REGULATORY MATTERS

12 Months Ended

Dec. 31, 2022

REGULATORY MATTERS

REGULATORY MATTERS

20.REGULATORY MATTERS:

The Corporation and its bank affiliates are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements.

Further, the Corporation’s primary source of funds to pay dividends to shareholders is dividends from its subsidiary banks and compliance with these capital requirements can affect the ability of the Corporation and its banking affiliates to pay dividends. At December 31, 2022, none of undistributed earnings of the subsidiary banks, included in consolidated retained earnings, were available for distribution to the Corporation with regulatory approval. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and Banks must meet specific capital guidelines that involve quantitative measures of the Corporation’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporation’s and Banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and Banks to maintain minimum amounts and ratios of Total, Common equity tier I capital and Tier I Capital to risk-weighted assets, and of Tier I Capital to average assets. Under the Basel III rules, the Corporation must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The net unrealized gain or loss on available for sale securities is not included in computing regulatory capital.

Management believes, as of December 31, 2022 and 2021, that the Corporation meets all capital adequacy requirements to which it is subject.

As of December 31, 2022, the most recent notification from the respective regulatory agencies categorized the subsidiary banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the banks must maintain minimum total risk-based, Common equity tier I capital, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the banks’ category.

The following table presents the actual and required capital amounts and related ratios for the Corporation and First Financial Bank, N.A., at year-end 2022 and 2021.

									To Be Well Capitalized
						For Capital			Under Prompt Corrective
	Actual				Adequacy Purposes				Action Provisions
(Dollar amounts in thousands)	Amount		Ratio		Amount		Ratio		Amount	Ratio
Total risk-based capital
Corporation – 2022	$	561,347	14.61	%	$	403,400	10.500	%	N/A	N/A
Corporation – 2021		533,599	15.63	%		358,575	10.500	%	N/A	N/A
First Financial Bank – 2022		498,246	13.14	%		398,179	10.500	%	379,219	10.00	%
First Financial Bank – 2021		487,416	14.78	%		346,248	10.500	%	329,760	10.00	%
Common equity tier I capital
Corporation – 2022	$	521,568	13.58	%	$	268,933	7.000	%	N/A	N/A
Corporation – 2021		490,842	14.37	%		239,050	7.000	%	N/A	N/A
First Financial Bank – 2022		458,467	12.09	%		265,453	7.000	%	246,492	6.50	%
First Financial Bank – 2021		446,189	13.53	%		230,832	7.000	%	214,344	6.50	%
Tier I risk-based capital
Corporation – 2022	$	521,568	13.58	%	$	326,562	8.500	%	N/A	N/A
Corporation – 2021		490,842	14.37	%		290,275	8.500	%	N/A	N/A
First Financial Bank – 2022		458,467	12.09	%		322,336	8.500	%	303,375	8.00	%
First Financial Bank – 2021		446,189	13.53	%		280,296	8.500	%	263,808	8.00	%
Tier I leverage capital
Corporation – 2022	$	521,568	10.78	%	$	193,476	4.00	%	N/A	N/A
Corporation – 2021		490,842	9.83	%		199,702	4.00	%	N/A	N/A
First Financial Bank – 2022		458,467	9.50	%		193,073	4.00	%	241,341	5.00	%
First Financial Bank – 2021		446,189	9.18	%		194,405	4.00	%	243,006	5.00	%

In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC published an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Corporation is not adopting the capital transition relief.