FIRST FINANCIAL BANCORP /OH/ (FFBC) FY 2022 MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This annual report contains forward-looking statements. See the Forward-Looking Statements section that follows for further information on the risks and uncertainties associated with forward-looking statements.

The following discussion and analysis is presented by management to facilitate the understanding of the financial condition, cash flows, changes in financial condition and results of operations of First Financial Bancorp. Management's discussion and analysis identifies trends and material changes that occurred during the reporting periods presented and should be read in conjunction with the Consolidated Financial Statements and accompanying Notes.

Certain reclassifications of prior years' amounts have been made to conform to current year presentation. Such reclassifications had no effect on net earnings, total assets, liabilities and shareholders' equity.

EXECUTIVE SUMMARY

First Financial Bancorp. is a $17.0 billion financial holding company headquartered in Cincinnati, Ohio, which operates through its subsidiaries. These subsidiaries include First Financial Bank, an Ohio-chartered commercial bank, which operated 132 full service banking centers as of December 31, 2022. First Financial provides banking and financial services products to business and retail clients through its six lines of business: Commercial, Retail Banking, Mortgage Banking, Wealth Management, Investment Commercial Real Estate and Commercial Finance. The Commercial Finance business lends into targeted industry verticals on a nationwide basis. Operating under the brand of Yellow Cardinal Advisory Group, Wealth Management had $3.2 billion in assets under management as of December 31, 2022, and provides the following services: financial planning, investment management, trust administration, estate settlement, brokerage services and retirement planning.

Additional information about First Financial, including its products, services and banking locations, is available on the Company's website at www.bankatfirst.com.

The major components of First Financial’s operating results for the previous three years are summarized in Table 1 – Financial Summary and are discussed in greater detail in the sections that follow.

MARKET STRATEGY

First Financial develops a competitive advantage by utilizing a local market focus to provide superior service and build long-term relationships with clients while helping them achieve greater financial success. First Financial serves a combination of metropolitan and community markets in Ohio, Indiana, Kentucky and Illinois through its full-service banking centers. First Financial also has certain lending platforms that extend beyond the geographic banking center footprint to provide financing to franchise owners and clients within the financial services industry as well as equipment lease financing to commercial businesses. First Financial's investment in community markets is an important part of the Bank's core funding base and has historically provided stable, low-cost funding sources.

First Financial’s market selection process includes multiple factors, but markets are primarily chosen for their potential for long-term profitability and growth.  First Financial intends to concentrate plans for future growth and capital investment within its current markets, and will continue to evaluate additional growth opportunities in metropolitan markets located within, or in close proximity to, the Company's current geographic footprint.  Additionally, First Financial may seek strategic acquisitions that provide product line extensions or additional industry verticals that complement its existing business and diversify its product suite and revenue streams.

BUSINESS COMBINATIONS

In December 2021, the Company completed its acquisition of Summit Funding Group, Inc. and its subsidiaries. Summit was a privately held, full service, equipment financing company that originates, purchases, sells and services equipment leases to commercial businesses in the United States and Canada. Upon completion of the transaction, Summit became a subsidiary of the Bank and continues to operate as Summit Funding Group, taking advantage of its existing brand recognition within the equipment financing industry.

2 First Financial Bancorp 2022 Annual Report

First Financial acquired all of the issued and outstanding equity securities of Summit for aggregate consideration of approximately $127.1 million, consisting of $113.5 million in cash, $10.0 million of First Financial common stock, and a $3.6 million earn-out payment. Pursuant to the purchase agreement, the earn-out payments are payable annually for each of the five years following the closing of the acquisition, contingent upon the results of Summit's operations. First Financial incurred expenses related to the Summit acquisition of $0.6 million for the year ended December 31, 2022 and $2.6 million for the year ended December 31, 2021.

The Summit transaction was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition date in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed were $185.8 million and $122.5 million, respectively, and included $41.9 million of financing leases and $75.3 million of operating leases. These present value measurements were subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values became available.  The measurement period ended in December 2022.

Goodwill arising from the Summit acquisition was $63.7 million and reflects the business’s high growth potential and the expectation that the acquisition will provide additional revenue growth with the expansion of the Bank's leasing business. The goodwill is not deductible for income tax purposes as the transaction was accounted for as a tax-free exchange.  For further detail, see Note 10 – Goodwill and Other Intangible Assets.

See Note 24 – Business Combinations in the Notes to Consolidated Financial Statements, for further discussion of these transactions.

COVID-19 CONSIDERATIONS

The Company's operations and financial results were substantially influenced by the COVID-19 pandemic. At the onset of the pandemic, the Company updated operating protocols to continuously provide virtually all banking services while prioritizing the health and safety of both its clients and associates.

Sales associates, support teams and management returned to corporate offices and operations centers in the second and third quarters of 2021. The Company has continued to prioritize the health and safety of clients and associates, although without the significant disruptions to its workforce that occurred at the onset of the pandemic.

To assist clients during the pandemic, the Company implemented distinct COVID-19 relief programs to provide payment deferrals and fee waivers, in addition to temporarily suspending vehicle repossessions and residential property foreclosures. Further, the Company continuously monitored the actions of federal and state governments to proactively assist clients and ensure awareness of each financial assistance program available to them, while focusing internally on enhancing remote, mobile and online processes to better support a bank anytime, anywhere environment.

The Bank underwent a significant level of cross training and redeployment of associate resources to rapidly meet the influx of

client requests in response to the passage of the CARES Act, the establishment of the Paycheck Protection Program and the

approval of the Consolidated Appropriations Act. As of December 31, 2022, the Company had $3.0 million of outstanding PPP loans, net of unearned fees, compared to $55.6 million as of December 31, 2021.

As of December 31, 2021, the Company had $16.5 million of modified loans to COVID-19 impacted borrowers with principal amounts deferred and interest-only payments required. These loans had all returned to regular payment schedules as of December 31, 2022. As provided in the CARES Act and subsequently amended by the Consolidated Appropriations Act, loan modifications in response to COVID-19 that were executed between March 1, 2020 and January 1, 2022 on a loan that was not more than 30 days past due as of December 31, 2019 are not required to be reported as TDR.

First Financial Bancorp 2022 Annual Report 3

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1) Tax equivalent basis was calculated using a 21% tax rate.

(2) Includes loans held for sale.

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OVERVIEW OF OPERATIONS

Net income for the year ended December 31, 2022 was $217.6 million, resulting in earnings per diluted common share of $2.30. This compares to net income of $205.2 million and earnings per diluted common share of $2.14 in 2021. Return on average assets was was 1.33% and 1.28% for 2022 and 2021, respectively. First Financial’s return on average tangible shareholders’ equity for 2022 was 21.62%, compared to 16.43% for 2021.

Net interest income in 2022 increased $67.0 million, or 14.8%, from 2021, to $519.1 million, primarily driven by higher yields earned on the loan and investment portfolios resulting from a higher interest rate environment. The net interest margin on a fully tax equivalent basis was 3.77% for 2022 compared to 3.31% in 2021.

Noninterest income increased $18.1 million, or 10.6%, to $189.6 million during 2022 from $171.5 million in 2021. The increase in 2022 was primarily driven by increases in leasing business income and foreign exchange income, and was partially offset by lower mortgage banking income.

Noninterest expense increased $54.5 million, or 13.6%, from $400.8 million in 2021 to $455.3 million in 2022. This increase was largely driven by higher salaries and incentives, higher other noninterest expenses and leasing business expenses resulting from the acquisition of Summit at the end of 2021.

Income tax expense decreased $11.7 million, or 32.6%, to $24.1 million in 2022 from $35.8 million in 2021, with the effective tax rate decreasing to 10.0% in 2022 from 14.8% in 2021. The lower effective tax rate in 2022 was primarily related to tax credit investments realized during 2022.

Total loans increased $1.0 billion, or 10.9%, to $10.3 billion at December 31, 2022 from $9.3 billion at December 31, 2021, primarily driven by growth in C&I loans. Total deposits decreased $170.8 million, or 1.3%, to $12.7 billion as of December 31, 2022 from $12.9 billion at December 31, 2021 due to competitive pressures arising from an elevated interest rate environment.

The ACL was $133.0 million, or 1.29% of total loans at December 31, 2022, compared to $132.0 million, and 1.42% of total loans at December 31, 2021. First Financial recorded $6.7 million in provision expense during 2022, compared to $19.0 million in provision recapture during 2021.

First Financial’s operational results may be influenced by certain economic factors and conditions, such as market interest rates, industry competition, household and business spending levels, consumer confidence and the regulatory environment. For a more detailed discussion of the Company's operations, please refer to the sections that follow.

NON-GAAP FINANCIAL MEASURES

The Company utilizes certain non-GAAP financial measures, which it believes provide useful insight to the reader of the Consolidated Financial Statements. These non-GAAP measures should be supplemental to primary GAAP measures and should not be read in isolation or relied upon as a substitute for the primary GAAP measures.

For analytical purposes, net interest income is presented in the following table adjusted to a tax equivalent basis assuming a 21% marginal tax rate. Net interest income is disclosed on a tax equivalent basis to consistently reflect income from tax-exempt assets, such as municipal loans and investments, in order to facilitate a comparison between taxable and tax-exempt amounts.  Management believes it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax equivalent basis as these measures provide useful information to make peer comparisons.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1) Calculated using net interest income divided by average earning assets.

In addition to capital ratios defined by the U.S. banking agencies, First Financial considers various measures when evaluating capital utilization and adequacy, including the return on average tangible shareholder's equity and the tangible common equity ratio. These calculations are intended to complement the capital ratios defined by the U.S. banking agencies for both absolute and comparative purposes. As GAAP does not include capital ratio measures, the Company believes there are no comparable GAAP financial measures to these ratios. These ratios are not formally defined by GAAP or codified in the federal banking regulations and, therefore, are considered to be non-GAAP financial measures.

First Financial believes return on average tangible common equity is an important measure for comparative purposes with other financial institutions, but it is not defined under GAAP, and therefore is considered a non-GAAP financial measure. This measure is useful for evaluating the performance of a business as it calculates the return available to common shareholders without the impact of intangible assets and their related amortization.

First Financial encourages readers to consider its Consolidated Financial Statements in their entirety and not to rely on any single financial measure.

The following table reconciles non-GAAP capital ratios to GAAP:

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NET INCOME

2022 vs. 2021. First Financial’s net income increased $12.5 million, or 6.1%, to $217.6 million in 2022, compared to net income of $205.2 million in 2021. The increase in 2022 was primarily related to a $67.0 million, or 14.8%, increase in net interest income, a $18.1 million, or 10.6%, increase in noninterest income and a $11.7 million, or 32.6%, decrease in income tax expense, partially offset by a $54.5 million, or 13.6%, increase in noninterest expenses and a $25.8 million, or 135.4%, increase in provision expense.

2021 vs. 2020. First Financial’s net income increased $49.4 million, or 31.7%, to $205.2 million in 2021, compared to net

income of $155.8 million in 2020. The increase in 2021 was primarily related to a $89.8 million, or 126.9%, decrease in

provision expense, which was partially offset by a $17.6 million, or 9.3%, decline in noninterest income, a $10.1 million, or

2.6%, increase in noninterest expenses, a $7.2 million, or 25.1%, increase in income tax expense, and a $4.4 million, or 1.0%,

decrease in net interest income.

For more detail, refer to the Net interest income, Noninterest income, Noninterest expenses, Income taxes, and Asset quality and allowance for credit losses sections that follow.

NET INTEREST INCOME

First Financial’s net interest income for the years 2020 through 2022 is shown in Table 1 – Financial Summary.

First Financial’s principal source of income is net interest income, which is the excess of interest received from earning assets, including loan-related fees and purchase accounting accretion, less interest paid on interest-bearing liabilities. The amount of net interest income is determined by the volume and mix of earning assets, the rates earned on such assets and the volume, mix and rates paid for the deposits and borrowed money that support the earning assets. Earning assets consist of interest-bearing

First Financial Bancorp 2022 Annual Report 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

loans to customers as well as marketable investment securities. First Financial's tax equivalent net interest margin was 3.77%, 3.31% and 3.51% for 2022, 2021 and 2020, respectively.

Table 5 – Volume/Rate Analysis - Tax Equivalent Basis describes the extent to which changes in interest rates as well as changes in the volume of earning assets and interest-bearing liabilities have affected First Financial’s net interest income on a tax equivalent basis during the years presented. Nonaccrual loans and loans held for sale were included in the average loan balances used to determine the yields in Table 5 – Volume/Rate Analysis - Tax Equivalent Basis, which should be read in conjunction with Table 2 – Statistical Information.

Loan fees included in the interest income computation for 2022, 2021 and 2020 were $19.2 million, $46.8 million and $32.8 million, respectively, with the 2021 and 2020 activity being heavily influenced by PPP activity. Interest income also included purchase accounting accretion of $8.8 million, $12.3 million and $20.0 million for 2022, 2021 and 2020, respectively.

2022 vs. 2021. Net interest income increased $67.0 million, or 14.8%, from $452.1 million in 2021 to $519.1 million in 2022, as interest rates rose during 2022. The tax equivalent yield on earning assets increased due to higher interest rates which more than offset an increase in average earning asset balances during the period.

Net interest margin on a fully tax equivalent basis increased 46 bps to 3.77% for 2022 compared to 3.31% in 2021 as the Company's asset sensitive balance sheet responded to multiple Fed rate hikes. This resulted in a 71 bp increase in asset yields, which more than offset an increase in interest-bearing liabilities and a 36 bp increase in funding costs during the period.

Interest income grew $101.8 million, or 21.1%, in 2022 when compared to the prior year as the yield on earning assets rose to 4.25% from 3.54%. Additionally, average earning assets increased to $13.9 billion as of December 31, 2022 from $13.8 billion in 2021.

Total interest expense increased due to a 17 bp increase in the cost of interest-bearing deposits, an increase in average borrowings and a 63 bp increase in the average rate on those borrowings. The increasing rate environment drove the rise in the cost of interest-bearing deposits, which was 34 bps in 2022 compared to 17 bps for the same period in the prior year. Average borrowed funds increased $529.8 million in 2022, while the cost of these borrowed funds increased to 3.20% in 2022 from 2.57% during 2021.

2021 vs. 2020. Net interest income decreased $4.4 million, or 1.0%, from $456.5 million in 2020 to $452.1 million in 2021, as

interest rates declined and purchase accounting accretion moderated during 2021. The tax equivalent yield on earning assets

declined due to lower interest rates and more than offset an increase in average earning asset balances during the period.

Additionally, PPP fees increased $12.6 million, or 73.3%, in 2021, partially offsetting the impact from a challenging interest

rate environment.

Net interest margin on a fully tax equivalent basis decreased 20 bps to 3.31% for 2021 compared to 3.51% in 2020 as a decline

in interest rates drove a 49 bp decline in asset yields. These lower rates more than offset higher earning asset balances and a 39

bp decline in funding costs.

Interest income declined $41.7 million, or 8.0%, in 2021 when compared to the prior year as the yield on earning assets

declined to 3.54% from 4.03%, which more than offset the impact of higher earning asset balances. Average earning assets

increased to $13.8 billion as of December 31, 2021 from $13.2 billion in 2020 as the Company invested excess liquidity into

investment securities.

Interest expense decreased due to a 35 basis point decline in the cost of interest-bearing deposits and lower borrowing balances.

The low interest rate environment drove the decline in the cost of interest-bearing deposits, which was 17 bps in 2021 compared

to 52 bps for the same period in the prior year. Average borrowed funds declined $811.5 million in 2021, while the cost of

these borrowed funds increased to 2.57% in 2021 from 1.82% during 2020. Both the decline in balances and the increase in

rate were attributable to the repayment of PPPLF borrowings in 2021, which were used to fund PPP activity and carried a

relatively modest interest rate of 0.35%.

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First Financial Bancorp 2022 Annual Report 9

(1) Tax equivalent basis was calculated using a 21% tax rate.

(2) Includes nonaccrual loans and loans held-for-sale.

(3) Includes HTM securities, AFS securities and other investments.

NONINTEREST INCOME AND NONINTEREST EXPENSES

Noninterest income and noninterest expenses for 2022, 2021 and 2020 are shown in Table 6 – Noninterest Income and Noninterest Expenses.

NONINTEREST INCOME

2022 vs. 2021. Noninterest income increased $18.1 million, or 10.6%, from $171.5 million in 2021 to $189.6 million in 2022. The increase was attributed to $31.6 million of leasing business income, a $10.2 million, or 22.7%, increase in foreign exchange income and a $2.0 million, or 12.6%, increase in other noninterest income. These increases were partially offset by an $18.0 million, or 54.4%, decrease in gain on sale of loans, a $3.8 million, or 12.0%, decrease in service charges on deposit accounts, a $2.5 million, or 31.4%, decrease in client derivative fees and a $1.3 million, or 191.0%, decrease in unrealized gain (loss) on equity securities.

Elevated noninterest income in 2022 included leasing business income, which reflected new activity acquired as part of the Summit Funding Group acquisition at the end of 2021. In addition, noninterest income was bolstered by higher foreign exchange income, which had record demand for currency transactions in 2022. The increase in other noninterest income was driven by higher income earned on limited partnership investments during the year.

Partially offsetting those increases, gains on sales of retail mortgage loans declined in 2022 as loan demand slowed due to a significant increase in interest rates. Service charge income declined during the year as a result of the Company's changes to its service charge and overdraft programs, and client derivative fees declined as a result of lower product demand. The unrealized loss on equity securities in 2022 was related to a decline in the value of the Company's Class B Visa shares.

2021 vs. 2020. Noninterest income decreased $17.6 million, or 9.3%, from $189.1 million in 2020 to $171.5 million in 2021.

The decline was attributed to an $18.2 million, or 35.5%, decrease in gain on sale of loans, an $8.3 million, or 92.2%, decrease

in unrealized gain (loss) on equity securities, a $5.3 million, or 116.6%, decrease on sales of investment securities and a $2.4

million, or 23.1%, decrease in client derivative fees. These declines were partially offset by a $5.4 million, or 13.8%, increase

in foreign exchange income, a $3.7 million, or 30.1%, increase in other noninterest income, a $2.6 million, or 22.0%, increase

in bankcard income, a $2.5 million, or 11.7%, increase in trust and wealth management fees, and a $2.4 million, or 8.3%,

10 First Financial Bancorp 2022 Annual Report

increase in service charges on deposit accounts.

Gains on the sales of retail mortgage loans declined from record levels in 2020, as loan demand softened and premiums

moderated in 2021. Gains from sales of investment securities and unrealized gains on equity securities both declined in 2021

due to sales of Visa Class B shares and recording the remaining shares at fair value during 2020. Client derivatives fees

declined from prior year as demand moderated in 2021 in line with a decrease in loan balances.

Partially offsetting those declines, foreign exchange income increased in 2021 as Bannockburn had their best year to date, while other noninterest income increased due to an increase in limited partnership income and syndication fees during the period. In addition, wealth management, bankcard and service charge income all increased in 2021 as the economy began to recover from pandemic-related uncertainty.

First Financial Bancorp 2022 Annual Report 11

NONINTEREST EXPENSES

2022 vs. 2021. Noninterest expenses increased $54.5 million, or 13.6%, in 2022 compared to 2021, primarily due to

a $23.4 million, or 9.5%, increase in salaries and employee benefits, $20.4 million of leasing business expense, a $7.4 million, or 16.5%, increase in other noninterest expenses, a $2.3 million, or 7.3%, increase in data processing expenses, a $1.6 million, or 27.8%, increase in FDIC assessments and a $1.3 million, or 13.7%, increase in intangible asset amortization expense. These increases were partially offset by a $1.9 million, or 16.6%, decrease in professional services.

Salaries and employee benefits in 2022 were driven higher by annual compensation adjustments, incentive compensation tied to elevated fee income, and performance related incentives tied to the Company's financial results. Leasing business expense reflected new activity acquired as part of the Summit Funding Group transaction. The increase in other noninterest expense was largely attributed to higher write-downs of tax credit investments in 2022, while data processing expenses increased as the Company continued to make strategic investments in technology. FDIC assessment expense increased during the year due to higher assessment rates while intangible amortization expenses increased following the acquisition of Summit. Professional services declined in 2022 due to acquisition and loan sale related expenses in 2021 that did not recur in 2022.

2021 vs. 2020. Noninterest expenses increased $10.1 million, or 2.6%, in 2021 compared to 2020, primarily due to a $9.1

million, or 3.9%, increase in salaries and employee benefits, a $3.8 million, or 14.0%, increase in data processing expenses, a

$1.7 million, or 17.2%, increase in professional services, a $1.6 million, or 24.5%, increase in marketing expenses, and a $6.5

million, or 16.9%, increase in other noninterest expenses. These increases were partially offset by a $7.3 million, or 100.0%

decrease in debt extinguishment costs, a $1.8 million, or 29.7%, decrease in state intangible taxes, a $1.3 million, or 11.6%,

decrease in intangible asset amortization expense, a $1.1 million, or 7.7%, decrease in furniture and equipment expenses and

$1.1 million, or 4.8%, decrease in net occupancy expenses.

Higher salaries and employee benefits in 2021 were driven by annual compensation adjustments and performance related

incentives tied to the Company's financial results. Additionally, data processing and professional services increased in 2021 due to the Company's continued investment in technology and expenses associated with the Summit acquisition, respectively, while marketing expenses increased due to sponsoring more events in 2021 than 2020 due to the pandemic.

Other noninterest expenses rose primarily as a result of an increase in tax credit investment write-downs in 2021, as well as

$7.1 million of costs related to overdraft litigation settled during the year. Like many banks, First Financial has been the

subject of lawsuits relating to overdraft fees. This type of litigation is time consuming and expensive in large part due to the

amount of data to be sorted and disclosed, in some cases going back multiple years. During 2021, First Financial determined

that it was in its best interest to settle lawsuits in the states of Indiana and Ohio, resulting in higher litigation settlement expense in the year.

Debt extinguishment costs declined in 2021 as 2020 included $7.3 million of charges that did not recur in 2021 related to the

prepayment of $120.0 million of higher cost long-term FHLB debt.

INCOME TAXES

2022 vs. 2021. First Financial’s income tax expense in 2022 totaled $24.1 million compared to $35.8 million in 2021, resulting in effective tax rates of 10.0% and 14.8% for 2022 and 2021, respectively. The lower effective tax rate in 2022 was primarily related to an increase in tax credit activity during the year, partially offset by higher pre-tax income.

2021 vs. 2020. The Company's income tax expense totaled $35.8 million and $28.6 million in 2021 and 2020, respectively, which resulted in effective tax rates of 14.8% for 2021 and 15.5% for 2020. The lower effective tax rate in 2021 was largely the result of the recognition of tax credit investments during the year, partially offset by higher pre-tax income.

For further information on income taxes, see Note 16 – Income Taxes in the Notes to Consolidated Financial Statements.

INVESTMENTS

First Financial utilizes its investment portfolio as a source of liquidity and interest income, as well as a tool for managing the Company's interest rate risk profile. As such, the Company's primary investment strategy is to invest in debt securities with low credit risk, such as treasury and agency-backed residential MBS. The investment portfolio is also managed with consideration to prepayment, extension and maturity risk. First Financial invests primarily in MBS issued by U.S. government agencies and corporations, such as GNMA, FHLMC and FNMA, as these securities are considered to have a low credit risk and high

12 First Financial Bancorp 2022 Annual Report

liquidity profile due to government agency guarantees. Government and agency backed securities comprised 47.4% and 44.5% of First Financial's investment securities portfolio as of December 31, 2022 and 2021, respectively.

The Company also invests in certain securities that are not supported by government or agency guarantees and whose realization is dependent on future principal and interest repayments. Prior to purchase, First Financial performs a detailed collateral and structural analysis on these securities and strategically invests in asset classes in which First Financial has expertise and experience, as well as a senior position in the capital structure. First Financial continuously monitors credit risk and geographic concentration risk in its evaluation of market opportunities that would enhance the overall performance of the portfolio. Securities not supported by government or agency guarantees represented 52.6% and 55.5% of First Financial's investment securities portfolio as of December 31, 2022 and 2021, respectively.

The other investments category in the Consolidated Balance Sheets consists primarily of First Financial’s investments in FRB stock, FHLB stock and class B Visa shares.

2022 vs. 2021. First Financial’s investment portfolio at December 31, 2022 totaled $3.5 billion, compared to $4.3 billion at December 31, 2021, and represented 20.5% of total assets at December 31, 2022. The $812.6 million, or 18.9%, decline in the investment portfolio during 2022 was primarily related to the Company's strategic redeployment of balance sheet liquidity to fund strong loan growth during the year as well as a $347.0 million decline in the fair value of AFS securities due to higher interest rates.

First Financial classified $3.4 billion, or 97.6%, and $4.2 billion, or 97.7%, of investment securities as AFS at December 31, 2022 and 2021, respectively. First Financial classified $84.0 million, or 2.4%, and $98.4 million, or 2.3%, of investment securities as HTM at December 31, 2022 and 2021, respectively.

First Financial recorded a $325.9 million unrealized after-tax loss on the investment portfolio as a component of equity in AOCI resulting from changes in the fair value of AFS securities at December 31, 2022 due to rising interest rates. This unrealized loss position declined $347.0 million in 2022 from a $21.0 million unrealized after-tax gain at December 31, 2021. The overall duration of the investment portfolio increased to 4.6 years as of December 31, 2022 from 3.8 years as of December 31, 2021. First Financial has avoided adding to its portfolio any particular securities that would materially increase credit risk or geographic concentration risk and the Company continuously monitors and considers these risks in its evaluation of current market opportunities that would enhance the overall performance of the portfolio.

Debt securities issued by the U.S. government and U.S. government agencies and corporations, including the FHLB, FHLMC, FNMA and the U.S. Export/Import Bank, were not meaningful as a percentage of the portfolio at either December 31, 2022 or December 31, 2021.

Investments in MBS securities, which include CMOs, represented 51.6% and 51.4% of First Financial's total investment portfolio at December 31, 2022 and 2021, respectively. MBS are participations in pools of loans secured by mortgages under which payments of principal and interest are passed through to the security holders. These securities are subject to prepayment risk, particularly during periods of falling interest rates, and extension risk during periods of rising interest rates. Prepayments of the underlying residential real estate loans may shorten the lives of the securities, thereby affecting yields to maturity and market values.

Tax-exempt securities of states, municipalities and other political subdivisions totaled $716.6 million as of December 31, 2022 and $1.1 billion as of December 31, 2021, comprising 20.5% and 25.4% of the investment portfolio at December 31, 2022 and 2021, respectively. The securities are diversified to include states as well as issuing authorities within states, thereby decreasing geographic portfolio risk. First Financial continuously monitors the risk associated with this investment type and reviews underlying ratings for possible downgrades. First Financial does not own any state or other political subdivision securities that are currently impaired.

Asset-backed securities were $711.3 million, or 20.4% of the investment portfolio at December 31, 2022 and $719.6 million, or 16.7% of the investment portfolio at December 31, 2021. First Financial considers these investment securities to have lower credit risk and a high liquidity profile as a result of explicit guarantees on the collateral.

Other securities, consisting primarily of taxable securities of states, municipalities and other political subdivisions, in addition to debt securities issued by corporations, were $164.6 million, or 4.7% of the investment portfolio, at December 31, 2022 and $166.1 million, or 3.9% of the investment portfolio, at December 31, 2021.

First Financial Bancorp 2022 Annual Report 13

The estimated maturities and weighted-average yields of HTM and AFS investment securities as of December 31, 2022 are shown in Table 7 – Investment Securities. Tax-equivalent adjustments using a rate of 21% were included in calculating yields on tax-exempt obligations of state and other political subdivisions.

First Financial held cash on deposit with the Federal Reserve of $388.2 million and $214.8 million at December 31, 2022 and 2021, respectively. First Financial continually monitors its liquidity position as part of its ERM framework, specifically through its asset/liability management process.

The Company had a $0.6 million unrealized loss on equity securities recorded in noninterest income for the twelve months ended December 31, 2022 compared to a $0.7 million unrealized gain for the same period of 2021. The unrealized loss in 2022 is related to a decline in the value of the Company's Class B Visa shares.

First Financial will continue to monitor loan and deposit demand, balance sheet composition, capital sensitivity and the interest rate environment as it manages investment strategies in future periods. See Note 4 – Investment Securities in the Notes to Consolidated Financial Statements for additional information on the Company's investment portfolio and Note 23 – Fair Value Disclosures for additional information on how First Financial determines the fair value of investment securities.

14 First Financial Bancorp 2022 Annual Report

(1) Tax equivalent basis was calculated using a 21% tax rate and yields were based on amortized cost.

(2) Maturity represents estimated life of investment securities.

LENDING PRACTICES

First Financial remains dedicated to meeting the financial needs of individuals and businesses through its client-focused business model. The loan portfolio is comprised of a broad range of borrowers primarily located in the Ohio, Indiana and Kentucky markets; however, the commercial finance and leasing lines of business serve a national client base.

First Financial’s loan portfolio consists of commercial loan types, including C&I, lease financing (equipment leasing), construction real estate and commercial real estate, as well as consumer loan types, such as residential real estate, home equity, installment and credit card loans. First Financial's lending portfolios are managed to avoid the creation of inappropriate industry, geographic, franchise concept or borrower concentration risk.

Credit Management. Subject to First Financial’s credit policy and guidelines, credit underwriting and approval occur within the market and/or the centralized line of business originating the loan. First Financial has delegated a lending limit sufficient to address the majority of client requests in a timely manner to each market president and line of business manager. Loan requests for amounts greater than those limits require the approval of a designated credit officer or senior credit committee and may require additional approvals from the chief credit officer, the chief executive officer and the board of directors. This allows First Financial to manage the initial credit risk exposure through a standardized, strategic and disciplined approval process, but with an increasingly higher level of authority. Plans to purchase or sell a participation in a loan, or a group of loans, requires the approval of certain senior lending and administrative officers, and in some cases could include the board of directors.

Credit management practices are dependent on the type and nature of the loan. First Financial monitors all significant

First Financial Bancorp 2022 Annual Report 15

exposures on an ongoing basis. Commercial loans are assigned internal risk ratings reflecting the risk of loss inherent in the loan. These internal risk ratings are assigned upon initial approval of credit and are updated periodically thereafter. First Financial reviews and adjusts its risk ratings based on actual experience, which is the basis for determining an appropriate ACL. First Financial's commercial risk ratings of pass, special mention, substandard and doubtful are derived from standard regulatory rating definitions and facilitate the monitoring of credit quality across the commercial loan portfolio. For further information regarding these risk ratings, see Note 5 – Loans and Leases in the Notes to the Consolidated Financial Statements.

Commercial loans rated as special mention, substandard or doubtful are considered criticized, while loans rated as substandard or doubtful are considered classified. Commercial loans may be designated as criticized/classified based on individual borrower performance or industry and environmental factors. Criticized/classified loans are subject to more frequent internal reviews to assess the borrower’s credit status and develop appropriate action plans.

Management considers classified loans to be the leading indicator of credit losses, and these loans are typically managed by the Special Assets Department. Special Assets is a commercial credit group whose primary focus is to handle the day-to-day management of commercial workouts, recoveries and problem loan resolutions. Special Assets ensures that First Financial has appropriate oversight, improved communication and timely resolution of issues throughout the loan portfolio. Additionally, the Credit Risk Management group within First Financial's Risk Management function provides independent, objective oversight and assessment of commercial credit quality and processes.

Consumer lending credit approvals are based on, among other factors, the financial strength and payment history of the borrower, type of exposure and the transaction structure. Consumer loans are generally smaller dollar amounts than other types of lending and are made to a large number of customers, providing diversification within the portfolio. Credit risk in the consumer loan portfolio is managed by loan type, and consumer loan asset quality indicators, including delinquency, are continuously monitored. The Credit Risk Management group performs product-level performance reviews and assesses credit quality and compliance with underwriting and loan administration guidelines across the consumer loan portfolio.

LOANS AND LEASES

2022 vs. 2021. Loans, excluding loans held for sale, totaled $10.3 billion at December 31, 2022, increasing $1.0 billion, or 10.9%, compared to December 31, 2021.

C&I loans increased $690.2 million, or 25.4%, largely due to the Company's strong origination efforts over the course of 2022.

Installment loans increased $90.4 million, or 75.7%, during 2022 largely as a result of First Financial's partnership with a loan origination provider, which sourced $55.3 million of loans during the first half of the year before the Company began winding down the relationship. Finance lease balances increased $126.5 million, or 115.4%, due to added production from Summit Funding Group. Residential real estate loans increased $196.2 million, or 21.9%, as rising interest rates led to more adjustable rate and nonconforming jumbo mortgage originations, which the Company retains on its balance sheet. Construction real estate loans increased $56.2 million, or 12.3%, and home equity loans increased $25.4 million, or 3.6%. Partially offsetting these increases were declines in both commercial real estate loans and credit cards. Commercial real estate loans decreased $173.9 million, or 4.1%, and credit card balances decreased $0.4 million, or 0.8%. Average loan balances, including loans held for sale, were $9.6 billion for 2022, a decrease of $65.3 million, or 0.7%, compared to 2021, with the decline driven by outstanding PPP balances during 2021.

Table 9 – Loan Maturity/Rate Sensitivity indicates the contractual maturity of all loans outstanding at December 31, 2022 as well as their sensitivity to changes in interest rates.

For discussion of risks associated with the loan portfolio and First Financial's ACL, see the Asset Quality and Allowance for Credit Losses section included in Management’s Discussion and Analysis.

16 First Financial Bancorp 2022 Annual Report

COMMITMENTS AND CONTINGENCIES

Off-balance sheet arrangements include commitments to extend credit and financial guarantees.  Loan commitments are agreements to extend credit to a client absent any violation of any condition established in the commitment agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

First Financial had commitments outstanding to extend credit totaling $4.4 billion and $4.0 billion at December 31, 2022 and 2021, respectively. This increase in commitments was driven by the Company's strong origination efforts during the year.

First Financial Bancorp 2022 Annual Report 17

As of December 31, 2022, loan commitments with variable interest rates totaled $4.2 billion, while commitments with a fixed interest rate totaled $126.3 million. At December 31, 2021, commitments with variable interest rates totaled $3.8 billion, while loan commitments with a fixed interest rate totaled $129.2 million. The fixed rate loan commitments have interest rates ranging from 0% to 21% for both December 31, 2022 and 2021 and have maturities ranging from less than 1 year to 31.6 years at December 31, 2022 and less than 1 year to 30.9 years at December 31, 2021.

Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party.  First Financial’s portfolio of letters of credit consists primarily of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services.  First Financial issued letters of credit aggregating $31.5 million and $41.1 million at December 31, 2022, and 2021, respectively. Management conducts regular reviews of these instruments on an individual client basis.

First Financial is a party in risk participation transactions of interest rate swaps, which had total notional amount of $379.3 million and $362.8 million at December 31, 2022 and 2021, respectively.

First Financial is a limited partner in several tax-advantaged limited partnerships whose purpose is to invest in approved qualified affordable housing, renewable energy, or other renovation or community revitalization projects. These investments are included in Accrued interest and other assets in the Consolidated Balance Sheets, with any unfunded commitments included in Accrued interest and other liabilities in the Consolidated Balance Sheets. As of December 31, 2022, First Financial expects to recover its remaining investments through the use of the tax credits that are generated by the investments. First Financial had unfunded commitments related to tax credit investments of $84.3 million and $72.5 million at December 31, 2022 and 2021, respectively.

In the ordinary course of business, First Financial and its subsidiaries are parties to litigation, including claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral, foreclosure interests that are incidental to our regular business activities and other matters. While the ultimate liability with respect to these litigation matters and claims cannot be determined at this time, First Financial believes that damages, if any, and other amounts relating to pending matters are not probable or cannot be reasonably estimated as of December 31, 2022. Reserves are established for these various matters of litigation, when appropriate, under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel. First Financial had no reserves related to litigation matters as of December 31, 2022 or December 31, 2021.

ASSET QUALITY AND ALLOWANCE FOR CREDIT LOSSES

Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful or when principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to a borrower's continued failure to adhere to contractual payment terms, coupled with other pertinent factors. When a loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued but unpaid interest is reversed.

Loans are classified as TDRs when borrowers are experiencing financial difficulties and concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. TDRs are generally classified as nonaccrual for a minimum period of six months and may qualify for return to accrual status once they have demonstrated performance with the restructured terms of the loan agreement.

Nonperforming assets consist of nonaccrual loans, accruing TDRs (collectively, nonperforming loans) and OREO.

See Table 10 – Summary of the ACL and Selected Statistics for a summary of First Financial’s nonaccrual loans, TDRs and OREO.

2022 vs. 2021. Nonaccrual loans were $28.6 million, or 28 bps of total loans as of December 31, 2022. This represents a $19.8 million, or 40.9%, decline from $48.4 million as of December 31, 2021. The decline in nonaccrual loans was largely the result of strong resolution efforts during the year, risk rating upgrades as borrower performance improved, as well as the sale of select loans. Total nonperforming assets declined $20.3 million, or 33.8%, to $39.8 million at December 31, 2022 from $60.1 million at December 31, 2021. The decline in nonperforming assets was driven by the decline in nonaccrual loans as well as a $0.7 million decline in accruing TDRs.

18 First Financial Bancorp 2022 Annual Report

Classified asset balances increased $23.3 million, or 22.3%, to $128.1 million at December 31, 2022 from $104.8 million at December 31, 2021. The increase in classified asset balances during 2022 was primarily attributed to the downgrade of one large healthcare credit and one large specialty retail credit.

Allowance for credit losses. The ACL is a reserve accumulated on the Consolidated Balance Sheets through the recognition of the provision for loan and lease losses. First Financial records provision expense in the Consolidated Statements of Income to maintain the ACL at a level considered sufficient to absorb expected credit losses for financial assets in the portfolio over their expected remaining lives with consideration given to current and forward-looking information.

The recorded values of the loans and leases actually removed from the Consolidated Balance Sheets due to credit deterioration are referred to as charge-offs. First Financial's policy is to charge-off all or a portion of a loan when, in management's opinion, it is unlikely to collect the principal amount owed in full either through payments from the borrower or from the liquidation of collateral. All loans charged-off are subject to continuous review and concerted efforts are made to maximize any recovery. In most cases, the borrower’s debt obligation is not canceled even though the balance may have been charged-off. Actual losses on loans and leases are charged against the ACL. Any subsequent recovery of a previously charged-off loan is credited back to the ACL.

Management estimates the allowance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience paired with economic forecasts provide the basis for the quantitatively modeled estimation of expected credit losses. First Financial adjusts its quantitative model, as necessary, to reflect conditions not already considered therein. These adjustments are commonly known as the Qualitative Framework. The evaluation of these factors is the responsibility of the ACL committee, which is comprised of senior officers from the risk management, credit administration, finance and lending areas.

See Table 10 – Summary of the ACL and Selected Statistics for a summary of activity impacting the ACL and Table 11 – Allocation of the ACL for detail on its composition.

2022 vs. 2021. The total ACL, which includes both funded and unfunded reserves, was $151.4 million at December 31, 2022, which combined with 6 bps of net charge-offs to result in $11.7 million in total provision expense for the year. This compared to a total allowance of $145.4 million as of December 31, 2021 and $18.1 million of provision recapture in 2021.

The Company utilized the Moody's December baseline forecast as its R&S forecast in the quantitative model at December 31, 2022. For reasonableness, the Company also considered the impact to the model from alternative, more adverse economic forecasts, slower prepayment speeds and increased default rates. These alternative analyses were utilized to inform the Company's qualitative adjustments. Additionally, First Financial considered its credit exposure to certain industries believed to be at risk for future credit stress, such as franchise, hotel and investor commercial real estate lending, when making qualitative adjustments to the ACL model.

ACL - Loans and Leases. The ACL on loans and leases at December 31, 2022 was $133.0 million, or 1.29% of total loans, which was a $1.0 million, or 0.7%, increase from $132.0 million, and 1.42% of loans at December 31, 2021. Provision expense increased $25.8 million, or 135.4%, to $6.7 million in 2022 from $19.0 million of provision recapture in 2021. Modest ACL growth and the related increase in provision expense in 2022 was driven by strong loan growth, slower prepayments speeds and stable credit quality during the period. Provision recapture in 2021 was driven by improvements in credit quality and economic outlook following peak pandemic uncertainty in 2020.

Net charge-offs decreased $18.9 million, or 76.7%, to $5.7 million for 2022 compared to $24.7 million for 2021, while the ratio of net charge-offs as a percentage of average loans outstanding decreased to 6 bps in 2022 from 26 bps in 2021. This decline in net charge-offs reflected stable credit quality and the Company's focused resolution efforts over the course of the year. Additionally, $9.2 million of net charge-offs incurred in 2021 were the result of the sale of $133.8 million of hotel loans, which was executed to address various portfolio concentrations.

The ACL as a percentage of nonaccrual loans was 464.6% at December 31, 2022 and 272.8% at December 31, 2021. The increase in this ratio was attributed to the decline in nonaccrual loans during the period coupled with the slight increase in the ACL. The ACL as a percentage of nonperforming loans including accruing TDRs was 335.9% at December 31, 2022 compared to 220.0% at December 31, 2021.

First Financial Bancorp 2022 Annual Report 19

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Provision expense is a product of the Company's ACL model combined with net charge-off activity during the period. Provision expense increased $25.8 million during 2022 as the Company recorded $6.7 million of provision expense during the period compared to $19.0 million of provision recapture in 2021.

ACL - Unfunded Commitments. The ACL on unfunded commitments was $18.4 million as of December 31, 2022 and $13.4 million as of December 31, 2021. First Financial recorded $5.0 million of provision expense on unfunded commitments for the year ended December 31, 2022 compared to $0.9 million for the same period of 2021. The increases in both the ACL and provision expense on unfunded commitments were driven by an increase in the volume of outstanding commitments due to strong origination efforts during 2022 as well as a decline in commercial prepayments, which resulted in a longer duration for the unfunded commitment portfolio.

For further discussion of First Financial's ACL, see Note 6 – Allowance for Credit Losses in the Notes to Consolidated Financial Statements.

20 First Financial Bancorp 2022 Annual Report

(1) Includes loans classified as nonaccrual and troubled debt restructurings.

(2) Nonaccrual loans include nonaccrual TDRs of $10.0 million, $16.0 million, $14.7 million, $18.5 million, and $22.4 million, as of December 31, 2022, 2021, 2020, 2019, and 2018, respectively.

First Financial Bancorp 2022 Annual Report 21

Management’s Discussion and Analysis of Financial Condition and Results of Operations

DERIVATIVES

First Financial is authorized to use certain derivative instruments including interest rate caps, floors, swaps and foreign exchange contracts to meet the needs of its clients while managing interest rate risk associated with certain transactions.  The Company does not use derivatives for speculative purposes.

First Financial primarily utilizes interest rate swaps, which generally involve the receipt by First Financial of floating rate amounts from swap counterparties in exchange for payments to these counterparties by First Financial of fixed rate amounts received from borrowers. This results in the Company's loan customers receiving fixed rate funding while providing First Financial with a floating rate asset.

In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation agreements with counterparties whereby First Financial assumes a portion of the credit exposure associated with an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make payments to the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with the counterparty.

First Financial enters into IRLCs and forward commitments for the future delivery of mortgage loans to third party investors, which are considered derivatives. When borrowers secure an IRLC with First Financial and the loan is intended to be sold, First Financial will enter into forward commitments for the future delivery of the loans to third party investors in order to hedge against the effect of changes in interest rates impacting IRLCs and loans held for sale.

First Financial may enter into foreign exchange derivative contracts for the benefit of commercial customers to hedge their exposure to foreign currency fluctuations. Similar to the hedging of interest rate risk from interest rate derivative contracts, First Financial also enters into foreign exchange contracts with major financial institutions to economically hedge the exposure from client driven foreign exchange activity. The Company has risk limits and internal controls in place to help ensure excessive risk is not being taken in providing this service to customers.

See Note 13 – Derivatives in the Notes to Consolidated Financial Statements for additional information regarding First Financial's use of derivative instruments.

DEPOSITS

First Financial solicits deposits by offering commercial and consumer clients a wide variety of transaction and savings accounts, including checking, savings, money-market and time deposits of various maturities and rates.

2022 vs. 2021. First Financial's total deposits decreased $170.8 million, or 1.3%, to $12.7 billion as of December 31, 2022 from $12.9 billion at December 31, 2021. This decline was driven by a decrease in savings deposits of $329.2 million, or 7.9%, a decrease in interest-bearing checking deposits of $161.6 million, or 5.1%, and a decrease in noninterest bearing deposits of $50.4 million, or 1.2%. These changes were partially offset by a $370.4 million, or 27.8%, increase in time deposits. Total non-time deposit balances were $11.0 billion as of December 31, 2022 and $11.5 billion as of December 31, 2021. The decline in deposits was driven by rising interest rates and the corresponding competitive pressures.

22 First Financial Bancorp 2022 Annual Report

Total average deposits for 2022 decreased $80.1 million, or 0.6%, from 2021 primarily due to a decrease in average time deposits of $426.2 million, or 26.6%, and a decrease in average savings deposits $15.8 million, or 0.4%, partially offset by

an increase in average noninterest bearing deposits of $191.7 million, or 4.8%, and an increase in average interest-bearing demand deposits of $170.2 million, or 5.7%. The decline in time deposits was largely attributed to a $292.1 million decrease in average brokered deposits as the Company shifted to short term borrowings to satisfy its funding needs.

Table 12 – Uninsured Deposits-Maturities of Time Deposits Greater Than or Equal to $250,000 details the contractual maturity of deposits that are not FDIC insured. Time Deposits Greater Than or Equal to $250,000 represented 1.3% of total deposits outstanding at December 31, 2022 and 1.5% at December 31, 2021.

BORROWINGS

First Financial's short-term borrowings are utilized to manage the Company's normal liquidity needs. These borrowings include repurchase agreements utilized for corporate sweep accounts with cash management account agreements in place, as well as overnight advances from the FHLB. The Company's long-term borrowings consist of subordinated debt, FRB borrowings, FHLB long-term advances, repurchase agreements utilizing investment securities pledged as collateral and a capital loan from a municipality.

2022 vs. 2021. First Financial utilizes both short-term borrowings and long-term advances from the FHLB as wholesale funding sources. Borrowed funds were $1.6 billion as of December 31, 2022 compared to $706.0 million as of December 31, 2021. Borrowings increased during the period largely as a result of the Company utilizing short term advances in lieu of brokered CDs to satisfy its funding needs.

Short-term borrowings increased $991.0 million, or 334.6%, to $1.3 billion at December 31, 2022, from $296.2 million at December 31, 2021. First Financial had $1.1 billion of short-term borrowings from the FHLB at December 31, 2022 compared to $225.0 million at December 31, 2021. These short-term borrowings provided the required liquidity for funding the Company's loan growth. Short-term borrowings included no repurchase agreements as of December 31, 2022 compared to $51.2 million at December 31, 2021. The Company had no federal funds purchased as of December 31, 2022 or 2021.

Total long-term debt was $346.7 million and $409.8 million at December 31, 2022 and 2021, respectively. Outstanding subordinated debt totaled $313.7 million and $313.2 million as of December 31, 2022 and 2021, respectively. The subordinated debt is treated as Tier 2 capital for regulatory capital purposes and also included unamortized valuation and debt issuance costs of $7.8 million and $8.6 million as of December 31, 2022 and 2021, respectively.

In conjunction with the acquisition of Summit, First Financial assumed $96.4 million in outstanding long-term borrowings at December 31, 2021. These acquired long-term borrowings included $23.0 million of lines of credit with other banks utilized to

First Financial Bancorp 2022 Annual Report 23

Management’s Discussion and Analysis of Financial Condition and Results of Operations

operate the business and carried an average interest rate of 2.77%. These lines of credit were paid off in January 2022. Acquired long term borrowings also included term notes, both with and without recourse. These term notes had outstanding balances of $32.5 million and $73.4 million with average interest rates of 4.44% and 4.09% at December 31, 2022 and 2021, respectively. These term notes were used to finance Summit's equity investment in the purchase of equipment to be leased to customers.

The Company had no FHLB long-term advances as of December 31, 2022 or 2021. First Financial's total remaining borrowing capacity from the FHLB was $347.4 million at December 31, 2022. For ease of borrowing execution, First Financial utilizes a blanket collateral agreement with the FHLB. First Financial pledged $6.0 billion of certain eligible residential, commercial and agricultural real estate loans, home equity lines of credit and certain agency CMOs, municipals and CMBS securities as collateral for borrowings from the FHLB as of December 31, 2022.

See Note 12 – Borrowings in the Notes to Consolidated Financial Statements for additional information on First Financial's borrowings.

LIQUIDITY

Liquidity management is the process by which First Financial manages the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost. These funding commitments include withdrawals by depositors, credit commitments to borrowers, shareholder dividends, share repurchases, operating expenses and capital expenditures. Liquidity is derived primarily from deposit growth, principal and interest payments on loans and investment securities, maturing loans and investment securities and access to wholesale funding sources.

First Financial’s most stable source of liability-funded liquidity for both long and short-term needs is deposit growth and retention of the core deposit base. In addition to core deposit funding, First Financial also utilizes a variety of other short and long-term funding sources, which include subordinated notes, longer-term advances from the FRB and FHLB and its short-term line of credit. For further information regarding the company's liability-funded liquidity, see Note 11 - Deposits and Note 12 - Borrowings.

First Financial has a $40.0 million short-term credit facility with an unaffiliated bank that matures in December 2023. This facility has a variable interest rate and provides First Financial additional liquidity, if needed, for various corporate activities including the repurchase of First Financial common stock and the payment of dividends to shareholders. As of December 31, 2022, First Financial had no outstanding balance and at December 31, 2021, First Financial had an outstanding balance of $20.0 million on this short-term credit facility. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality and capital levels, and First Financial was in compliance with all covenants associated with this facility as of December 31, 2022.

Both First Financial and the Bank received investment grade credit ratings from Kroll Bond Rating Agency, Inc., an independent rating agency. These credit ratings impact the cost and availability of financing to First Financial, and a downgrade to these credit ratings could affect First Financial's or the Bank’s abilities to access the credit markets and potentially increase borrowing costs, negatively impacting financial condition and liquidity. Key factors in maintaining high credit ratings include consistent and diverse earnings, strong credit quality and capital ratios, diverse funding sources and disciplined liquidity monitoring procedures. The ratings of First Financial and the Bank at December 31, 2022 were as follows:

For ease of borrowing execution, First Financial utilizes a blanket collateral agreement with the FHLB. First Financial pledged $6.0 billion of certain eligible residential, commercial and farm real estate loans, home equity lines of credit and government, agency and CMBS investments as collateral for borrowings from the FHLB as of December 31, 2022.

24 First Financial Bancorp 2022 Annual Report

First Financial's principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. The market value of investment securities classified as AFS totaled $3.4 billion and $4.2 billion at December 31, 2022 and 2021, respectively. As of December 31, 2022, $1.9 billion of AFS securities were unpledged and there were $371.4 million of securities available to be sold at breakeven.

HTM securities that are maturing within a short period of time can be an additional source of liquidity. As of December 31, 2022 and 2021, the Company had no HTM securities maturing within one year.

In total, First Financial expects $814.2 million of cash flows from its investment portfolio in the next 12 months.

Other sources of liquidity include cash and due from banks and interest-bearing deposits with other banks. At December 31, 2022, these balances totaled $595.7 million, and First Financial had unused and available overnight wholesale funding sources of $3.7 billion, or 22.0% of total assets, to fund loan and deposit activities in addition to general corporate requirements.

Certain restrictions exist regarding the Bank's ability to transfer funds to First Financial in the form of cash dividends, loans, other assets or advances and the approval of the Bank's primary federal regulator is required to pay dividends in excess of regulatory limitations. Dividends paid to First Financial from the Bank totaled $170.0 million, $200.0 million and $80.0 million for 2022, 2021 and 2020, respectively. As of December 31, 2022, the Bank had retained earnings of $794.6 million, of which $219.3 million was available for distribution to First Financial without prior regulatory approval. As an additional source of liquidity, First Financial had $91.0 million in cash at the parent company as of December 31, 2022.

Share repurchases also impact First Financial's liquidity. For further information regarding share repurchases, see the Capital section that follows.

Capital expenditures were $13.8 million for 2022, $15.3 million for 2021 and $16.5 million for 2020. Material commitments for capital expenditures as of December 31, 2022, were $31.6 million. Management believes that sufficient liquidity exists to fund its future capital expenditure commitments.

Management is not aware of any other trends, events or regulatory requirements that, if implemented, are likely to have a material effect on First Financial’s liquidity.