Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 2026
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-16759
FIRST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Indiana
35-1546989
(State or other jurisdiction
(I.R.S. Employer
incorporation or organization)
Identification No.)
One First Financial Plaza, Terre Haute, IN
47807
(Address of principal executive office)
(Zip Code)
(812)
238-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.125 per share
THFF
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑.
As of November 1, 2026, the registrant had outstanding 11,891,896 shares of common stock, $0.125 stated par value per share.
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets
3
Consolidated Statements of Income and Comprehensive Income
4
Consolidated Statements of Shareholders’ Equity
5
Consolidated Statements of Cash Flows
6
Notes to Consolidated Financial Statements
7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
35
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
42
PART II. Other Information:
Item 1. Legal Proceedings
43
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
44
Signatures
45
2
Part I – Financial Information
Item 1.Financial Statements
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except per share data)
September 30,
December 31,
2026
2025
(unaudited)
ASSETS
Cash and due from banks
$
92,497
130,369
Federal funds sold
667
475
Securities available-for-sale
1,104,628
1,149,526
Loans:
Commercial
2,371,255
2,375,344
Residential
1,308,869
986,955
Consumer
725,268
688,135
4,405,392
4,050,434
(Less) plus:
Net deferred loan (fees)/costs
6,408
4,869
Allowance for credit losses
(49,717)
(47,995)
4,362,083
4,007,308
Restricted stock
23,579
18,536
Accrued interest receivable
28,797
27,762
Premises and equipment, net
87,697
78,582
Bank-owned life insurance
137,867
131,286
Goodwill
98,229
Other intangible assets
17,629
16,234
Other real estate owned
1,418
94
Other assets
105,856
97,725
TOTAL ASSETS
6,060,947
5,756,126
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Non-interest-bearing
990,989
916,473
Interest-bearing:
Certificates of deposit exceeding the FDIC insurance limits
218,702
135,605
Other interest-bearing deposits
3,655,606
3,499,033
4,865,297
4,551,111
Short-term borrowings
203,472
292,468
Other borrowings
262,348
188,208
Other liabilities
69,384
73,470
TOTAL LIABILITIES
5,400,501
5,105,257
Shareholders’ equity
Common stock, $0.125 stated value per share; Authorized shares - 40,000,000; Issued shares-16,206,804 in 2026 and 16,190,157 in 2025; Outstanding shares - 11,891,896 in 2026 and 11,880,759 in 2025
2,022
2,021
Additional paid-in capital
148,046
147,442
Retained earnings
791,803
741,793
Accumulated other comprehensive loss
(127,387)
(86,681)
Less: Treasury shares at cost - 4,314,908 in 2026 and 4,309,398 in 2025
(154,038)
(153,706)
TOTAL SHAREHOLDERS’ EQUITY
660,446
650,869
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three Months Ended
Nine Months Ended
INTEREST INCOME:
Loans, including related fees
76,585
67,070
218,092
195,457
Securities:
Taxable
6,367
5,985
19,257
17,902
Tax-exempt
3,019
2,689
8,897
7,915
Other
958
900
2,848
2,579
TOTAL INTEREST INCOME
86,929
76,644
249,094
223,853
INTEREST EXPENSE:
Deposits
18,117
18,002
52,496
54,696
2,303
1,916
7,275
5,007
2,983
2,123
7,642
4,901
TOTAL INTEREST EXPENSE
23,403
22,041
67,413
64,604
NET INTEREST INCOME
63,526
54,603
181,681
159,249
Provision for (benefit from) credit losses - loans
(250)
1,950
3,600
5,850
Provision for (benefit from) credit losses - unfunded commitments
(500)
—
100
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES
64,276
52,653
178,581
153,299
NON-INTEREST INCOME:
Trust and financial services
1,394
1,278
4,388
4,161
Service charges and fees on deposit accounts
8,407
8,104
24,006
23,243
Other service charges and fees
259
251
978
823
Securities gains (losses), net
24
(109)
21
Interchange income
232
176
632
570
Loan servicing fees
338
997
830
Gain on sales of mortgage loans
335
494
1,122
1,149
469
484
1,283
1,244
TOTAL NON-INTEREST INCOME
11,434
11,149
33,297
32,041
NON-INTEREST EXPENSE:
Salaries and employee benefits
20,809
19,788
63,442
58,725
Occupancy expense
2,730
2,738
8,402
7,886
Equipment expense
5,836
4,811
16,473
13,903
FDIC expense
665
690
2,045
2,235
11,239
10,021
34,325
30,234
TOTAL NON-INTEREST EXPENSE
41,279
38,048
124,687
112,983
INCOME BEFORE INCOME TAXES
34,431
25,754
87,191
72,357
Provision for income taxes
6,990
4,992
17,203
14,603
NET INCOME
27,441
20,762
69,988
57,754
OTHER COMPREHENSIVE INCOME
Change in unrealized gains/(losses) on securities, net of reclassifications and taxes
(36,401)
19,596
(40,943)
33,642
Change in funded status of post retirement benefits, net of taxes
79
237
8
COMPREHENSIVE INCOME
(8,881)
40,361
29,282
91,404
PER SHARE DATA
Basic and Diluted Earnings per Share
2.31
1.75
5.89
4.87
Weighted average number of shares outstanding (in thousands)
11,892
11,851
11,889
11,848
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Three and Nine Months Ended
September 30, 2026, and 2025
(Unaudited)
Accumulated
Common
Additional
Retained
Comprehensive
Treasury
Stock
Capital
Earnings
Income/(Loss)
Total
Balance, July 1, 2025
2,020
146,391
712,271
(118,234)
(154,780)
587,668
Net income
Other comprehensive income
19,599
Omnibus Equity Incentive Plan
233
Cash dividends, $.51 per share
(6,044)
Balance, September 30, 2025
146,624
726,989
(98,635)
622,218
Balance, July 1, 2026
147,844
771,022
(91,065)
675,785
(36,322)
202
Cash dividends, $.56 per share
(6,660)
Balance, September 30, 2026
Balance, January 1, 2025
2,018
145,927
687,366
(132,285)
(153,985)
549,041
33,650
697
699
Treasury shares purchased (17,028 shares)
(795)
Cash dividends, $1.53 per share
(18,131)
Balance, January 1, 2026
(40,706)
1
604
605
Treasury shares purchased (5,510 shares)
(332)
Cash dividends, $1.68 per share
(19,978)
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of premiums and discounts on investments
2,274
2,981
Provision for credit losses
3,100
5,950
Securities (gains)/losses
109
(21)
Depreciation and amortization
8,997
9,104
Bargain purchase gain
(33)
Restricted stock compensation
Gain on sale of mortgage loans
(1,122)
(1,149)
(Gain)/loss on sale of other real estate
(66)
Other, net
(7,206)
(14,623)
NET CASH FROM OPERATING ACTIVITIES
76,716
60,629
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available-for-sale
47,691
Calls, maturities and principal reductions on securities available-for-sale
101,855
93,280
Purchases of securities available-for-sale
(106,319)
(42,477)
Loans made to customers, net of repayment
(69,288)
(129,816)
Net change in federal funds sold
(192)
663
Redemption of restricted stock
1,230
62
Purchase of restricted stock
(5,058)
(1,268)
Cash received (disbursed) from acquisitions, net
(12,790)
Proceeds from sales of other real estate owned
72
449
Additions to premises and equipment
(3,085)
(2,787)
NET CASH FROM INVESTING ACTIVITIES
(45,884)
(81,894)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits
970
(103,580)
Net change in short-term borrowings
(94,482)
(4,535)
Dividends paid
(19,969)
(18,120)
Purchase of treasury shares
Proceeds from other borrowings
3,983,893
1,850,000
Maturities of other borrowings
(3,938,784)
(1,707,793)
NET CASH FROM FINANCING ACTIVITIES
(68,704)
15,177
NET CHANGE IN CASH AND CASH EQUIVALENTS
(37,872)
(6,088)
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD
93,526
CASH AND DUE FROM BANKS, END OF PERIOD
87,438
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying September 30, 2026 and 2025 consolidated financial statements are unaudited. The December 31, 2025 consolidated financial statements are as reported in the First Financial Corporation (the “Corporation”) 2025 annual report. The information presented does not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. The following notes should be read together with notes to the consolidated financial statements included in the 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2025.
1. Significant Accounting Policies
The significant accounting policies followed by the Corporation and its subsidiaries for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. All adjustments which are, in the opinion of management, necessary for a fair statement of the results for the periods reported have been included in the accompanying consolidated financial statements and are of a normal recurring nature.
The Corporation operates as a single segment entity for financial reporting purposes and adopted Accounting Standards Update (“ASU”) 2023-07, Segment Reporting, for the nine months ended September 30, 2026. The Company has determined that its current operating model is structured whereby banking locations and divisions serve a similar base of commercial and retail customers for which the Corporation provides similar products and services managed through similar processes and technology platforms. The Chief Financial Officer (“CFO”) serves as the Corporation’s chief operating decision maker (“CODM”). The CODM allocates resources and assesses performance of the Corporation based on the consolidated performance, excluding all significant intercompany balances and transactions of the Corporation and its wholly owned subsidiary, the banking segment, and does not significantly utilize disaggregated segment financial information for decision making and resource allocation. The CODM assesses performance for the banking segment and decides how to allocate resources based on net income as reported on the consolidated statement of income as consolidated net income. Accordingly, all of the Corporation’s operations are considered by management to be aggregated in one reportable operating segment, the banking segment. All categories of interest expense and non-interest expense as disclosed on the Corporation’s consolidated statements of income are considered significant to the banking segment.
The Corporation has reviewed the requirements of ASU 2023-07 and has determined that no additional segment disclosures are required, specifically as a result of the following:
The Omnibus Equity Incentive Plan is a long-term incentive plan that was designed to align the interests of participants with the interests of shareholders. Under the plan, awards may be made based on certain performance measures. The grants are made in restricted stock units that are subject to a vesting schedule. These shares vest over 3 years in increments of 33%, 33%, and 34%, respectively. For the nine months ended September 30, 2026 and 2025, 16,647 and 25,134 shares were awarded, respectively. These shares had a grant date value of $1.1 million and $1.2 million for 2026 and 2025, vest over three years, and their grant is not subject to future performance measures. Outstanding shares are increased at the award date for the total shares awarded.
On March 1, 2026, the Corporation completed its acquisition of CedarStone Financial, Inc. Therefore, the results of CedarStone have been included in the results of operations beginning on March 1, 2026. See Note 12, Acquisitions, for more information.
On August 26, 2026, the Corporation entered into an Agreement and Plan of Merger (the “Merger Agreement”) with First Illinois Corporation, Decatur, Illinois (“First Illinois”). Under the terms of the Merger Agreement, subject to the allocation and election procedures set forth therein, each outstanding share of First Illinois common stock will be converted into the right to receive either 0.5727 shares of the Corporation’s common stock or $44.35 in cash, with 70% of First Illinois common stock to be exchanged for the
Corporation’s common stock and 30% to be exchanged for cash, in each case subject to the terms of the Merger Agreement. Cash will be paid in lieu of fractional shares. The merger is expected to close in the first quarter of 2027.
On July 4, 2025, President Trump signed into law the legislation formally titled, “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14,” (“the Act”). The Corporation evaluated and applied the income tax implications of the Act. The Corporation’s financial statements were not materially impacted by the Act.
2. New accounting standards
Accounting Pronouncements Adopted:
In July 2025, the Financial Accounting Standards Board (“FASB”) issued ASU 2025-05, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets." This ASU amends Accounting Standards Codification (“ASC”) 326-20 to provide a practical expedient (for all entities) and an accounting policy election (for all entities, other than public business entities that elect the practical expedient) related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, "Revenue From Contracts with Customers". This ASU is effective for annual and interim reporting periods in fiscal years beginning after December 15, 2025. Early adoption is permitted for financial statements that have not yet been issued. The Corporation adopted ASU 2025-05 on January 1, 2026. The Corporation assessed ASU 2025-05, elected the practical expedient, and applied the standard to the consolidated financial statements and related disclosures.
In November 2025, the FASB issued ASU 2025-08 Financial Instruments—Credit Losses (Topic 326) — Purchased Loans. The amendments in this ASU expand the population of acquired financial assets subject to the gross-up approach in Topic 326. In accordance with the amendments in this ASU, loans (excluding credit cards) acquired without credit deterioration and deemed “seasoned” are purchased seasoned loans and accounted for using the gross-up approach at acquisition. All non-PCD (purchased financial asset with credit deterioration) loans (excluding credit cards) that are acquired in a business combination are deemed seasoned. Other non-PCD loans (excluding credit cards) are seasoned if they were purchased at least 90 days after origination and the acquirer was not involved in the origination of the loans. The amendments in this ASU are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The amendments in this ASU should be applied prospectively to loans that are acquired on or after the initial application date. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. The Corporation early adopted ASU 2025-08 on January 1, 2026. The Corporation applied the standard to the acquisition of CedarStone Financial Inc., which supported the impact to the allowance for credit loss, but limited the impact to the provision for credit losses on March 1, 2026.
Recent Accounting Pronouncements:
In November 2024, FASB)issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU is intended to provide investors more detailed disclosures around specific types of expenses. This ASU requires certain details for expenses presented on the face of the consolidated statements of income as well as selling expenses to be presented in the notes to the financial statements. This update is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The disclosure updates are required to be applied prospectively with the option for retrospective application. The Corporation is assessing ASU 2024-03 and its effect on its consolidated financial statements and related disclosures.
3. Allowance for Credit Losses
The following table presents the activity of the allowance for credit losses by portfolio segment for the three months ended September 30.
Allowance for Credit Losses:
September 30, 2026
(Dollar amounts in thousands)
Unallocated
Beginning balance
17,919
19,261
13,196
562
50,938
(1,981)
703
1,022
Loans charged-off
(489)
(213)
(2,347)
(3,049)
Recoveries
643
137
1,298
2,078
Ending Balance
16,092
19,888
13,169
568
49,717
September 30, 2025
16,408
17,795
12,559
325
47,087
1,584
(787)
1,100
53
(364)
(8)
(2,854)
(3,226)
248
74
1,600
17,876
17,074
12,083
378
47,411
The following table presents the activity of the allowance for credit losses by portfolio segment for the nine months ended September 30.
18,805
16,620
12,348
222
47,995
Initial allowance on acquired loans
502
2,722
96
3,320
(1,781)
593
4,442
346
(2,383)
(394)
(7,301)
(10,078)
949
347
3,584
4,880
16,963
17,470
12,046
253
46,732
1,339
(507)
4,893
125
(1,063)
(125)
(8,207)
(9,395)
637
236
3,351
4,224
9
The tables below present the recorded investment in non-performing loans by class of loans.
Loans Past
Due Over
Nonaccrual
90 Days
With No
and Greater
Allowance
Still Accruing
For Credit Loss
Commercial & Industrial
380
Farmland
191
Non Farm, Non Residential
89
14,176
78
Agriculture
645
All Other Commercial
185
143
First Liens
875
1,355
Home Equity
83
219
Junior Liens
273
Multifamily
All Other Residential
Motor Vehicle
2,212
All Other Consumer
139
TOTAL
1,343
19,775
245
December 31, 2025
51
6,058
394
15,365
13,126
1,218
195
606
918
82
178
442
81
47
517
205
39
20
2,449
213
1,114
27,495
13,970
10
The following tables present the amortized cost basis of collateral dependent loans by class of loans:
Collateral Type
Real Estate
3,316
13,834
430
2,197
565
16,739
3,746
3,644
5,666
48
17,572
829
21,714
6,495
11
The following tables present the aging of the recorded investment in loans by past due category and class of loans.
30-59 Days
60-89 Days
Past Due
Current
429
194
766
603,848
604,614
112
303
121,506
121,809
2,060
124
2,184
1,089,322
1,091,506
92
181
119,680
119,861
138
446,523
447,226
1,928
1,586
1,608
5,122
548,421
553,543
658
145
201
1,004
142,282
143,286
975
398
447
1,820
81,906
83,726
497,965
35,183
5,722
1,161
558
7,441
692,345
699,786
261
113
57
431
28,192
28,623
12,424
4,115
3,416
19,955
4,407,173
4,427,128
883
3,937
1,640
6,460
642,454
648,914
320
128,663
128,983
1,060
1,772
85
2,917
910,280
913,197
63
71
343
477
141,341
141,818
17
175
192
556,861
557,053
3,852
1,151
779
5,782
444,131
449,913
618
234
566
105,700
107,118
403
126
266
795
71,989
72,784
187
265
68
520
331,317
331,837
26
50
28,936
28,986
7,186
1,457
629
9,272
653,385
662,657
392
103
563
28,056
28,619
15,007
9,116
4,643
28,766
4,043,113
4,071,879
12
Loan Modifications Made to Borrowers Experiencing Financial Difficulty:
Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.
The following table presents the amortized cost of loans and leases at September 30, 2026 that were both experiencing financial difficulty and modified during the twelve months ended September 30, 2026, by class and by type of modification. The percentage of the amortized cost of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost of each class of financial receivable is also presented below.
Combination
Term
Extension and
Extension
Class of
Principal
Payment
Interest Rate
Financing
Forgiveness
Delay
Reduction
Receivable
302
46
0.06
%
14
0.02
73
0.21
22
87
0.03
387
119
0.01
The Corporation has no commitments to lend additional amounts to the borrowers included in the table above.
The Corporation closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last twelve months:
30 - 59
60 - 89
Greater Than
Days
89 Days
The following table presents the financial effect of loan and lease modifications presented above to borrowers experiencing financial difficulty for the twelve months ended September 30, 2026.
Weighted-
Average
(months)
4.25
64
240
0.63
180
25
2.03
13
The following table presents the amortized cost basis of loans that had a payment default during the twelve months ended September 30, 2026 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.
Upon the Corporation’s determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
Credit Quality Indicators:
The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $250 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. The Corporation uses the following definitions for risk ratings:
Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard: Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected.
Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values.
Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring.
The following tables present the commercial loan portfolio by risk category. These balances do not include accrued interest:
Term Loans at Amortized Cost Basis by Origination Year
Revolving
2024
2023
2022
Prior
Loans
Commercial and Industrial
Pass
77,900
61,718
55,879
23,286
62,943
138,084
124,966
544,776
Special Mention
5,473
7,139
2,051
341
12,182
20,096
47,620
Substandard
406
133
60
110
3,022
3,490
7,228
Doubtful
Not Rated
594
1,071
725
313
122
34
2,859
Subtotal
84,373
63,260
63,750
25,710
63,516
153,322
148,552
602,483
Current period gross charge-offs
-
149
52
211
10,374
13,635
7,623
13,172
12,461
49,744
512
107,521
880
749
1,606
4,542
8,738
895
1,510
2,405
11,254
15,279
9,229
14,052
12,542
55,800
118,668
72,908
175,896
165,652
122,805
168,876
333,247
18,149
1,057,533
3,891
8,270
2,044
14,211
136
15,524
15,660
757
73,665
179,787
173,922
169,018
350,815
1,088,161
775
6,101
6,509
6,947
3,924
3,305
16,964
56,610
100,360
1,226
241
1,182
2,719
2,019
7,131
14,618
105
16
437
930
1,785
6,420
7,840
7,205
5,184
6,024
19,420
64,671
116,764
256
55
826
Other Commercial
87,242
147,876
35,007
13,677
65,726
82,421
11,952
443,901
300
560
860
203
167
215
148,176
35,567
65,774
82,791
445,179
544
571
Multifamily >5 Residential
15,931
89,623
139,402
54,515
67,829
109,758
1,059
478,117
6,060
11,713
184
17,957
21,991
79,542
109,942
496,074
270,456
495,257
410,510
231,379
381,140
730,218
213,248
2,732,208
12,513
6,504
17,816
4,113
14,860
20,971
27,227
104,004
625
1,133
23
246
20,696
4,420
27,281
1,351
726
170
3,836
284,945
503,965
429,075
235,943
396,416
772,090
244,895
2,867,329
15
2021
109,471
69,074
31,396
89,638
70,630
99,985
140,465
610,659
6,292
1,145
5,347
3,769
2,603
19,458
32
504
1,511
6,737
4,203
12,998
1,595
1,061
514
289
115
3,627
111,066
76,438
32,244
91,576
77,603
110,544
147,271
646,742
86
56
15,852
9,054
17,769
14,137
15,774
49,862
365
122,813
701
1,933
478
626
1,104
10,199
18,948
50,581
125,856
156,729
157,955
90,074
153,861
138,925
170,080
9,680
877,304
8,350
946
2,034
11,330
1,924
15,699
3,382
21,005
166,305
156,731
154,624
176,193
910,336
33
13,315
10,053
6,034
6,428
3,040
27,137
56,978
122,985
385
84
914
141
999
4,298
6,821
29
287
207
142
4,422
3,865
8,969
13,729
10,425
6,241
7,485
3,219
32,558
65,141
138,798
95,156
87,870
62,856
90,093
70,734
136,922
7,986
551,617
541
754
366
381
95,456
88,430
90,108
71,275
137,501
553,612
728
30,157
96,593
55,938
54,759
34,709
37,417
310,117
12,075
6,319
18,394
280
485
420
953
1,373
67,039
35,129
44,969
330,369
420,680
430,599
264,067
408,916
333,812
521,403
216,018
2,595,495
685
16,431
1,003
15,080
5,488
13,208
6,901
58,796
298
717
2,775
17,768
8,068
45,315
1,062
305
556
2,075
6,107
422,989
448,390
266,301
427,076
357,624
552,346
230,987
2,705,713
The Corporation evaluates the credit quality of its other loan portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity. Accordingly, loans on non-accrual status and loans past due 90 days or more and still accruing interest are considered to be nonperforming for purposes of credit quality evaluation. The following table presents the other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming. These balances do not include accrued interest:
Performing
53,249
69,267
71,181
48,430
75,423
224,183
7,524
549,257
Non-performing
748
371
1,028
2,225
69,345
71,929
48,801
225,211
551,482
169
188
140
476
472
696
2,162
2,891
135,683
142,520
54
163
301
2,216
3,054
135,767
142,821
17,394
21,688
11,936
8,737
8,089
10,924
4,172
82,940
28
75
507
21,716
12,147
8,874
8,164
10,980
83,447
104
Other Residential
10,132
11,281
4,394
2,733
3,360
3,145
35,045
38
240,595
213,846
119,373
73,021
41,747
5,987
40
694,609
518
595
306
534
147
2,196
240,691
214,364
119,968
73,327
42,281
6,134
696,805
334
2,090
1,299
1,470
1,365
208
6,766
Other Consumer
3,423
3,399
2,593
1,282
1,143
1,245
15,215
28,300
37
3,453
2,630
1,322
1,254
15,236
28,463
27
250
535
324,933
319,957
209,949
134,899
131,924
248,375
162,634
1,532,671
678
1,591
854
1,403
5,392
Total other loans
325,029
320,635
211,540
135,753
132,589
249,778
162,739
1,538,063
64,142
61,775
39,526
74,359
60,920
144,310
1,786
446,818
70
1,456
1,571
61,845
60,965
145,766
448,389
31
938
793
650
1,284
101,907
106,169
393
683
276
1,459
102,300
106,787
19
23,832
13,403
9,409
9,145
4,674
9,676
2,107
72,246
152
99
307
13,417
9,561
9,170
4,691
9,775
72,553
30
7,829
6,807
3,843
4,991
3,573
1,757
28,800
49
3,622
1,765
28,857
279,286
168,244
113,956
76,182
14,119
5,441
657,237
519
500
866
128
2,429
279,508
168,763
114,456
77,048
14,313
5,569
659,666
759
2,380
2,279
4,075
713
249
10,455
4,776
5,276
2,726
1,503
1,137
942
11,842
28,202
67
65
267
4,778
5,343
2,793
1,522
1,172
954
11,907
28,469
761
380,203
256,443
170,253
166,830
84,682
163,410
117,651
1,339,472
224
670
719
943
357
1,878
458
5,249
380,427
257,113
170,972
167,773
85,039
165,288
118,109
1,344,721
The Corporation has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:
Purchase price of loans at acquisition
2,795
Allowance for credit losses at acquisition
695
Non-credit discount at acquisition
226
Par value of loans at acquisition
3,716
18
4. Securities
The amortized cost and fair value of the Corporation’s investments are shown below. All securities are classified as available-for-sale.
Amortized
Unrealized
Cost
Gains
Losses
Fair Value
U.S. Government agencies
100,256
(10,811)
89,447
Mortgage Backed Securities - residential
559,954
(75,235)
484,721
Mortgage Backed Securities - commercial
12,360
(857)
11,503
Collateralized mortgage obligations
170,668
(27,470)
143,205
State and municipal obligations
402,083
(46,797)
355,298
Municipal taxable
20,075
(2,524)
17,558
Collateralized debt obligations
2,661
(13)
2,896
1,265,644
2,691
(163,707)
91,945
114
(7,749)
84,310
Mortgage Backed Securities-residential
573,002
873
(58,456)
515,419
Mortgage Backed Securities-commercial
12,712
(328)
12,386
179,638
(21,622)
158,098
379,894
1,280
(23,456)
357,718
20,554
(1,893)
18,745
2,850
1,257,745
5,285
(113,504)
Contractual maturities of debt securities at September 30, 2026 were as follows.
Available-for-Sale
Fair
Value
Due in one year or less
5,346
5,327
Due after one but within five years
36,513
35,235
Due after five but within ten years
124,287
116,026
Due after ten years
356,516
308,611
522,662
465,199
Mortgage-backed securities and collateralized mortgage obligations
742,982
639,429
There were zero and $1 thousand gross gains and zero and $110 thousand in gross losses from investment sales/calls realized by the Corporation for the three and nine months ended September 30, 2026, respectively. For the three and nine months ended September 30, 2025, there were $25 thousand and $25 thousand in gross gains and $1 thousand and $4 thousand in gross losses realized on sales/calls of investment securities, respectively.
The following tables show the securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in continuous unrealized loss position.
Less Than 12 Months
More Than 12 Months
38,204
(1,930)
50,935
89,139
Mortgage Backed Securities - Residential
107,719
(5,050)
376,406
(70,185)
484,125
Mortgage Backed Securities - Commercial
1,042
10,255
11,297
29,602
(1,418)
112,724
(26,052)
142,326
198,937
(9,569)
143,300
(37,228)
342,237
2,940
(76)
13,314
(2,448)
16,254
235
Total temporarily impaired securities
378,679
(18,056)
706,934
(145,651)
1,085,613
7,137
(31)
59,562
(7,718)
66,699
11,961
(29)
427,877
(58,427)
439,838
11,114
4,381
(43)
135,393
(21,579)
139,774
23,889
(86)
204,976
(23,370)
228,865
13,876
47,368
(189)
852,798
(113,315)
900,166
Management evaluates securities for impairment related to credit losses at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. The investment securities portfolio is evaluated for impairment related to credit losses by segregating the portfolio into two general segments.
In evaluating for impairment, management considers the reason for the decline, the extent of the decline, the duration 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 less any current-period loss, 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 cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.
Gross unrealized losses on investment securities were $163.7 million as of September 30, 2026 and $113.5 million as of December 31, 2025. Management believes these losses represent negative adjustments to market value relative to the interest rate environment reflecting the increase in market rates and not losses related to the creditworthiness of the issuer. The portfolio contains primarily government agency, agency backed mortgage backed securities (“MBS”), and collateralized mortgage obligations (“CMO”), which are issued by government sponsored enterprises and are backed by the full faith and credit of the United States government. Secondarily, the Corporation invests in municipal securities issued by state and local governments. Of these, almost half are either insured or contain state enhancements. On the remaining, credit is monitored by the Corporation’s investment committee. Based upon our review of the issuers, we do not believe these investments to be other than temporarily impaired. Management does not intend to sell these securities and it is not more likely than not that the Corporation will be required to sell them before their anticipated recovery.
The table below presents a rollforward of the credit losses recognized in earnings for the periods presented:
Three Months Ended September 30,
Nine Months Ended September 30,
2,675
2,974
Recoveries of amounts previously written off
(299)
Ending balance
5. Qualified Affordable Housing Project Investments
The Corporation invests in qualified affordable housing projects. The balance of investment for qualified housing projects was $36.3 million at September 30, 2026 and $37.9 million at December 31, 2025. These balances are reflected in the other assets line on the consolidated balance sheets. Total unfunded commitments related to the investments in qualified affordable housing projects totaled $17.4 million at September 30, 2026 and $19.9 million at December 31, 2025. These balances are reflected in the other liabilities line on the consolidated balance sheets. The Corporation expects to fulfill these commitments by December 31, 2037.
The Corporation recognized amortization expense of $16 thousand during the nine months ended September 30, 2026, and $47 thousand during the nine months ended September 30, 2025, which was included within other noninterest expense on the consolidated statements of income. The Corporation recognized amortization expense of $2.3 million during the nine months ended September 30, 2026, and $2.2 million during the nine months ended September 30, 2025, which was included within income tax expense on the consolidated statements of income. Additionally, the Corporation recognized tax credits and other benefits from its investment in affordable housing tax credits of $3.3 million during the nine months ended September 30, 2026, and $2.8 million during the nine months ended September 30, 2025.
6. Fair Value
FASB ASC No. 820-10 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) of identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The fair value of most securities available for sale is determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
For those securities that cannot be priced using quoted market prices or observable inputs a Level 3 valuation is determined. These securities are primarily trust preferred securities and collateralized debt obligations. The fair value of collateralized debt obligations are derived by comparing the securities to current market rates plus an appropriate credit spread to determine an estimated value. Illiquidity spreads are then considered. Credit reviews are performed on each of the issuers. The significant unobservable inputs used in the fair value measurement of the Corporation’s collateralized debt obligations are credit spreads related to specific issuers. Significantly higher credit spread assumptions would result in significantly lower fair value measurement. Conversely, significantly lower credit spreads would result in a significantly higher fair value measurements.
The fair value of derivatives is based on valuation models using observable market data as of the measurement date (Level 2 inputs).
Fair Value Measurements Using:
Quoted Prices in Active Markets for Identical Assets
Significant Other Observable Inputs
Significant Unobservable Inputs
Level 1
Level 2
Level 3
State and municipal
1,101,967
Derivative Assets
3,505
Derivative Liabilities
(3,505)
1,146,676
2,709
(2,709)
There were no transfers between Level 1 and Level 2 during 2026 or 2025.
The tables below present a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2026 and the year ended December 31, 2025.
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
State and
municipal
Collateralized
obligations
debt obligations
Beginning balance, July 1
2,651
Total realized/unrealized gains or losses
Included in earnings
Included in other comprehensive income
Transfers
Settlements
Ending balance, September 30
Beginning balance, January 1
Year Ended
805
3,701
(46)
Purchases
(805)
Ending balance, December 31
Other real estate owned (“OREO”) is valued at Level 3. Other real estate owned at September 30, 2026 with a value of $1.4 million was reduced by $41 thousand for fair value adjustments. At September 30, 2026 OREO was comprised of $1.2 million from commercial loans and $183 thousand from residential loans. OREO at December 31, 2025 with a value of $94 thousand was reduced by $9 thousand for fair value adjustments. At December 31, 2025 OREO was comprised of $94 thousand from residential loans.
Fair value is measured based on the value of the collateral securing those loans, and is determined using several methods. Generally the fair value of real estate is determined based on appraisals by qualified licensed appraisers. Appraisals for real estate generally use three methods to derive value: cost, sales or market comparison and income approach. The cost method bases value on the cost to replace current property. The market comparison evaluates the sales price of similar properties in the same market area. The income approach considers net operating income generated by the property and the investor’s required return. The final fair value is based on a reconciliation of these three approaches. If an appraisal is not available, the fair value may be determined by using a cash flow analysis,
a broker’s opinion of value, the net present value of future cash flows, or an observable market price from an active market. Fair value of other real estate is based upon the current appraised values of the properties as determined by qualified licensed appraisers and the Company’s judgment of other relevant market conditions. Appraisals are obtained annually and reductions in value are recorded as a valuation through a charge to expense. The primary unobservable input used by management in estimating fair value are additional discounts to the appraised value to consider market conditions and the age of the appraisal, which are based on management’s past experience in resolving these types of properties. These discounts range from 10% to 100% with an average discount of 43%. Values for non-real estate collateral, such as business equipment, are based on appraisals performed by qualified licensed appraisers or the customers financial statements. Values for non-real estate collateral use much higher discounts than real estate collateral. Other real estate and individually evaluated loans carried at fair value are primarily comprised of smaller balance properties.
The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at September 30, 2026.
Valuation Technique(s)
Unobservable Input(s)
Range
Discounted cash flow
Discount rate
5.71
Collateral dependent loans
14,561
Discount rate for age of appraisal and market conditions
10.00%-100.00
The following table presents quantitative information about recurring and non-recurring Level 3 fair value measurements at December 31, 2025.
5.96
7,328
The carrying amounts and estimated fair value of financial instruments at September 30, 2026 and December 31, 2025, are shown below. Carrying amount is the estimated fair value for cash and due from banks, federal funds sold, short-term borrowings, accrued interest receivable and payable, demand deposits, short-term debt and variable-rate loans or deposits that reprice frequently and fully. Security fair values were described previously. For fixed-rate, collectively evaluated loans or deposits, variable rate loans or deposits with infrequent repricing or repricing limits, and for longer-term borrowings, fair value is based on discounted cash flows using current market rates applied to the estimated life and considering credit risk. The valuation of individually evaluated loans was described previously. Loan fair value estimates represent an exit price. Fair values of loans held for sale are based on market bids on the loans or similar loans. It was not practicable to determine the fair value of restricted stock for the Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) due to restrictions placed on its transferability. Fair value of debt is based on current rates for similar financing. The fair value of off-balance sheet items is not considered material.
Carrying
34,855
57,642
n/a
Loans, net
4,238,703
7,208
21,589
(4,865,297)
(4,861,864)
(203,472)
(262,348)
Accrued interest payable
(3,317)
38,587
91,782
3,949,043
6,482
21,280
(4,551,111)
(4,554,207)
(292,468)
(188,208)
(3,084)
7. Borrowings
Short-term borrowings:
Period–end short-term borrowings were comprised of the following:
Federal Funds Purchased
173,775
257,825
Repurchase Agreements
29,697
34,643
The Corporation enters into sales of securities under agreements to repurchase. The amounts received under these agreements represent short-term borrowings and are reflected as a liability in the consolidated balance sheets. The securities underlying these agreements are included in investment securities in the consolidated balance sheets. The Corporation has no control over the market value of the securities, which fluctuates due to market conditions. However, the Corporation is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase agreement price. The Corporation manages this risk by maintaining an unpledged securities portfolio that it believes is sufficient to cover a decline in the market value of the securities sold under agreements to repurchase.
Collateral pledged to repurchase agreements by remaining maturity are as follows:
Remaining Contractual Maturity of the Agreements
Overnight
Greater
and
Up to 30
30 - 90
than 90
continuous
days
Mortgage Backed Securities - Residential and CollateralizedMortgage Obligations
27,336
1,805
27,514
351
3,978
2,800
Other borrowings:
Other borrowings at September 30, 2026 and December 31, 2025 are summarized as follows:
FHLB advances
259,316
175,708
Notes payable
3,032
12,500
The aggregate minimum annual retirements of other borrowings are as follows:
Twelve Months Ended September 30,
2027
258,893
2028
423
2029
2030
2031
Thereafter
At September 30, 2026 and December 31, 2025, other borrowings are summarized as follows: The Corporation’s subsidiary bank is a member of the FHLB and accordingly is permitted to obtain advances. There were $259.3 million of advances from the FHLB at September 30, 2026, and $175.7 million of advances at December 31, 2025. FHLB advances are, generally due in full at maturity. They are secured by eligible securities and a blanket pledge on real estate loan collateral. In addition the Corporation acquired a note payable to a commercial bank and debentures with the acquisition of CedarStone. The note was repaid during the nine months ended September 30, 2026, and the balance of the debentures at September 30, 2026 was $3.0 million.
8. Components of Net Periodic Benefit Cost
Post-Retirement
Pension Benefits
Health Benefits
Service cost
108
312
323
Interest cost
991
1,016
2,971
3,049
Expected return on plan assets
(1,215)
(1,094)
(3,647)
(3,281)
Net amortization of prior service cost
Net amortization of net (gain) loss
(30)
(39)
(90)
(117)
Net Periodic Benefit Cost
(120)
(4)
91
(12)
Employer Contributions
The Corporation previously disclosed in its consolidated financial statements for the year ended December 31, 2025 that it expected to contribute $1.6 million, $556 thousand, and $244 thousand to its Pension Plan, Employee Stock Option Plan (“ESOP”) and Post Retirement Health Benefits Plan, respectively, in 2026. Contributions of $1.1 million, $0, and $164 thousand have been made to the Pension Plan, ESOP, and Post Retirement Health Benefits Plan, respectively. The Pension plan was frozen for most employees at the end of 2012 and for those employees there will be discretionary contributions to the ESOP plan and a 401K plan in place of the former Pension benefit. In the first nine months of 2026 and 2025 there were $3.0 million and $2.4 million of expense recorded, respectively, for potential contributions to these alternative retirement benefit options.
9. Revenue from Contracts with Customers
All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The following table presents the Corporation’s sources of non-interest income for the periods presented. Items outside the scope of ASC 606 are noted as such.
Non-interest income
Service charges on deposits and debit card fee income
Net gains on sales of OREO
Net gains on sales of loans (a)
Loan servicing fees (a)
Net gains/(losses) on sales of securities (a)
Other service charges and fees (a)
417
1,276
1,177
Total non-interest income
Service charges on deposits: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.
Trust and financial services: The Corporation earns asset management fees from its contracts with trust customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Corporation provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed (i.e., the trade date). Other related services provided and the fees the Corporation earns, which are based on a fixed fee schedule, are recognized when the services are rendered.
Interchange income: The Corporation earns interchange fees from debit and credit cardholder transactions conducted through the payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
Gains/Losses on sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Corporation finances the sale of OREO to the buyer, the Corporation assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Corporation adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.
10. Accumulated Other Comprehensive (Loss)
The following tables summarize the changes, net of tax, within each classification of accumulated other comprehensive (loss) for the three and nine months ended September 30, 2026 and 2025.
gains and
(Losses) on available-
for-sale
Retirement
Securities
plans
Beginning balance, July 1,
(87,900)
(3,165)
Change in other comprehensive income (loss) before reclassification
Amounts reclassified from accumulated other comprehensive income
Net current period other comprehensive income (loss)
Ending balance, September 30,
(124,301)
(3,086)
Beginning balance, January 1,
(83,358)
(3,323)
(41,025)
319
(113,761)
(4,473)
19,614
(18)
(15)
(94,165)
(4,470)
(127,807)
(4,478)
33,658
(16)
Balance at
Current Period
7/1/2026
Change
9/30/2026
Unrealized gains (losses) on securities available-for-sale without other than temporary impairment
(89,888)
(36,409)
(126,297)
Unrealized gains (losses) on securities available-for-sale with other than temporary impairment
1,988
1,996
Total unrealized loss on securities available-for-sale
Unrealized gain (loss) on retirement plans
1/1/2026
(85,496)
(40,801)
2,138
(142)
Total unrealized gain (loss) on securities available-for-sale
7/1/2025
9/30/2025
(115,942)
19,645
(96,297)
2,181
(49)
2,132
Unrealized loss on retirement plans
1/1/2025
(129,979)
33,682
2,172
(40)
Total unrealized income (loss) on securities available-for-sale
Three Months Ended September 30, 2026
Details about accumulated
Amount reclassified from
Affected line item in
other comprehensive
accumulated other
the statement where
income components
comprehensive income
net income is presented
(in thousands)
Unrealized gains and losses
Net securities gains (losses)
on available-for-sale
Income tax expense
securities
Net of tax
Amortization of
(105)
(a)
Salary and benefits
retirement plan items
(79)
Total reclassifications for the period
Nine Months Ended September 30, 2026
(82)
(315)
(237)
(319)
Three Months Ended September 30, 2025
(6)
(3)
Nine Months Ended September 30, 2025
(5)
(11)
11. Leases
The Corporation leases certain branches under operating leases. At September 30, 2026, the Corporation had lease liabilities totaling $8.7 million and right-of-use assets totaling $8.6 million related to these leases. At December 31, 2025, the Corporation had lease liabilities totaling $7.5 million and right-of-use assets totaling $7.4 million related to these leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets, respectively, on the consolidated balance sheets. At September 30, 2026, the weighted average remaining lease term for operating leases was 10.8 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.89%.
The calculated amounts of the lease liabilities and right-of-use assets are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Corporation’s lease agreements often include one or more options to renew at the Corporation’s discretion. If at lease inception, the Corporation considers the exercising of a renewal option to be reasonably certain, the Corporation will include the extended term in the calculation of the lease liability and right-of-use asset. Regarding the discount rate, the standard requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Corporation utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.
The following table represents lease costs and other lease information. As the Corporation elected not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities.
Lease costs were as follows:
Operating lease cost
1,055
1,058
Short-term lease cost
41
Variable lease cost
Total lease cost
1,110
1,103
Other information:
Cash paid for amounts included in the measurement of operating lease liabilities
1,009
936
Right-of-use assets obtained in exchange for new operating lease liabilities
2,773
Future minimum payments for operating leases with initial or remaining terms of one year or more as of September 30, 2026 were as follows:
1,405
1,040
921
718
5,661
Total Future Minimum Lease Payments
11,100
Amounts Representing Interest
(2,357)
Present Value of Net Future Minimum Lease Payments
8,743
12. Acquisitions
On March 1, 2026, the Corporation completed its acquisition of CedarStone Financial, Inc. Therefore, the results of CedarStone have been included in the results of operations beginning on March 1, 2026. Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Interim Merger (the “Effective Time”), the Corporation paid $19.12 per share in cash for each share of CedarStone’s common stock outstanding. The aggregate value of the transaction was approximately $25.0 million. Acquisition-related costs of $1.5 million were recognized in the Corporation’s income statement for the year ended December 31, 2025. Additionally, the Corporation recognized acquisition-related costs of $1.5 million in the Corporation’s income statement for the nine months ending September 30, 2026.
The following table summarizes the consideration paid and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date, which resulted in a bargain purchase gain of $33 thousand.
Measurement
As Initially
Period
Reported
Adjustments
As Adjusted
Consideration
Cash consideration
25,003
Fair value of total consideration transferred
Assets acquired
Cash
13,224
(1,011)
12,213
Investment securities available-for-sale
53,509
(97)
53,412
Bank owned life insurance
4,481
Federal Home Loan Bank stock
1,215
286,102
Premises and equipment
11,106
Core deposit intangibles
5,317
773
153
926
Total assets acquired
375,727
(955)
374,772
Liabilities assumed
313,536
20,800
13,627
(272)
1,773
Total liabilities assumed
350,008
349,736
Net identifiable assets
25,719
(683)
25,036
(716)
The fair value of net assets acquired includes fair value adjustments to certain receivables that were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows. However, the Corporation believes that all contractual cash flows related to these financial instruments will be collected. As such, these receivables were not considered impaired at the acquisition date and were not subject to guidance relating to purchase credit deteriorated loans, which have shown evidence of credit deterioration since origination. Adjustments made above were within the allowable one year measurement period.
The fair value of purchased financial assets with credit deterioration was $3.0 million on the date of acquisition. The gross contractual amounts receivable relating to the purchased financial assets with credit deterioration was $3.7 million. The Corporation estimates, on the date of acquisition, that $695 thousand of the contractual cash flows specific to the purchased financial assets with credit deterioration will not be collected.
The following table presents supplemental pro forma information as if the acquisition had occurred as of January 1, 2025. The unaudited pro forma information includes adjustments for interest income on loans and securities acquired, interest expense on deposits acquired, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effected on the assumed dates.
Net interest income
182,775
160,360
69,566
58,867
Basic and diluted earnings per share
5.85
4.97
ITEMS 2. and 3. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk
The purpose of this discussion is to point out key factors in recent performance of First Financial Corporation (the Corporation) compared with earlier periods. The discussion should be read in conjunction with the financial statements beginning on page three of this report. All figures are for the consolidated entities. It is presumed the readers of these financial statements and of the following narrative have previously read the Corporation’s consolidated financial statements on Form 10-K filed for the fiscal year ended December 31, 2025.
This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation, the Corporation’s ability to effectively execute its business plans; changes in general economic and financial market conditions; changes in interest rates; changes in the competitive environment; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; losses, customer bankruptcy, claims and assessments; changes in banking regulations or other regulatory or legislative requirements affecting the Corporation’s business; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (“FASB”) or other regulatory agencies. Additional information concerning factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements is available in the Corporation’s Form 10-K for the year ended December 31, 2025, and subsequent filings with the United States Securities and Exchange Commission (SEC). Copies of these filings are available at no cost on the SEC’s Web site at www.sec.gov or on the Corporation’s Web site at www.first-online.com. Management may elect to update forward-looking statements at some future point; however, it specifically disclaims any obligation to do so.
Critical Accounting Policies
Certain of the Corporation’s accounting policies are important to the portrayal of the Corporation’s financial condition and results of operations, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these judgments include, without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for credit losses and the valuation of goodwill and valuing investment securities. See further discussion of these critical accounting policies in the Corporation’s consolidated financial statements on Form 10-K filed for the fiscal year ended December 31, 2025.
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 credit losses on unfunded commitments were $49.7 million and $2.4 million, respectively at September 30, 2026, compared to $48.0 million and $2.9 million, respectively at December 31, 2025. The qualitative amount of the reserve increased $2.0 million to $16.1 million from December 31, 2025 to September 30, 2026. The quantitative amount is $33.3 million at September 30, 2026, compared to $33.6 million at December 31, 2025. There was a decrease of $500 thousand in the allowance for credit losses on unfunded commitments from December 31, 2025 to September 30, 2026. As a result of the acquisition of CedarStone Financial, Inc., the Corporation recorded an additional allowance for credit loss on loans of $3.3 million. 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.
36
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.
Summary of Operating Results
On March 1, 2026, First Financial Corporation completed the acquisition of CedarStone Financial, Inc. As a result of the acquisition, the book value of loans acquired were $292 million, and the book value of deposits acquired were $313 million. Additionally, a bargain purchase gain of $33 thousand was recognized. Net income reflects seven months of activity for the nine months ended September 30, 2026, from the CedarStone acquisition. Included in the variances in the following discussion are the values provided in this paragraph.
Net income for the three months ended September 30, 2026 was $27.4 million, compared to $20.8 million for the same period in 2025. Basic and diluted earnings per share increased to $2.31 for the third quarter of 2026 compared to $1.75 for the same period in 2025. Return on average assets and return on average equity were 1.79% and 16.13% respectively, for the three months ended September 30, 2026 compared to 1.48% and 13.82% for the three months ended September 30, 2025. Net income for the nine months ended September 30, 2026 was $70.0 million, compared to $57.8 million for the same period in 2025. Basic and diluted earnings per share increased to $5.89 for the nine months of 2026 compared to $4.87 for the same period in 2025. Return on average assets and return on average equity were 1.54% and 13.91% respectively, for the nine months ended September 30, 2026 compared to 1.39% and 13.23% for the nine months ended September 30, 2025.
In light of events in the banking sector, including bank failures, continuing interest rate activity and recessionary concerns, the Corporation has proactively positioned the balance sheet to mitigate the risks affecting the Corporation and the overall banking industry in order to serve its clients and communities.
The primary components of income and expense affecting net income are discussed in the following analysis.
Net Interest Income
The Corporation’s primary source of earnings is net interest income, which is the difference between the interest earned on loans and other interest-earning assets and the interest paid for deposits and other sources of funds. Net interest income increased $8.9 million (or 16.3%) in the three months ended September 30, 2026 to $63.5 million from $54.6 million in the same period in 2025. The net interest margin for the three months ended September 30, 2026 is 4.51% compared to 4.25% for the same period in 2025, a 0.26% increase. Net interest income increased $22.4 million (or 14.1%) in the nine months ended September 30, 2026 to $181.7 million from $159.2 million in the same period in 2025. The net interest margin for the nine months ended September 30, 2026 is 4.36% compared to 4.17% for the same period in 2025, a 0.19% increase.
The increase in yields on investments of 30 basis points is the primary contributor to the improved yield on average earning assets for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. Comparing the nine months
ended September 30, 2026 to the nine months ended September 30, 2025, the effective rate paid on average interest-bearing deposits decreased 10 basis points. For the same period discussed above, interest paid on other borrowings decreased 67 basis points.
Non-Interest Income
Non-interest income for the three months ended September 30, 2026 was $11.4 million compared to $11.1 million for the same period in 2025. Non-interest income for the nine months ended September 30, 2026 was $33.3 million compared to $32.0 million for the same period in 2025.
Non-Interest Expenses
The Corporation’s non-interest expense for the three months ended September 30, 2026 was $41.2 million compared to $38.0 million for the same period in 2025. The Corporation’s non-interest expense for the nine months ended September 30, 2026 was $124.7 million compared to $113.1 million for the same period in 2025. This includes an overall increase in operating expenses as a result of the CedarStone acquisition.
Allowance for Credit Losses
The Corporation’s benefit from credit losses on loans for the three months ended September 30, 2026, was $250 thousand, compared to $2.0 million of expense for the same period of 2025. The benefit from credit losses was primarily due to an individually evaluated loan from a prior acquisition that was fully recovered during the current quarter. Net charge-offs for the three months ended September 30, 2026, were $971 thousand compared to net charge-offs of $1.6 million for the same period of 2025. The Corporation’s provision for credit losses on loans for the nine months ended September 30, 2026, was $3.6 million, compared to $5.9 million for the same period of 2025. Net charge-offs for the nine months ended September 30, 2026 were $5.2 million compared to net charge-offs of $5.2 million for the same period of 2025. 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 as of September 30, 2026. In the first nine months of 2026, no significant changes were made.
Income Tax Expense
The Corporation’s effective income tax rate for the first nine months of 2026 was 19.73% compared to 20.18% for the same period in 2025.
Non-performing Loans
Non-performing loans consist of (1) non-accrual loans on which the ultimate collectability of the full amount of interest is uncertain, and (2) loans past due ninety days or more as to principal or interest. Non-performing loans decreased 26.2% to $21.1 million at September 30, 2026 compared to $28.6 million at December 31, 2025.
A summary of non-performing loans at September 30, 2026 and December 31, 2025 follows:
Non-accrual loans
Accruing loans past due over 90 days
1,294
1,083
21,069
28,578
Ratio of the allowance for credit losses as a percentage of non-performing loans
236.0
167.9
The following loan categories comprise significant components of the nonperforming non-restructured loans:
Commercial loans
15,577
22,836
Residential loans
1,847
1,997
Consumer loans
2,351
2,662
Past due 90 days or more and still accruing
1,032
Interest Rate Sensitivity and Liquidity
The 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. The Corporation’s net interest income performance is largely dependent on the effective management of this risk.
The Asset Liability position is measured using sophisticated risk management tools, including earning simulation and market value of equity sensitivity analysis. These tools allow management to quantify and monitor both short-term 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 September 30, 2026. 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 1.48% over the next 12 months but increase 1.33% over 24 months. Given a 100 basis point decrease in rates, net interest income would increase 3.20% over the next 12 months and increase 0.23% over 24 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
4.68
(5.91)
(15.08)
Down 200
4.80
(1.64)
(7.73)
Down 100
3.20
0.23
(2.80)
Up 100
(1.48)
1.33
4.39
Up 200
(5.53)
0.13
6.24
Up 300
(8.11)
0.26
9.41
Typical rate shock analysis does not reflect management’s ability to react and thereby reduce the effect of rate changes, and represents a worst-case scenario.
Liquidity Risk
Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers, and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Generally the Corporation relies on deposits, loan repayments and repayments of investment securities as its primary sources of funds. The Corporation has $5.8 million of investments that mature throughout the next 12 months. The Corporation also anticipates $101.6 million of principal payments from mortgage-backed and other securities. Given the current rate environment, the Corporation anticipates $18.1 million in securities to be called within the next 12 months. The Corporation also has $74.6 million of unused borrowing capacity available with the Federal Home Loan Bank of Indianapolis, $1.1 billion 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.
Financial Condition
Comparing the first nine months of 2026 to year-ended December 31, 2025, loans net of deferred loan costs, have increased $356 million to $4.4 billion. Deposits increased 6.9% to $4.9 billion at September 30, 2026 compared to December 31, 2025. Other borrowings increased $74.1 million to $262.3 million at September 30, 2026 compared to December 31, 2025. Shareholders’ equity increased 1.47% or $9.6 million. This financial performance increased book value per share 1.38% to $55.54 at September 30, 2026 from $54.78 at December 31, 2025. Book value per share is calculated by dividing the total shareholders’ equity by the number of shares outstanding. Accumulated other comprehensive loss increased $40.7 million primarily due to the market value of the securities portfolio, which reflected the decrease in securities pricing.
Capital Adequacy
The Federal Reserve, OCC and Federal Deposit Insurance Corporation (collectively, joint agencies) establish regulatory capital guidelines for U.S. banking organizations. Regulatory capital guidelines require that capital be measured in relation to the credit and market risks of both on- and off-balance sheet items using various risk weights. On January 1, 2015, the Basel 3 rules became effective and include transition provisions through January 1, 2019. Under Basel 3, Total capital consists of two tiers of capital, Tier 1 and Tier 2. Tier 1 capital is further composed of Common equity tier 1 capital and additional tier 1 capital.
Common equity tier 1 capital primarily includes qualifying common shareholders’ equity, retained earnings and certain minority interests. Goodwill, disallowed intangible assets and certain disallowed deferred tax assets are excluded from Common equity tier 1 capital.
Additional tier 1 capital primarily includes qualifying non-cumulative preferred stock, trust preferred securities (Trust Securities) subject to phase-out and certain minority interests. Certain deferred tax assets are also excluded.
Tier 2 capital primarily consists of qualifying subordinated debt, a limited portion of the allowance for loan and lease losses, Trust Securities subject to phase-out and reserves for unfunded lending commitments. The Corporation’s Total capital is the sum of Tier 1 capital plus Tier 2 capital.
To meet adequately capitalized regulatory requirements, an institution must maintain a Tier 1 capital ratio of at least 8.50 percent and a Total capital ratio of at least 10.50 percent. A “well-capitalized” institution must generally maintain capital ratios 200 bps higher than the minimum guidelines. The risk-based capital rules have been further supplemented by a Tier 1 leverage ratio, defined as Tier 1 capital divided by quarterly average total assets, after certain adjustments. Bank holding companies must have a minimum Tier 1 leverage ratio of at least 4.0 percent. National banks must maintain a Tier 1 leverage ratio of at least 5.0 percent to be classified as “well capitalized.” Failure to meet the capital requirements established by the joint agencies can lead to certain mandatory and discretionary actions by regulators that could have a material adverse effect on the Corporation’s financial position. Below are the capital ratios for the Corporation and lead bank.
The fully phased in capital conservation buffer set the minimum ratios for common equity Tier 1 capital at 7.0%, the Tier 1 capital at 8.5% and the total capital at 10.5%. Currently the Corporation exceeds all of these minimums.
To Be Well Capitalized
Common equity tier 1 capital
Corporation
13.34
13.21
N/A
First Financial Bank
13.14
13.11
6.50
Total risk-based capital
14.38
14.22
14.18
14.14
10.00
Tier I risk-based capital
8.00
Tier I leverage capital
11.20
11.25
10.71
10.82
5.00
ITEM 4.Controls and Procedures
The Corporation’s management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. As of September 30, 2026, an evaluation was performed under the supervision and with the participation of management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on that evaluation, management, including the principal executive officer and principal financial officer, concluded that the Corporation’s disclosure controls and procedures as of September 30, 2026 were effective in ensuring material information required to be disclosed in this Quarterly Report on Form 10-Q was recorded, processed, summarized, and reported on a timely basis. Additionally, there was no change in the Corporation's internal control over financial reporting that occurred during the quarter ended September 30, 2026 that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting.
PART II – Other Information
ITEM 1.Legal Proceedings.
There are no material pending legal proceedings, other than routine litigation incidental to the business of the Corporation or its subsidiaries, to which the Corporation or any of the subsidiaries is a party to or of which any of their respective property is subject. Further, there is no material legal proceeding in which any director, officer, principal shareholder, or affiliate of the Corporation or any of its subsidiaries, or any associate of such director, officer, principal shareholder or affiliate is a party, or has a material interest, adverse to the Corporation or any of its subsidiaries.
ITEM 1A. Risk Factors.
There have been no material changes in the risk factors from those disclosed in the Corporation’s consolidated financial statements on Form 10-K filed for the fiscal year ended December 31, 2025.
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds.
The Corporation periodically acquires shares of its common stock directly from shareholders in individually negotiated transactions. On April 21, 2022 the Corporation issued a press release announcing that its Board of Directors authorized a stock repurchase program pursuant to which up to 10% of the Corporations outstanding shares of common stock, or approximately 1,243,531 shares may be repurchased.
Following is certain information regarding shares of common stock purchased by the Corporation during the quarter covered by this report.
(c)
Total Number Of Shares
(b)
Purchased As Part Of
Maximum
Total Number Of
Average Price
Publicly Announced Plans
Number of Shares That May Yet
Shares Purchased
Paid Per Share
Or Programs *
Be Purchased *
July 1-31, 2026
August 1-31, 2026
September 1-30, 2026
518,860
ITEM 3.Defaults upon Senior Securities.
Not applicable.
ITEM 4.Mine Safety Disclosures
ITEM 5.Other Information.
During the three months ended September 30, 2026, there were no Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements adopted, modified or terminated by any director or officer of the Corporation.
ITEM 6.Exhibits.
Exhibit No.:
Description of Exhibit:
3.1
Amended and Restated Articles of Incorporation of First Financial Corporation, incorporated by reference to Exhibit 3(i) of the Corporation’s Form 10-Q filed for the quarter ended September 30, 2002.
3.2
Amended and Restated Code of By-Laws of First Financial Corporation, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed on February 22, 2021.
3.3
Articles of Amendment to the Amended and Restated Articles of Incorporation of First Financial Corporation, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed on April 27, 2021.
10.2*
2001 Long-Term Incentive Plan of First Financial Corporation, incorporated by reference to Exhibit 10.3 of the Corporation’s Form 10-Q filed for the quarter ended September 30, 2002.
10.5*
2005 Long-Term Incentive Plan of First Financial Corporation, incorporated by reference to Exhibit 10.7 of the Corporation’s Form 8-K filed on September 4, 2007.
10.6*
2005 Executives Deferred Compensation Plan, incorporated by reference to Exhibit 10.5 of the Corporation’s Form 8-K filed on September 4, 2007.
10.7*
2005 Executives Supplemental Retirement Plan, incorporated by reference to Exhibit 10.6 of the Corporation’s Form 8-K filed on September 4, 2007.
10.9*
First Financial Corporation 2010 Long-Term Incentive Compensation Plan incorporated by reference to Exhibit 10. 9 of the Corporation’s Form 10-K filed March 15, 2011.
10.10*
First Financial Corporation 2011 Short-Term Incentive Compensation Plan incorporated by reference to Exhibit 10.10 of the Corporation’s Form 10-K filed March 15, 2011.
10.11*
First Financial Corporation Amended and Restated 2011 Omnibus Equity Incentive Plan incorporated by reference to Exhibit 10.1 of the Corporation’s Form 8-K for the annual meeting filed on April 27, 2021.
10.12*
Form of Restricted Stock Award Agreement under the First Financial Corporation 2011 Omnibus Equity Incentive Plan incorporated by reference to Exhibit 10.12 of the Corporation’s Form 10-Q for the quarter ended March 31, 2012 filed on May 10, 2012.
10.13*
Employment Agreement for Norman D. Lowery, effective July 1, 2026, incorporated by reference to Exhibit 10.1 of the Corporation’s Form 8-K filed June 30, 2026.
10.14*
Employment Agreement for Rodger A. McHargue, effective July 1, 2026, incorporated by reference to Exhibit 10.2 of the Corporation’s Form 8-K filed June 30, 2026.
10.15*
Employment Agreement for Stephen P. Panagouleas, effective July 1, 2026, incorporated by reference to Exhibit 10.3 of the Corporation’s Form 8-K filed June 30, 2026.
10.16*
Employment Agreement for Mark A. Franklin, effective July 1, 2026, incorporated by reference to Exhibit 10.4 of the Corporation’s Form 8-K filed June 30, 2026.
10.17*
Employment Agreement for Paul D. Nungester, effective September 1, 2026, incorporated by reference to Exhibit 10.1 of the Corporation’s Form 8-K filed September 15, 2026.
31.1
Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 by Principal Executive Officer, dated November 4, 2026.
31.2
Sarbanes-Oxley Act 302 Certification for Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 by Principal Financial Officer, dated November 4, 2026.
32.1
Certification, dated November 4, 2026, of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2005 on Form 10-Q for the quarter ended September 30, 2026.
101.1
Financial statements from the Quarterly Report on Form 10-Q of the Corporation for the quarter ended September 30, 2026, formatted in XBRL pursuant to Rule 405 : (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Shareholders’ Equity, and (v) Notes to Consolidated Financial Statements, as blocks of text and in detail**.
*Management contract or compensatory plan or arrangement.
**Furnished, not filed, for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
(Registrant)
Date: November 4, 2026
By /s/ Norman D. Lowery
Norman D. Lowery, President, CEO & Director
(Principal Executive Officer)
By /s/ Rodger A. McHargue
Rodger A. McHargue, Treasurer and CFO
(Principal Financial Officer)