 2023, the Company had total counterparty notional amounts outstanding of $7.0 billion spread among five counterparties, with an estimated fair value of $23.9 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.

Commodity contracts. In August of 2024, First Financial began entering into financially settled commodity derivative contracts for the benefit of commercial customers to hedge their exposure to various commodity price fluctuations. Similar to the hedging of interest rate risk from interest rate client derivative and foreign exchange contracts, First Financial also enters into commodity contracts with major financial institutions to economically hedge a substantial portion of the exposure from client driven commodity derivative activity. These derivatives are classified as free-standing instruments with the revaluation gain or loss recorded in Derivative income in the Consolidated Statements of Income. The Company has risk limits and internal controls in place to help ensure excessive risk is not being taken when providing this service to customers. These controls include monitoring of commodity volatility and credit exposure on these contracts. While these derivatives represent economic hedges, they do not qualify as hedges for accounting purposes. At September 30, 2024, the Company had total counterparty notional amount outstanding of $0.3 million with one counterparty, with an estimated fair value of $0.2 million.

Cash Flow Hedges. In 2023, First Financial entered into interest rate collars and floors, which are designated as cash flow hedges. These cash flow hedges are utilized to mitigate interest rate risk on variable-rate commercial loan pools. As of both September 30, 2024 and December 31, 2023, these hedges were determined to be effective and are expected to remain effective during the remaining terms. Changes in the fair value of cash flow hedges included in the assessment of hedge effectiveness are recorded in AOCI and reclassified from AOCI to current period earnings when the hedged item affects earnings. Reclassified gains and losses on interest rate contracts related to commercial and industrial loans are recorded within interest income in the Consolidated Statements of Income.

The structure of the interest rate collars is such that First Financial pays the counterparty an incremental amount if the collar index exceeds the cap rate. Conversely, First Financial receives an incremental amount if the index falls below the floor rate. No payments are required if the collar index falls between the cap and floor rates.

The notional value of the Company's cash flow hedges was $1.0 billion at September 30, 2024, with a $2.3 million loss recorded in AOCI in the Consolidated Balance Sheet. As of September 30, 2024, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows is 51 months. It is estimated that $0.7 million will be reclassified from OCI to interest income during the next 12 months.

At December 31, 2023, the notional value of the Company's cash flow hedges was $1.0 billion, with a $3.8 million gain recorded in AOCI in the Consolidated Balance Sheet. As of December 31, 2023, the maximum length of time over which the Company was hedging its exposure to the variability in future cash flows was 60 months.


Derivatives in Cash Flow Hedging Relationship	Location of Gain or (Loss) Reclassified from AOCI into income	Gain (loss) reclassified in AOCI on Derivatives				Gain (loss) recognized in OCI on Derivatives
(Dollars in thousands)		September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Interest rate contracts	Interest income/(expense)	$	(199)	$	(71)	$	3,116	$	(1,493)


Derivatives in Cash Flow Hedging Relationship	Location of Gain or (Loss) Reclassified from AOCI into income	Gain (loss) reclassified in AOCI on Derivatives				Gain (loss) recognized in OCI on Derivatives
(Dollars in thousands)		September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Interest rate contracts	Interest income/(expense)	$	(596)	$	(72)	$	(1,433)	$	(1,824)


		September 30, 2024									December 31, 2023
					Estimated fair value									Estimated fair value
(Dollars in thousands)		Notional amount			Gain (1)			Loss (2)			Notional amount			Gain (1)			Loss (2)
Derivatives not designated as qualifying hedging instruments
Interest rate derivatives - instruments associated with loans
Matched interest rate contracts with borrowers		$	2,198,862		$	22,400		$	(69,381)		$	2,172,714		$	13,232		$	(104,343)
Matched interest rate contracts with counterparty		2,198,862			69,205			(22,400)			2,172,714			104,092			(13,232)
Foreign exchange contracts
Matched foreign exchange contracts with customers		7,362,469			88,853			(93,429)			7,021,569			84,731			(60,825)
Match foreign exchange contracts with counterparty		7,301,358			93,429			(88,853)			6,972,870			60,825			(84,731)
Commodity contracts
Matched commodity with client		300			0			(155)			0			0			0
Matched commodity with counterparty		300			155			0			0			0			0
Total derivatives not designated as qualifying hedging instruments	19,062,151			274,042			(274,218)			18,339,867			262,880			(263,131)

Derivatives designated as qualifying hedging instruments
Cash flow hedges
Interest rate collars and floors		1,000,000			4,497			0			1,000,000			6,896			0
Total derivatives designated as qualifying hedging instruments		1,000,000			4,497			0			1,000,000			6,896			0
Total		$	20,062,151		$	278,539		$	(274,218)		$	19,339,867		$	269,776		$	(263,131)


	September 30, 2024						December 31, 2023
(Dollars in thousands)	Gross amounts of recognized assets (liabilities)		Gross amounts offset in the Consolidated Balance Sheets		Net amounts of assets/(liabilities) presented in the Consolidated Balance Sheets		Gross amounts of recognized assets (liabilities)		Gross amounts offset in the Consolidated Balance Sheets		Net amounts of assets/(liabilities) presented in the Consolidated Balance Sheets


Interest rate contracts (1)	$	(91,605)	$	111,251	$	19,646	$	(117,324)	$	270,678	$	153,354
Foreign exchange contracts	(182,282)		4,608		(177,674)		(145,556)		55,959		(89,597)
Commodity contracts	(155)		155		0		0		0		0
Cash flow hedges	4,497		(3,021)		1,476		6,896		(4,886)		2,010
Total	$	(269,545)	$	112,993	$	(156,552)	$	(255,984)	$	321,751	$	65,767
(1) Includes accrued interest receivable and collateral.


(Dollars in thousands)	Notional amount		Average maturity (years)	Fair value
Interest rate contracts
Receive fixed, matched interest rate contracts with borrower	$	2,198,862	4.3	$	(46,981)
Pay fixed, matched interest rate contracts with counterparty	2,198,862		4.3	46,805
Foreign exchange contracts
Foreign exchange contracts-pay USD	7,362,469		0.7	(4,576)
Foreign exchange contracts-receive USD	7,301,358		0.7	4,576
Commodities contracts
Client commodity contracts	300		1.4	(155)
Counterparty commodity contracts	300		1.4	155
Total client derivatives	19,062,151		1.5	(176)

Cash flow hedges
Interest rate collars and floors on loan pools	1,000,000		2.8	4,497
Total cash flow hedges	1,000,000		2.8	4,497
Total	$	20,062,151	1.6	$	4,321

At September 30, 2024, the derivative collateral owed by the Company to counterparty banks was $30.1 million with $16.5 million restricted within cash and due from banks on the Company's Consolidated Balance Sheets and $46.7 million recorded in short-term borrowings. Derivative collateral owed by the Company to the counterparty banks at December 31, 2023 was $116.2 million with $21.6 million restricted within cash and due from banks and $137.8 million recorded in short-term borrowings.

Credit derivatives. In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation agreements with counterparties whereby First Financial either assumes or sells 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 either make a payment to or receive a payment from the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract. The total notional value of the purchased risk agreements totaled $219.3 million as of September 30, 2024 and $232.5 million as of December 31, 2023. The total notional value of the sold risk agreements totaled $104.5 million as of September 30, 2024 and $109.2 million as of December 31, 2023. The net fair value of these agreements was recorded in Accrued interest and other liabilities on the Consolidated Balance Sheets and was $0.1 million at both September 30, 2024 and December 31, 2023.