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First Financial Corporation

03/04/2026 | Press release | Distributed by Public on 03/04/2026 13:47

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as disclosures found elsewhere in this report are based upon First Financial Corporation's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Corporation to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, securities valuation and goodwill. Actual results could differ from those estimates.

Allowance for credit losses. The allowance for credit losses (ACL) represents management's estimate of expected losses inherent within the existing loan portfolio. The allowance for credit losses is increased by the provision for credit losses charged to expense and reduced by loans charged off, net of recoveries. The allowance for credit losses is determined based on management's assessment of several factors: reviews and evaluations of specific loans, changes in the nature and volume of the loan portfolio, current economic conditions, nonperforming loans, determination of acquired loans as purchase credit deteriorated, and reasonable and supportable forecasts. Loans are individually evaluated when they do not share risk characteristics with other loans in the respective pool. Loans evaluated individually are excluded from the collective evaluation. Management elected the collateral dependent practical expedient upon adoption of ASC 326. Expected credit losses on individually evaluated loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Management utilizes a cohort methodology to determine the allowance for credit losses. This method identifies and captures the balance of a pool of loans with similar risk characteristics, as of a particular point in time to form a cohort, then tracks the respective losses generated by that cohort of loans over their remaining life. The cohorts track loan balances and historical loss experience since 2008, and management extends the look back period each quarter to capture all available data points in the historical loss rate calculation. The quantitative component of the ACL involves assumptions that require a significant level of estimation; these include historical losses as a predictor of future performance, appropriateness of selected delay periods, and the reasonableness of the portfolio segmentation.

A historical data set is expected to provide the best indication of future credit performance. Delay periods represent the amount of time it takes a cohort of loans to become seasoned, or incur sufficient attrition through pay downs, renewals, or charge-offs. Portfolio segmentation relates to the pooling of loans with similar risk characteristics, such as industry types, collateral, and consumer purpose. On an annual basis, in the first quarter, management performs a recalibration of the delay periods and portfolio segmentation to determine whether they are reasonable and appropriate based on the information available at that time.

Management considers qualitative adjustments to expected credit loss estimates for information not already captured in the loss estimation process. Where past performance may not be representative of future losses, loss rates are adjusted for qualitative and economic forecast factors. Management uses the peak three consecutive quarter net charge off rate to capture maximum potential volatility over the reasonable and supportable forecast period. Historical losses utilized in setting the qualitative factor ranges are anchored to 2008 and may be supplemented by peer information when needed. The qualitative factor ranges are recalibrated annually to capture recent behavior that is indicative of the credit profile of the current portfolio.

Qualitative factors include items, such as changes in lending policies or procedures, asset specific risks, and economic uncertainty in forward-looking forecasts. Economic indicators utilized in forecasting include unemployment rate, gross domestic product, housing starts, and interest rates. Management uses a two-year reasonable and supportable period across all loan segments to forecast economic conditions. Management believes the two-year time horizon aligns with available industry guidance and various forecasting sources. Economic forecast adjustments are overlaid onto historical loss rates. As such, reversion from forecast rates to historical loss rates is immediate.

The ACL and allowance for unfunded commitments were $48.0 million and $2.9 million, respectively at December 31, 2025, compared to $46.7 million and $2.1 million, respectively at December 31, 2024. The qualitative amount of the reserve increased $1.3 million to $14.1 million. The quantitative amount is $33.6 million at December 31, 2025, compared to $33.6 million at December 31, 2024. There was an $800 thousand increase in the allowance for unfunded commitments. See additional discussion of ACL in the Allowance for Credit Losses section below.

Based on management's analysis of the current portfolio, management believes the allowance is adequate. Changes in the financial condition of individual borrowers, economic conditions, historical loss experience, or the condition of the various markets in which collateral may be sold may affect the required level of the allowance for credit losses and the associated provision for credit losses. As management monitors these changes, as well as those factors discussed above, adjustments may be recorded to the allowance for credit losses and the associated provision for credit losses in the future.

Securities valuation and potential impairment. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported separately in accumulated other comprehensive income (loss), net of tax. The Corporation obtains market values from a third party on a monthly basis in order to adjust the securities to fair value. Equity securities that do not have readily determinable fair values are carried at cost. Additionally, all securities are required to be evaluated for impairment related to credit losses. In evaluating for impairment, management considers the reason for the decline, the extent of the decline, and whether the Corporation intends to sell a security or is more likely than not to be required to sell a security before recovery of its amortized cost. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the security's amortized cost is written down to fair value through income. If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis, then the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. No allowance for credit losses for available-for-sale securities was needed at December 31, 2025.

Goodwill. The carrying value of goodwill requires management to use estimates and assumptions about the fair value of the reporting unit compared to its book value. An impairment analysis is prepared on an annual basis. Fair values of the reporting units are determined by an analysis which considers cash flows streams, profitability and estimated market values of the reporting unit. The majority of the Corporation's goodwill is recorded at First Financial Bank, N. A.

Management believes the accounting estimates related to the allowance for credit losses, valuation of investment securities and the valuation of goodwill are "critical accounting estimates" because: (1) the estimates are highly susceptible to change from period to period because they require management to make assumptions concerning, among other factors, the changes in the types and volumes of the portfolios, valuation assumptions, and economic conditions, and (2) the impact of recognizing an impairment or credit loss could have a material effect on the Corporation's assets reported on the balance sheet as well as net income.

RESULTS OF OPERATIONS - SUMMARY FOR 2025

COMPARISON OF 2025 TO 2024

Net income for 2025 was $79.2 million, or $6.68 per share versus $47.3 million, or $4.00 per share for 2024. The increase in 2025 net income is primarily due to organic growth. In 2024 reduced net income was primarily due to increased provision for credit losses associated with the acquisition of SimplyBank, as described in those respective sections in the following pages. Return on average assets at December 31, 2025 increased 54.35% to 1.42% compared to 0.92% at December 31, 2024.

The primary components of income and expense affecting net income are discussed in the following analysis.

NET INTEREST INCOME

The principal source of the Corporation's earnings is net interest income, which represents the difference between interest earned on loans and investments and the interest cost associated with deposits and other sources of funding. Net interest income increased in 2025 to $219.9 million compared to $175.0 million in 2024. Total average interest earning assets increased to $5.25 billion in 2025 from $4.87 billion in 2024. The tax-equivalent yield on these assets increased to 5.92% in 2025 from 5.55% in 2024. Total average interest-bearing liabilities increased to $4.12 billion in 2025 from $3.93 billion in 2024. The average cost of these interest-bearing liabilities decreased to 2.08% in 2025 from 2.28% in 2024.

The net interest margin increased from 3.71% in 2024 to 4.29% in 2025. Earning asset yields increased 37 basis points while the rate on interest-bearing liabilities decreased by 20 basis points.

CONSOLIDATED BALANCE SHEET - AVERAGE BALANCES AND INTEREST RATES


		December 31,
		2025								2024								2023
		Average						Yield/		Average						Yield/		Average						Yield/
(Dollar amounts in thousands)		Balance			Interest			Rate		Balance			Interest			Rate		Balance			Interest			Rate
ASSETS
Interest-earning assets:
Loans (1) (2)		$	3,905,450			269,037		6.89	%	$	3,468,534			227,580		6.56	%	$	3,111,784			190,947		6.14	%
Taxable investment securities			801,952			23,822		2.97	%		851,935			24,237		2.84	%		895,120			24,643		2.75	%
Tax-exempt investments (2)			452,324			17,560		3.88	%		458,328			17,125		3.74	%		463,541			16,591		3.58	%
Cash and due from banks			92,376			793		0.86	%		83,690			947		1.13	%		90,582			1,546		1.71	%
Federal funds sold			929			8		0.86	%		8,806			452		5.13	%		3,108			124		3.99	%
Total interest-earning assets			5,253,031			311,220		5.92	%		4,871,293			270,341		5.55	%		4,564,135			233,851		5.12	%
Non-interest earning assets:
Premises and equipment, net			80,164								73,774								67,468
Other assets			285,398								251,222								210,277
Less allowance for loan losses			(46,930)								(41,969)								(39,432)
TOTALS		$	5,571,663							$	5,154,320							$	4,802,448
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Transaction accounts		$	3,096,881			49,885		1.61	%	$	3,092,818			56,500		1.83	%	$	2,869,873			42,594		1.48	%
Time deposits			716,836			22,548		3.15	%		674,441			24,571		3.64	%		434,943			9,100		2.09	%
Short-term borrowings			162,775			6,502		3.99	%		97,176			4,284		4.41	%		117,235			5,370		4.58	%
Other borrowings			141,371			6,785		4.80	%		69,201			4,401		6.36	%		82,316			4,071		4.95	%
Total interest-bearing liabilities:			4,117,863			85,720		2.08	%		3,933,636			89,756		2.28	%		3,504,367			61,135		1.74	%
Non interest-bearing liabilities:
Demand deposits			819,966								638,420								801,316
Other			38,275								46,301								10,193
			4,976,104								4,618,357								4,315,876
Shareholders' equity			595,559								535,963								486,572
TOTALS		$	5,571,663							$	5,154,320							$	4,802,448
Net interest earnings					$	225,500							$	180,585							$	172,716
Net yield on interest- earning assets								4.29	%							3.71	%							3.78	%

(1)For purposes of these computations, non-accruing loans are included in the daily average loan amounts outstanding.

(2)Interest income includes the effect of tax equivalent adjustments using a federal tax rate of 21%.

The following table sets forth the components of net interest income due to changes in volume and rate. The table information compares 2025 to 2024 and 2024 to 2023.


		2025 Compared to 2024 Increase												2024 Compared to 2023 Increase
		(Decrease) Due to												(Decrease) Due to
								Volume/												Volume/
(Dollar amounts in thousands)		Volume			Rate			Rate			Total			Volume			Rate			Rate			Total
Interest earned on interest-earning assets:
Loans (1) (2)		$	28,667		$	11,359		$	1,431		$	41,457		$	21,891		$	13,226		$	1,516		$	36,633
Taxable investment securities			(1,422)			1,070			(63)			(415)			(1,189)			823			(40)			(406)
Tax-exempt investment securities (2)			(224)			668			(9)			435			(187)			729			(8)			534
Cash and due from banks			98			(228)			(24)			(154)			(118)			(521)			40			(599)
Federal funds sold			(404)			(376)			336			(444)			227			36			65			328
Total interest income		$	26,715		$	12,493		$	1,671		$	40,879		$	20,624		$	14,293		$	1,573		$	36,490
Interest paid on interest-bearing liabilities:
Transaction accounts			74			(6,680)			(9)			(6,615)			3,309			9,833			764			13,906
Time deposits			1,545			(3,357)			(211)			(2,023)			5,011			6,746			3,714			15,471
Short-term borrowings			2,892			(402)			(272)			2,218			(919)			(202)			35			(1,086)
Other borrowings			4,590			(1,080)			(1,126)			2,384			(649)			1,164			(185)			330
Total interest expense			9,101			(11,519)			(1,618)			(4,036)			6,752			17,541			4,328			28,621
Net interest income		$	17,614		$	24,012		$	3,289		$	44,915		$	13,872		$	(3,248)		$	(2,755)		$	7,869

(1)For purposes of these computations, non-accruing loans are included in the daily average loan amounts outstanding.

(2)Interest income includes the effect of tax equivalent adjustments using a federal tax rate of 21%.

PROVISION FOR CREDIT LOSSES

The provision for credit losses charged to expense is based upon current expected loss and the results of a detailed analysis estimating an appropriate and adequate allowance for credit losses. The analysis is governed by Accounting Standards Codification (ASC 326), implemented in 2020, which used an economic forecast that included the impact of the COVID-19 pandemic. For the year ended December 31, 2025, the provision for credit losses was $8.2 million, a decrease of $8.0 million, or 49%, compared to 2024, as required under the current CECL guidance. In the third quarter 2024 the Corporation recorded $5.5 million in Day 2 provision on non-PCD loans acquired from SimplyBank. Also in 2024, the provision as well as charge-offs were impacted by one previously identified credit, reflecting further deterioration in collateral values in the year. No further losses are expected on this credit. Based on management's analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate.

Net charge-offs for 2025 were $6.9 million as compared to $12.2 million for 2024 and $7.3 million for 2023 with the 2024 charge-offs driven from the previously identified credit discussed above. Non-accrual loans increased to $27.5 million at December 31, 2025 from $11.5 million at December 31, 2024. Loans past due 90 days and still on accrual decreased to $1.1 million compared to $1.8 million at December 31, 2024.

NON-INTEREST INCOME

Non-interest income decreased to $42.0 million in 2025 from $42.8 million earned in 2024.

NON-INTEREST EXPENSES

Non-interest expenses increased to $154.9 million in 2025 from $144.4 million in 2024. The increase in non-interest expenses is primarily due to a full year of operating expenses from the 2024 acquisition.

INCOME TAXES

The Corporation's federal income tax provision was $19.5 million in 2025 compared to $9.9 million in 2024. The overall effective tax rate in 2025 of 19.8% increased as compared to a 2024 effective rate of 17.3%. Pretax income for the year ended December 31, 2025, was significantly higher than pretax income for the same period in 2024. Since our permanent differences remained similar income was the driving factor for the increase in effective tax rate.

COMPARISON OF 2024 TO 2023

Net income for 2024 was $47.3 million, or $4.00 per share versus $60.7 million, or $5.08 per share for 2023. The decrease in 2024 net income is primarily due to increased provision for credit losses associated with the acquisition of SimplyBank, as well as non-interest expenses, which included increased operating expenses, as a result of the acquisition and expenses associated with the acquisition, as described in those respective sections in the following pages.

Net interest income increased $7.7 million in 2024 compared to 2023. The provision for credit losses increased $8.9 million from $7.3 million in 2023 to a provision of $16.2 million in 2024.

Non-interest income remained stable and non-interest expenses increased $14.2 million. The increase in non-interest expenses is primarily due to $1.7 million of expenses associated with the acquisition, as well as increases in operating expenses as a result of the 2024 acquisition.

The provision for income taxes decreased $1.9 million from 2023 to 2024 and the effective tax rate increased to 17.3% in 2024 from 16.3% in 2023.

COMPARISON AND DISCUSSION OF 2025 BALANCE SHEET TO 2024

The Corporation's total assets increased 3.5% or $195.8 million at December 31, 2025, from a year earlier. Available-for-sale securities decreased $46.5 million at December 31, 2025, from the previous year. Loans, net increased by $216.9 million to $4.01 billion. Deposits decreased $167.8 million while borrowings increased by $265.5 million. Total shareholders' equity increased $101.8 million to $650.9 million at December 31, 2025. Accumulated other comprehensive income increased $45.6 million primarily due to the market value of the securities portfolio, which reflected an increase in securities pricing. In 2025 dividends declared by the Corporation totaled $2.09 per share. There were also 30,114 shares from the treasury with a value of $1.66 million that were contributed to the ESOP plan in 2025 compared to 34,235 shares with a value of $1.67 million in 2024.

Following is an analysis of the components of the Corporation's balance sheet.

SECURITIES

The Corporation's investment strategy seeks to maximize income from the investment portfolio while using it as a risk management tool and ensuring safety of principal and capital. During 2025 the portfolio's balance decreased by 3.9%. Given the performance of the market, the Corporation shifted away from purchases to replace maturities in 2025. In 2025 the Corporation recorded $4.6 million of losses associated with an investment portfolio restructuring in which $80 million of securities were sold and reinvested at an approximately two percent higher yield. The average life of the portfolio decreased from 6.4 years in 2024 to 5.9 years in 2025. The portfolio structure will continue to provide cash flows to be reinvested during 2025.


		1 year and less				1 to 5 years					5 to 10 years					Over 10 Years					2025
(Dollar amounts in thousands)		Balance		Rate		Balance			Rate		Balance			Rate		Balance			Rate		Total
U.S. government sponsored entity mortgage-backed securities and agencies and U.S. Treasury (1)		$	2,501	2.65	%	$	16,129		3.23	%	$	38,479		2.94	%	$	555,006		2.87	%	$	612,115
Collateralized mortgage obligations (1)			206	2.24	%		339		1.56	%		3,673		2.94	%		153,880		2.49	%		158,098
States and political subdivisions			6,617	3.37	%		29,758		2.97	%		110,494		3.01	%		229,594		2.77	%		376,463
Collateralized debt obligations			-	-	%		-		-	%		2,850		-	%		-		-	%		2,850
TOTAL		$	9,324	3.15	%	$	46,226		3.05	%	$	155,496		2.93	%	$	938,480		2.78	%	$	1,149,526

(1)	Distribution of maturities is based on the estimated life of the asset.


		1 year and less					1 to 5 years					5 to 10 years					Over 10 Years					2024
(Dollar amounts in thousands)		Balance			Rate		Balance			Rate		Balance			Rate		Balance			Rate		Total
U.S. government sponsored entity mortgage-backed securities and agencies (1)		$	3,555		2.40	%	$	21,926		3.64	%	$	30,151		3.43	%	$	578,331		2.76	%	$	633,963
Collateralized mortgage obligations (1)			3,778		2.15	%		1,190		1.86	%		6,378		2.98	%		151,680		2.44	%		163,026
States and political subdivisions			5,677		2.89	%		37,074		2.85	%		106,461		2.87	%		246,893		2.60	%		396,105
Collateralized debt obligations			-		-	%		-		-	%		2,896		-	%		-		-	%		2,896
TOTAL			13,010		2.54	%	$	60,190		3.12	%	$	145,886		2.93	%	$	976,904		2.67	%		1,195,990

(1)	Distribution of maturities is based on the estimated life of the asset.

Net unrealized gain/loss on available for sale securities increased $57.6 million from a net unrealized loss of $165.8 million in 2024 to a net unrealized loss of $108.2 million in 2025. The Corporation does not expect realized losses, as there is no intent to sell at a loss.

LOAN PORTFOLIO

Loans outstanding by major category as of December 31 for each of the last five years and the maturities at year end 2025 are set forth in the following analyses.


(Dollar amounts in thousands)		2025			2024			2023			2022			2021
Loan Category
Commercial		$	2,375,344		$	2,196,351		$	1,817,526		$	1,798,260		$	1,674,066
Residential			986,955			967,386			695,788			673,464			664,509
Consumer			688,135			668,058			646,758			588,539			474,026
TOTAL		$	4,050,434		$	3,831,795		$	3,160,072		$	3,060,263		$	2,812,601


					After One
		Within			But Within			After Five
(Dollar amounts in thousands)		One Year			Five Years			Years			Total
MATURITY DISTRIBUTION
Commercial, financial and agricultural		$	1,016,347		$	1,104,064		$	254,933		$	2,375,344
TOTAL
Residential												986,955
Consumer												688,135
TOTAL											$	4,050,434
Loans maturing after one year with:
Fixed interest rates					$	489,126		$	238,275
Variable interest rates						614,938			16,658
TOTAL					$	1,104,064		$	254,933

Commercial Real Estate represents $1.9 billion of total exposure as of December 31, 2025, and is within regulatory guidance. This exposure is well diversified by geography, real estate type, and industry designation. During the underwriting process, Commercial Real Estate is stressed using a combination of several risk variables, such as interest rate change, cap rate changes, revenue and expense variances, and term changes. Periodic review of this exposure is performed to identify and monitor any potential weaknesses within a specific credit.

ALLOWANCE FOR CREDIT LOSSES

The activity in the Corporation's allowance for credit losses is shown in the following analysis:


(Dollar amounts in thousands)		2025			2024			2023			2022			2021
Amount of loans outstanding at December 31,		$	4,050,434		$	3,831,795		$	3,160,072		$	3,060,263		$	2,812,601
Average amount of loans by year		$	3,905,450		$	3,468,534		$	3,111,784		$	2,884,053		$	2,602,344
Allowance for credit losses at beginning of year		$	46,732		$	39,767		$	39,779		$	48,305		$	44,076
Loans charged off:
Commercial			1,353			7,890			966			3,917			2,158
Residential			241			343			216			657			812
Consumer			11,216			11,056			14,314			11,132			5,246
Total loans charged off			12,810			19,289			15,496			15,706			8,216
Recoveries of loans previously charged off:
Commercial			901			1,946			1,083			2,062			1,069
Residential			276			451			292			759			616
Consumer			4,696			4,685			6,814			6,384			3,884
Total recoveries			5,873			7,082			8,189			9,205			5,569
Net loans charged off			6,937			12,207			7,307			6,501			2,647
Provision charged to expense			8,200			16,166			7,295			(2,025)			2,466
PCD ACL on acquired loans			-			3,006			-			-			4,410
Balance at end of year		$	47,995		$	46,732		$	39,767		$	39,779		$	48,305
Ratio of net charge-offs during period to average loans outstanding			0.18	%		0.35	%		0.23	%		0.23	%		0.10	%

The allowance is maintained at an amount management believes sufficient to absorb expected losses in the loan portfolio. Monitoring loan quality and maintaining an adequate allowance is an ongoing process overseen by senior management and the loan review function. On at least a quarterly basis, a formal analysis of the adequacy of the allowance is prepared and reviewed by management and the Board of Directors. This analysis serves as a point in time assessment of the level of the allowance and serves as a basis for provisions for credit losses. The loan quality monitoring process includes assigning loan grades and the use of a watch list to identify loans of concern.

The analysis of the allowance for credit losses includes the allocation of specific amounts of the allowance to individually evaluated loans, generally based on an analysis of the collateral securing those loans. Portions of the allowance are also allocated to loan portfolios, based upon a variety of factors including historical loss experience, trends in the type and volume of the loan portfolios, trends in delinquent and non-performing loans, and economic trends affecting our market, including current conditions and reasonable and supportable forecasts about the future. These components are added together and compared to the balance of our allowance at the evaluation date. The allowance for credit losses as a percentage of total loans decreased to 1.18% at year-end 2025 compared to 1.22% at year-end 2024. Based on management's analysis of the current portfolio, an evaluation that includes consideration of changes in CECL model assumptions of credit quality, economic conditions, and loan composition, management believes the allowance is adequate. Non-performing loans of $28.6 million at December 31, 2025 increased from $13.3 million at December 31, 2024.

The table below presents the allocation of the allowance to the loan portfolios at year-end.


		Years Ended December 31,
(Dollar amounts in thousands)		2025			2024			2023			2022			2021
Commercial		$	18,805		$	16,963		$	13,264		$	12,949		$	18,883
Residential			16,620			17,470			14,327			14,568			18,316
Consumer			12,348			12,046			11,797			12,104			10,721
Unallocated			222			253			379			158			385
TOTAL ALLOWANCE FOR CREDIT LOSSES		$	47,995		$	46,732		$	39,767		$	39,779		$	48,305

NONPERFORMING LOANS

Management monitors the components and status of nonperforming loans as a part of the evaluation procedures used in determining the adequacy of the allowance for credit losses. It is the Corporation's policy to discontinue the accrual of interest on loans where, in management's opinion, serious doubt exists as to collectability. The amounts shown below represent non-accrual loans and those loans which are past due more than 90 days where the Corporation continues to accrue interest.



	2025			2024			2023			2022			2021
Non-accrual loans	$	27,495		$	11,479		$	23,596		$	8,481		$	9,590
Accruing loans past due over 90 days		1,083			1,821			960			1,119			515
	$	28,578		$	13,300		$	24,556		$	9,600		$	10,105

Ratio of the allowance for credit losses as a percentage of non-performing loans		167.9	%		351.4	%		161.9	%		414.4	%		478.0	%

The ratio of the allowance for loan losses as a percentage of nonperforming loans was 167.9% at December 31, 2025, compared to 351.4% in 2024. In the footnotes to the financial statements the amount reported for nonperforming loans is the recorded investment which includes accrued interest receivable. The following loan categories comprise significant components of the nonperforming loans at December 31, 2025 and 2024:


	2025				2024
Non-accrual loans
Commercial loans	$	22,836	83	%	$	6,697	58	%
Residential loans		1,997	7	%		2,050	18	%
Consumer loans		2,662	10	%		2,732	24	%
	$	27,495	100	%	$	11,479	100	%
Past due 90 days or more and still accruing
Commercial loans	$	50	5	%	$	42	2	%
Residential loans		1,032	95	%		1,778	98	%
Consumer loans		1	0	%		1	0	%
	$	1,083	100	%	$	1,821	100	%

Management considers the present allowance to be appropriate and adequate to cover expected losses inherent in the loan portfolio based on the current economic environment. However, future economic changes cannot be predicted. Deteriorating economic conditions could result in an increase in the risk characteristics of the loan portfolio and an increase in the potential for credit losses.

DEPOSITS

The information below presents the average amount of deposits and rates paid on those deposits for 2025, 2024 and 2023.


		2025					2024					2023
(Dollar amounts in thousands)		Amount			Rate		Amount			Rate		Amount			Rate
Non-interest-bearing demand deposits		$	819,966				$	638,420				$	801,316
Interest-bearing demand deposits			1,700,520		2.31	%		1,681,079		2.61	%		1,440,411		2.15	%
Savings deposits			1,396,361		0.76	%		1,411,739		0.90	%		1,429,462		0.82	%
Time deposits: $100,000 or more			340,101		3.44	%		318,400		4.15	%		176,453		2.89	%
Other time deposits			376,735		2.88	%		356,041		3.19	%		258,490		1.54	%
TOTAL		$	4,633,683				$	4,405,679				$	4,106,132

Average deposits increased 5.18% to $4.6 billion at December 31, 2025 compared to December 31, 2024.

The Corporation estimates that uninsured deposits ⁽¹⁾ totaled $864.6 million, or 19% of total deposits, at December 31, 2025, compared to $980.5 million, or 21%, at December 31, 2024. The maturities of certificates of deposit of more than $100 thousand outstanding at December 31, 2025, are summarized as follows:


(Dollar amounts in thousands)
3 months or less	$	150,284
Over 3 through 6 months		150,538
Over 6 through 12 months		50,896
Over 12 months		13,300
TOTAL	$	365,018

(1) Uninsured deposits include the Call Report estimate of uninsured deposits less affiliate deposits, estimated insured portion of servicing deposits, additional structured FDIC coverage and collateral deposits.

OTHER BORROWINGS

Advances from the Federal Home Loan Bank increased to $175.7 million in 2025 compared to $7.3 million in 2024. First Financial Corporation borrowed $25 million on a note payable in June 2024 for the acquisition of SimplyBank. On December 31, 2025, the balance on the note was $12.5 million. The Asset/Liability Committee reviews these funding sources and considers the related strategies on a monthly basis. See Interest Rate Sensitivity and Liquidity below for more information.

CAPITAL RESOURCES

Bank regulatory agencies have established capital adequacy standards which are used extensively in their monitoring and control of the industry. These standards relate capital to level of risk by assigning different weightings to assets and certain off-balance-sheet activity. As shown in the footnote to the consolidated financial statements ("Regulatory Matters"), the Corporation's subsidiary banking institutions capital exceeds the requirements to be considered well capitalized at December 31, 2025.

First Financial Corporation's objective continues to be to maintain adequate capital to merit the confidence of its customers and shareholders. To warrant this confidence, the Corporation's management maintains a capital position which they believe is sufficient to absorb unforeseen financial shocks without unnecessarily restricting dividends to its shareholders. The Corporation's dividend payout ratio for 2025 and 2024 was 31.3% and 46.5%, respectively. The Corporation expects to continue its policy of paying regular cash dividends, subject to future earnings and regulatory restrictions and capital requirements.

INTEREST RATE SENSITIVITY AND LIQUIDITY

First Financial Corporation has established risk measures, limits and policy guidelines for managing interest rate risk and liquidity. Responsibility for management of these functions resides with the Asset/Liability Committee. The primary goal of the Asset/Liability Committee is to maximize net interest income within the interest rate risk limits approved by the Board of Directors.

Interest Rate Risk: Management considers interest rate risk to be the Corporation's most significant market risk. Interest rate risk is the exposure to changes in net interest income as a result of changes in interest rates. Consistency in the Corporation's net interest income is largely dependent on the effective management of this risk. The Asset/Liability position is measured using sophisticated risk management tools, including earnings simulation and market value of equity sensitivity analysis. These tools allow management to quantify and monitor both short-and long-term exposure to interest rate risk. Simulation modeling measures the effects of changes in interest rates, changes in the shape of the yield curve and the effects of embedded options on net interest income. This measure projects earnings in the various environments over the next three years. It is important to note that measures of interest rate risk have limitations and are dependent on various assumptions. These assumptions are inherently uncertain and, as a result, the model cannot precisely predict the impact of interest rate fluctuations on net interest income. Actual results will differ from simulated results due to timing, frequency and amount of interest rate changes as well as overall market conditions. The Committee has performed a thorough analysis of these assumptions and believes them to be valid and theoretically sound. These assumptions are continuously monitored for behavioral changes.

The Corporation from time to time utilizes derivatives to manage interest rate risk. Management continuously evaluates the merits of such interest rate risk products but does not anticipate the use of such products to become a major part of the Corporation's risk management strategy.

The table below shows the Corporation's estimated sensitivity profile as of December 31, 2025. The change in interest rates assumes a parallel shift in interest rates of 100, 200, and 300 basis points. Given a 100 basis point increase in rates, net interest income would decrease 1.67% over the next 12 months and increase 1.52% over the following 12 months. Given a 100 basis point decrease in rates, net interest income would increase 3.72% over the next 12 months and increase 0.09% over the following 12 months. These estimates assume all rate changes occur overnight and management takes no action as a result of this change.


Basis Point		Percentage Change in Net Interest Income
Interest Rate Change		12 months		24 months		36 months
Down 300		5.83	%	(5.29)	%	(14.69)	%
Down 200		5.67		(1.83)		(8.45)
Down 100		3.72		0.09		(3.26)
Up 100		(1.67)		1.52		4.77
Up 200		(6.02)		0.26		6.71
Up 300		(8.87)		0.39		10.07

Typical rate shock analysis does not reflect management's ability to react and thereby reduce the effects of rate changes, and represents a worst-case scenario.

Liquidity Risk Liquidity is measured by the bank's ability to raise funds to meet the obligations of its customers, including deposit withdrawals and credit needs. This is accomplished primarily by maintaining sufficient liquid assets in the form of investment securities and core deposits. The Corporation has $9.3 million of investments that mature throughout the coming 12 months. The Corporation also anticipates $109.7 million of principal payments from mortgage-backed securities. Given the current rate environment, the Corporation anticipates $36.3 million in securities to be called within the next 12 months. The Corporation also has $341.5 million of unused borrowing capacity available with the Federal Home Loan Bank of Indianapolis, $837.2 million available with the Federal Reserve Bank, and $90 million of available fed funds lines with correspondent banks. With these sources of funds, the Corporation currently anticipates adequate liquidity to meet the expected obligations of its customers.

The Corporation also has additional sources of liquidity available through secured and unsecured borrowing capacity. These include upstream correspondents, the Federal Home Loan Bank, and the Federal Reserve Bank.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS

The Corporation has various financial obligations, including contractual obligations and commitments that may require future cash payments.

The Corporation has obligations on deposits as described in Note 10 to the consolidated financial statements.

The Corporation has obligations on borrowings as described in Notes 11 and 12 to the consolidated financial statements.

The Corporation has obligations under its pension, supplemental executive retirement plan and post-retirement medical benefits plan as described in Note 16 to the consolidated financial statements.

The Corporation has lease obligations on certain branch properties and equipment as described in Note 8 to the consolidated financial statements.

Commitments: The following table details the amount and expected maturities of significant commitments as of December 31, 2025. Further discussion of these commitments is included in Note 15 to the consolidated financial statements.


		Total
		Amount			One year			Over One
(Dollar amounts in thousands)		Committed			or less			Year
Commitments to extend credit:
Unused loan commitments		$	924,046		$	331,556		$	592,490
Commercial letters of credit			14,844			14,844			-

Commitments to extend credit, including loan commitments, standby and commercial letters of credit do not necessarily represent future cash requirements, in that these commitments often expire without being drawn upon.

First Financial Corporation published this content on March 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 04, 2026 at 19:48 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]

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