A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. For contracts where First Financial is a lessee, the recipient of the right to control, substantially all of those agreements are for real estate property for branches, ATM locations and office space.

Substantially all of the Company's lessee contracts are classified as operating leases. Under ASC 842, operating lease agreements are required to be recognized on the Consolidated Balance Sheets as a ROU asset and a corresponding lease liability. The Company's right to use an asset over the life of a lease is recorded as a ROU asset in Accrued interest and other assets on the Consolidated Balance Sheets. Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives received. As of September 30, 2026 and December 31, 2025, the Company's ROU asset was $44.5 million and $48.6 million, respectively. First Financial recorded a $53.5 million and $58.1 million lease liability in Accrued interest and other liabilities on the Consolidated Balance Sheets at September 30, 2026 and December 31, 2025, respectively.

The calculated amount of the ROU assets and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of minimum lease payments. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term.

First Financial's leases are generally for periods of 5 to 30 years with various renewal options. Certain renewal options are included in the measurement of the ROU assets and lease liabilities if they are reasonably certain to be exercised. Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Variable lease payments that are not dependent on an index or a rate are excluded from the measurement of the lease liability and are recognized in profit and loss when incurred. Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time. The Company has elected not to recognize short-term leases (terms of one year or less) as lease liabilities and right-of use assets; related expenses are recognized on a straight-line basis over the lease term.

First Financial has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance, are not included in the measurement of the lease liability since they are generally able to be segregated. First Financial does not have any material sub-lease agreements.


	Three months ended				Nine months ended
	September 30,				September 30,
(Dollars in thousands)	2026		2025		2026		2025
Operating lease cost	$	1,860	$	1,988	$	7,001	$	5,996
Finance lease cost:
Amortization of right-of-use assets	27		25		77		76
Interest on lease liabilities	12		13		36		40
Short-term lease cost	155		0		155		0
Variable lease cost	843		759		2,410		2,279
Total lease cost	$	2,897	$	2,785	$	9,679	$	8,391


(Dollars in thousands)	Operating leases		Finance leases
2026 (remaining three months)	$	2,557	$	38
2027	9,881		154
2028	9,510		159
2029	7,504		160
2030	6,860		111
Thereafter	30,187		705
Total lease payments	66,499		1,327
Less imputed interest	(13,025)		(251)
Total	$	53,474	$	1,076


(Dollars in thousands)	September 30, 2026			December 31, 2025
Operating leases
Operating lease right-of-use assets	$	44,472		$	48,647
Operating lease liabilities	53,474			58,112

Finance leases
Premises and equipment	$	851		$	910
Long-term debt	1,076			1,149

Weighted-average remaining lease term
Operating leases	10.5 years			10.7 years
Finance leases	9.6 years			10.2 years

Weighted-average discount rate
Operating leases	3.68		%	3.53		%
Finance leases	4.37		%	4.42		%


	Three months ended				Nine months ended
	September 30,				September 30,
(Dollars in thousands)	2026		2025		2026		2025
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,607	$	2,121	$	8,000	$	6,338
Operating cash flows from finance leases	12		13		36		40
Financing cash flows from finance leases	26		25		78		73
ROU assets obtained in exchange for lease obligations
Operating leases	789		0		7,845		399
Finance leases	0		0		0		(272)