First Financial Bancorp Reports First Quarter 2014 Financial Results - KALB-TV News Channel 5 & CBS 2

First Financial Bancorp Reports First Quarter 2014 Financial Results

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SOURCE First Financial Bancorp

CINCINNATI, April 29, 2014 /PRNewswire/ -- First Financial Bancorp (Nasdaq: FFBC) ("First Financial" or the "Company") announced today financial and operational results for the first quarter 2014.

First quarter net income was $15.1 million and earnings per diluted common share were $0.26.  This compares with fourth quarter net income of $3.8 million and earnings per diluted common share of $0.07 and first quarter 2013 net income of $13.8 million and earnings per diluted common share of $0.24.

  • Continued solid quarterly performance
    • ­Quarterly results included several items which reduced earnings per diluted share by approximately $0.02 on a net basis
    • ­Return on average assets of 0.96%; 1.02% as adjusted for the items noted below
    • ­Return on average tangible common equity of 10.49%; 11.13% as adjusted for the items noted below
  • Capital ratios remain strong
    • ­Tangible common equity to tangible assets of 9.23%
    • ­Tier 1 capital ratio of 14.42%
    • ­Total risk-based capital ratio of 15.67%
  • Total uncovered loan growth for the quarter of 12.6% on an annualized basis
    • ­Strong performance in traditional C&I / owner-occupied CRE and franchise lending
    • ­Solid growth in investment CRE lending
  • Quarterly net interest margin of 3.82%
    • ­Decline of 8 bps on a reported basis and 4 bps on an adjusted basis compared to the linked quarter
    • ­Yield on investment securities increased 14 bps to 2.52%
  • Continued improvement in asset quality metrics
    • Total nonperforming assets declined $11.0 million, or 15.2%, and represent 0.95% of total assets compared to 1.13% for the linked quarter
    • ­Net charge-offs declined $1.6 million, or 44.4%, compared to the linked quarter and totaled 23 bps of average uncovered loans on an annualized basis

During the quarter, the Company incurred certain pre-tax expenses of $0.4 million resulting from the execution of its efficiency initiatives.  The Company also incurred pre-tax acquisition-related and market expansion costs of $0.6 million as well as legal settlement expenses of $0.5 million.  Additionally, pre-tax net gains of $0.1 million were recognized resulting from the sales of investment securities.  In the aggregate, these items reduced pre-tax earnings by $1.4 million, or approximately $0.02 per diluted share after taxes.

The board of directors has authorized a dividend of $0.15 per common share for the next regularly scheduled dividend, payable on July 1, 2014 to shareholders of record as of May 30, 2014.

Under the announced share repurchase plan, the Company repurchased 40,255 shares during the first quarter 2014 at an average price of $17.32 per share.  Subsequent to the signing of a definitive merger agreement to acquire Guernsey Bancorp, Inc. in a transaction including $13.5 million of cash consideration and an increasingly active M&A environment industry-wide, the Company expects to continue the first quarter suspension of its share repurchase plan for the second quarter 2014.

Claude Davis, President and Chief Executive Officer, commented, "Our financial results for the first quarter were impacted by seasonal and weather-related events that drove a decline in noninterest income and increases in employee benefit-related expenses and occupancy costs.  Excluding the effect of these items, our operating performance remained strong and was consistent with our results from the prior quarter.

"As we announced in a separate release, we strengthened our entry to the dynamic Columbus, Ohio market with the signing of a definitive merger agreement to acquire the parent of The Guernsey Bank, an institution with $122.9 million in assets and $100.5 million in deposits across three banking centers, all of which are located in demographically attractive communities.  Guernsey has built a strong retail banking franchise that provides an excellent strategic complement to the asset generation platforms of The First Bexley Bank and Insight Bank.  Taken as a whole, these transactions position First Financial as one of the larger community banks serving the growth oriented Columbus market and provide a strong foundation for future growth.  Integration activities related to the First Bexley and Insight transactions are progressing well and we continue to expect that the deals will close during the second quarter.

"Regarding our expansion into Fort Wayne, we are pleased with the progress our new commercial and mortgage lending teams are making as they build the First Financial brand in the market.  The commercial team has been active with origination and commitment levels exceeding expectations to date and with the long winter behind us, the mortgage team is building a strong pipeline as we move into the second quarter.

"Our solid pipeline at the end of the year translated into strong loan production during the first quarter as our uncovered portfolio increased $108.6 million, or 12.6% on an annualized basis, compared to the linked quarter and was up $365.4 million, or 11.2%, year-over-year.  Furthermore, uncovered loan production outpaced the decline in covered loan balances as total loan balances increased $60.1 million during the quarter.  As business confidence continues to improve in our markets, the level of new business opportunities continues to grow as well and we remain optimistic about our ability to keep our loan production momentum moving forward into the second quarter.

"From a credit perspective, our resolution efforts have continued to produce positive results as our level of nonperforming assets has declined to its lowest level since the second quarter of 2009.  Additionally, the positive trend experienced in charge-off activity over the last five quarters continued as net charge-offs dropped to 23 bps of average loan balances for the quarter and contributed to a decline in credit costs."

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income for the first quarter was $54.8 million as compared to $55.8 million for the fourth quarter 2013 and $58.7 million for the first quarter 2013.  Compared to the linked quarter, total interest income decreased $0.9 million, or 1.4%, and total interest expense increased $0.1 million, or 3.1%.  Net interest margin was 3.82% for the first quarter as compared to 3.90% for the fourth quarter 2013 and 4.04% for the first quarter 2013.  Included in the fourth quarter 2013's interest income was the recognition of $0.6 million of previously reserved interest related to loans that returned to accrual status.  Excluding this amount, net interest margin for the fourth quarter 2013 was 3.86%, resulting in a decline of 4 bps during the first quarter.

Interest income earned on loans decreased $3.2 million, or 6.1%, compared to the prior quarter.  Excluding the reserved interest recognized in the fourth quarter 2013 discussed above, interest income on loans decreased $2.6 million, or 5.1%, during the first quarter.  The decrease in interest income earned on loans was driven primarily by a decline of $55.5 million, or 11.3%, in average covered loan balances as well as a decline in loan fees earned on the uncovered loan portfolio.  Partially offsetting the negative impact from covered loan activity was the lower amortization of the FDIC indemnification asset which declined $1.0 million, or 41.9%, as the average balance of the asset declined $34.5 million, or 44.1%, during the quarter.

Growth in average uncovered loan balances of $85.3 million, or 2.5% on a linked quarter basis, helped to partially offset the impact on net interest income from covered loan activity during the quarter as well as the lower level of loan fees.  Excluding the reserved interest recognized in the fourth quarter 2013, the yield earned on the uncovered portfolio during the quarter was approximately 4.34%, an 11 bp decrease compared to the linked quarter.

Interest income earned from investment securities increased $1.3 million, or 13.3%, compared to the prior quarter as average balances increased $153.2 million, or 9.3%, and the yield earned on the portfolio increased 14 bps to 2.52%.

The slight increase in total interest expense was due to an increase in deposit and short-term borrowing costs.  Average time deposit balances increased $20.5 million, or 2.2%, with the related cost of funds increasing 4 bps compared to the linked quarter.  The cost of funds related to total interest-bearing deposits increased 1 bp to 36 bps compared to the fourth quarter 2013.  Average short-term borrowing balances increased $259.5 million, or 49.6%, during the quarter with the impact on net interest margin partially offset by a decline of 3 bps in the related cost of funds. 

NONINTEREST INCOME

The following table presents noninterest income for the three months ended March 31, 2014 and for the trailing four quarters, adjusted to exclude the impact of covered loan activity and other select items on the Company's reported balance.

 




























Table I














For the Three Months Ended





March 31,


December 31,


September 30,


June 30,


March 31,




(Dollars in thousands)

2014


2013


2013


2013


2013

















Total noninterest income

$      14,175


$      13,043


$      22,291


$      11,615


$      26,698

















Selected components of noninterest income


























Accelerated discount on covered loans 1

1,015


1,572


1,711


1,935


1,935




FDIC loss sharing income

(508)


(3,385)


5,555


(7,384)


8,934




Gain on sale of investment securities

50


-


-


188


1,536




Other items not expected to recur

-


-


-


442


-

















Total noninterest income excluding items noted above

$      13,618


$      14,856


$      15,025


$      16,434


$      14,293






























1  Net of the related adjustment on the FDIC indemnification asset



















 

Excluding the items highlighted in Table I, noninterest income earned in the first quarter was $13.6 million compared to $14.9 million in the fourth quarter 2013 and $14.3 million in the first quarter 2013.  The decrease of $1.2 million compared to the linked quarter was driven by seasonal declines in service charges on deposit accounts and bankcard income as well as lower net gains on sales of residential mortgages, rental income from covered OREO and portfolio valuations related to client derivatives, partially offset by higher trust and wealth management fees.

NONINTEREST EXPENSE

The following table presents noninterest expense for the three months ended March 31, 2014 and for the trailing four quarters, adjusted to exclude the impact of covered asset activity and other select items on the Company's reported balance.

 





























Table II














For the Three Months Ended





March 31,


December 31,


September 30,


June 30,


March 31,




(Dollars in thousands)

2014


2013


2013


2013


2013

















Total noninterest expense

$      47,842


$      70,285


$      48,801


$      53,283


$      53,106

















Selected components of noninterest expense


























Loss (gain) - covered real estate owned

33


946


204


(2,212)


(157)




Loss sharing expense

1,569


1,495


1,724


1,578


2,286




Pension settlement charges

-


462


1,396


4,316


-




Expenses associated with efficiency initiative

350


1,450


1,051


1,518


2,878




FDIC indemnification asset valuation adjustment

-


22,417


-


-


-




Acquisition-related expenses

620


284


-


-


-




Other items not expected to recur

465


-


-


-


390

















Total noninterest expense excluding items noted above

$      44,805


$      43,231


$      44,426


$      48,083


$      47,709

















FDIC loss share support 1

$           862


$           844


$           841


$           795


$           776






























1  Represents direct expenses associated with credit management and loan administration related to covered assets as well as compliance




with FDIC loss sharing agreements; included in total noninterest expense excluding the items noted above and comprised of several noninterest



expense line items











 

Excluding the items highlighted in Table II, noninterest expense in the first quarter was $44.8 million compared to $43.2 million in the fourth quarter 2013 and $47.7 million in the first quarter 2013.  The increase of $1.6 million compared to the linked quarter was due to seasonal increases in benefit expenses and higher weather-related occupancy costs, partially offset by lower state intangible tax, marketing and other noninterest expenses.  Acquisition-related expenses include $0.2 million of professional services expenses, $0.2 million of data processing costs and $0.2 million of employee benefit expenses.  Other items not expected to recur from the first quarter 2014 consist of legal settlement expenses.

INCOME TAXES

For the first quarter, income tax expense was $7.1 million, resulting in an effective tax rate of 31.9%, compared with an income tax benefit of $1.2 million and an effective tax rate of -47.4% during the fourth quarter 2013 and income tax expense of $6.4 million and an effective tax rate of 31.5% during the first quarter 2013.  The increase in the effective tax rate as compared to the linked quarter is primarily related to higher pre-tax income in the first quarter as a result of the valuation adjustment to the FDIC indemnification asset recognized during the fourth quarter 2013 as well as favorable state tax adjustments resulting from the completion of 2012 state tax returns and a related adjustment to deferred taxes recognized during the prior quarter.  While the effective tax rate may fluctuate from quarter to quarter due to tax jurisdiction changes and the level of tax-enhanced assets, the overall effective tax rate for the full year is expected to be in the range of approximately 32.0% - 34.0%.

CREDIT QUALITY – EXCLUDING COVERED ASSETS

The following table presents certain credit quality metrics related to the Company's uncovered loan portfolio as of March 31, 2014 and the trailing four quarters.

 





























Table III














As of or for the Three Months Ended





March 31,


December 31,


September 30,


June 30,


March 31,




(Dollars in thousands)

2014


2013


2013


2013


2013

















Total nonaccrual loans 1

$      35,334


$      37,605


$      57,926


$      62,011


$      64,452




Troubled debt restructurings - accruing

13,400


15,094


16,278


12,924


12,757




Total nonperforming loans

48,734


52,699


74,204


74,935


77,209




Total nonperforming assets

61,477


72,505


86,008


86,733


89,202

















Nonperforming assets as a % of:













Period-end loans plus OREO

1.70%


2.06%


2.50%


2.56%


2.74%




Total assets

0.95%


1.13%


1.38%


1.38%


1.40%




Nonperforming assets ex. accruing TDRs as a % of:












Period-end loans plus OREO

1.33%


1.63%


2.03%


2.17%


2.34%




Total assets

0.74%


0.89%


1.12%


1.18%


1.20%

















Nonperforming loans as a % of total loans

1.35%


1.50%


2.16%


2.22%


2.38%

















Provision for loan and lease losses - uncovered

$        1,159


$        1,851


$        1,413


$        2,409


$        3,041

















Allowance for uncovered loan & lease losses

$      43,023


$      43,829


$      45,514


$      47,047


$      48,306

















Allowance for loan & lease losses as a % of:













Total loans

1.19%


1.25%


1.33%


1.39%


1.49%




Nonaccrual loans

121.8%


116.6%


78.6%


75.9%


75.0%




Nonperforming loans

88.3%


83.2%


61.3%


62.8%


62.6%

















Total net charge-offs

$        1,965


$        3,536


$        2,946


$        3,668


$        2,512




Annualized net-charge-offs as a % of average













loans & leases

0.23%


0.41%


0.34%


0.45%


0.32%






























1  Includes nonaccrual troubled debt restructurings








 

Net Charge-offs

For the first quarter, net charge-offs declined $1.6 million, or 44.4%, to $2.0 million compared to the linked quarter.  Significant charge-offs during the quarter included a $0.5 million valuation adjustment related to a commercial credit as well as a $0.4 million charge-off associated with the disposition of a commercial real estate credit.

Nonperforming Assets

Nonaccrual loans, including nonaccrual troubled debt restructurings, decreased $2.3 million, or 6.0%, to $35.3 million as of March 31, 2014 from $37.6 million as of December 31, 2013.  The decline in nonaccrual loans as compared to the linked quarter was primarily related to payments on two commercial real estate credits totaling $1.0 million as well as the charge-offs discussed above.

Accruing troubled debt restructurings decreased $1.7 million, or 11.2%, to $13.4 million as of March 31, 2014 from $15.1 million as of December 31, 2013.  This decline was primarily related to a $0.7 million performing loan that was refinanced at market terms upon maturity and is no longer classified as a troubled debt restructuring as well as a $0.8 million loan that was reclassified to nonaccrual status during the first quarter.

OREO decreased $7.1 million, or 35.7%, to $12.7 million during the first quarter as resolutions and valuation adjustments of $8.3 million exceeded additions of $1.2 million during the quarter.  While there were no individually significant additions during the first quarter, resolutions during the period included a single commercial property totaling $7.9 million which was added to OREO during the fourth quarter 2013.

Classified assets declined $7.0 million, or 6.4%, to $103.5 million as of March 31, 2014 from $110.5 million as of December 31, 2013 and decreased $27.0 million, or 20.7%, from $130.4 million as of March 31, 2013.  Classified assets are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse.

Delinquent Loans

As of March 31, 2014, loans 30-to-89 days past due totaled $13.9 million, or 0.38% of period-end loans, compared to $13.6 million, or 0.39%, as of December 31, 2013 and $18.2 million, or 0.56%, as of March 31, 2013.  The increase of $0.3 million, or 2.0%, during the first quarter was driven primarily by a $2.1 million increase in delinquent commercial real estate loans, partially offset by declines in delinquencies across the commercial, residential real estate and home equity loan portfolios during the period.

LOANS (EXCLUDING COVERED LOANS)

The following table presents the loan portfolio, excluding covered loans, as of March 31, 2014, December 31, 2013 and March 31, 2013.

 

































Table IV
















As of





March 31, 2014


December 31, 2013


March 31, 2013







Percent




Percent




Percent




(Dollars in thousands)

Balance


of Total


Balance


of Total


Balance


of Total



















Commercial

$ 1,118,057


30.9%


$ 1,035,668


29.5%


$    892,381


27.5%



















Real estate - construction

87,996


2.4%


80,741


2.3%


87,542


2.7%



















Real estate - commercial

1,513,891


41.9%


1,496,987


42.7%


1,433,182


44.1%



















Real estate - residential

360,671


10.0%


352,931


10.1%


330,260


10.2%



















Installment

44,911


1.2%


47,133


1.3%


53,509


1.6%



















Home equity

374,427


10.4%


376,454


10.7%


365,943


11.3%



















Credit card

34,458


1.0%


35,592


1.0%


32,465


1.0%



















Lease financing

79,792


2.2%


80,135


2.3%


53,556


1.6%



















Total

$ 3,614,203


100.0%


$ 3,505,641


100.0%


$ 3,248,838


100.0%
































Loans, excluding covered loans, totaled $3.6 billion as of March 31, 2014, increasing $108.6 million, or 12.6% on an annualized basis, compared to the linked quarter and $365.4 million, or 11.2%, compared to March 31, 2013.  The increase relative to the linked quarter was driven by growth in traditional C&I and owner-occupied commercial real estate, franchise finance and investment commercial real estate.

INVESTMENTS

The following table presents a summary of the total investment portfolio at March 31, 2014.































Table V
















As of March 31, 2014






Held-to-


Available-for-






Percent of




(Dollars in thousands)


Maturity


Sale


Other


Total


Portfolio


















Debt obligations of the U.S. Government


$               -


$      20,901


$             -


$      20,901


1.2%




Debt obligations of U.S. Government Agency

18,603


9,726


-


28,329


1.6%




Residential Mortgage Backed Securities














Pass-through securities:














Agency fixed rate


83,590


104,791


-


188,381


10.5%




Agency adjustable rate


140,386


40,992


-


181,378


10.1%




Non-Agency fixed rate


-


10,086


-


10,086


0.6%




Collateralized mortgage obligations:














Agency fixed rate


356,663


261,262


-


617,925


34.3%




Agency variable rate


-


96,023


-


96,023


5.3%




Agency collateralized and insured municipal securities

67,348


103,308


-


170,656


9.5%




Commercial mortgage backed securities


223,039


115,635


-


338,674


18.8%




Municipal bond securities


1,177


1,392


-


2,569


0.1%




Corporate securities


-


40,913


-


40,913


2.3%




Asset-backed securities


-


49,430


-


49,430


2.7%




Regulatory stock


-


-


42,576


42,576


2.4%




Other


-


8,067


5,083


13,150


0.7%




















$    890,806


$    862,526


$   47,659


$ 1,800,991


100.0%












































The investment portfolio remained flat on a linked quarter basis as $139.7 million of purchases were offset by sales, amortizations and other portfolio reductions.  The Company sold $92.5 million of securities during the quarter consisting primarily of certain CLOs in response to the potential regulatory impact under the Dodd-Frank Act (the "Volcker Rule") and, to a lesser extent, hybrid securities, CMOs and corporate securities, recognizing a net pre-tax gain of $0.1 million.  As of March 31, 2014, the overall duration of the investment portfolio decreased slightly to 4.2 years compared to 4.3 years as of December 31, 2013.  The yield earned on the portfolio during the quarter increased 14 bps to 2.52% from 2.38% for the linked quarter, driven by higher reinvestment rates and continued stabilization in premium amortization.  Due primarily to a tightening of mortgage and fixed income spreads during the quarter, the net unrealized loss included in accumulated other comprehensive loss related to the investment portfolio decreased $3.9 million to $12.4 million as of March 31, 2014.

DEPOSITS

Non-time deposit balances totaled $3.9 billion as of March 31, 2014, decreasing $20.8 million, or 0.5%, compared to the linked quarter.  Seasonal factors drove declines in commercial and public fund transaction balances of $21.5 million and $49.1 million, respectively.  This was offset by an increase in consumer balances of $50.0 million across multiple product offerings.

Time deposit balances increased $3.7 million, or 0.4%, due to an increase in public fund balances, partially offset by a slight decline in consumer balances.

The Company's total cost of deposit funding, inclusive of noninterest-bearing balances, was 28 bps for the quarter, representing an increase of 1 bp compared to the prior quarter and a decrease of 4 bps compared to the first quarter 2013.

CAPITAL MANAGEMENT

The following table presents First Financial's regulatory and other capital ratios as of March 31, 2014, December 31, 2013 and March 31, 2013.





















Table VI










As of





March 31,


December 31,


March 31,





2014


2013


2013













Leverage Ratio

9.94%


10.11%


10.00%













Tier 1 Capital Ratio

14.42%


14.61%


15.87%













Total Risk-Based Capital Ratio

15.67%


15.88%


17.15%













Ending tangible shareholders' equity









to ending tangible assets

9.23%


9.20%


9.60%













Ending tangible common shareholders'









equity to ending tangible assets

9.23%


9.20%


9.60%













Tangible book value per share

$10.24


$10.10


$10.33





























Shareholders' equity increased $9.2 million during the quarter due to net income for the quarter and a decline in the unrealized loss related to the investment portfolio, partially offset by dividends declared and share repurchases.  The Company's regulatory capital ratios declined during the quarter due primarily to increases in tangible assets and risk-weighted assets resulting from the increase in uncovered loans.  The Company's tangible common equity ratio increased modestly during the quarter as the increase in tangible common equity outweighed the increase in tangible assets.  Regulatory capital ratios as of March 31, 2014 are considered preliminary pending the filing of the Company's regulatory reports.

Teleconference / Webcast Information

First Financial's executive management will host a conference call to discuss the Company's financial and operating results on Wednesday, April 30, 2014 at 8:30 a.m. Eastern Time.  Members of the public who would like to listen to the conference call should dial (888) 317-6016 (U.S. toll free), (855) 669-9657 (Canada toll free) or +1 (412) 317-6016 (International) (no passcode required).  The number should be dialed five to ten minutes prior to the start of the conference call.  The conference call will also be accessible as an audio webcast via the Investor Relations section of the Company's website at www.bankatfirst.com.  A replay of the conference call will be available beginning one hour after the completion of the live call through May 15, 2014 at (877) 344-7529 (U.S. toll free), (855) 669-9658 (Canada toll free) and +1 (412) 317-0088 (International); conference number 10045038.  The webcast will be archived on the Investor Relations section of the Company's website through April 30, 2015.

Press Release and Additional Information on Website

This press release as well as supplemental information and any non-GAAP reconciliations related to this release is available to the public through the Investor Relations section of First Financial's website at www.bankatfirst.com/investor.

About First Financial Bancorp

First Financial Bancorp is a Cincinnati, Ohio based bank holding company.  As of March 31, 2014, the Company had $6.5 billion in assets, $4.0 billion in loans, $4.8 billion in deposits and $691 million in shareholders' equity.  The Company's subsidiary, First Financial Bank, N.A., founded in 1863, provides banking and financial services products through its four lines of business: commercial, consumer, wealth management and mortgage.  The commercial, consumer and mortgage units provide traditional banking services to business and retail clients.  First Financial Wealth Management provides wealth planning, portfolio management, trust and estate, brokerage and retirement plan services and had approximately $2.5 billion in assets under management as of March 31, 2014.  The Company's strategic operating markets are located in Ohio, Indiana and Kentucky where it operates 106 banking centers.  Additional information about the Company, including its products, services and banking locations is available at www.bankatfirst.com.

Important Information for Investors and Shareholders

This communication does not constitute an offer of any securities for sale. This communication is being made in respect of the proposed transactions involving First Financial, The First Bexley Bank and Insight Bank.  In connection with the proposed transactions, the Company filed with the SEC registration statements on Form S-4 that included proxy statements/prospectuses for the shareholders of First Bexley and Insight.  INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENTS/PROSPECTUSES AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTIONS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT FIRST FINANCIAL, FIRST BEXLEY AND INSIGHT AND THE PROPOSED TRANSACTIONS.  Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov.  Investors may also obtain these documents, without charge, from First Financial's website at http://www.bankatfirst.com or by contacting First Financial's investor relations department at (877) 322-9530.

Forward-Looking Statement

Certain statements contained in this release which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act.  Examples of forward-looking statements include, but are not limited to, projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure and other financial items, statements of plans and objectives of First Financial or its management or board of directors and statements of future economic performances and statements of assumptions underlying such statements.  Words such as ''believes,'' ''anticipates,'' "likely," "expected," ''intends,'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.  Management's analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance.  However, such performance involves risks and uncertainties that may cause actual results to differ materially.  These factors include, but are not limited to: economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company's business; the effect of and changes in policies and laws or regulatory agencies (notably the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act); management's ability to effectively execute its business plan; mergers and acquisitions, including costs or difficulties related to the integration of acquired companies, including the recently announced proposed acquisitions of The First Bexley Bank, Insight Bank and Guernsey Bancorp; the Company's ability to comply with the terms of loss sharing agreements with the FDIC; the effect of changes in accounting policies and practices; and the costs and effects of litigation and of unexpected or adverse outcomes in such litigation.  Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2013, as well as its other filings with the SEC, for a more detailed discussion of these risks, uncertainties and other factors that could cause actual results to differ from those discussed in the forward-looking statements.  Such forward-looking statements are meaningful only on the date when such statements are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such a statement is made to reflect the occurrence of unanticipated events.

 

 


FIRST FINANCIAL BANCORP.
CONSOLIDATED FINANCIAL HIGHLIGHTS


(Dollars in thousands, except per share)
(Unaudited)






















Three months ended,


Mar. 31,


Dec. 31,


Sep. 30,


Jun. 30,


Mar. 31,


2014


2013


2013


2013


2013











RESULTS OF OPERATIONS










Net income

$15,104


$3,785


$14,911


$15,829


$13,824

Net earnings per share - basic 

$0.26


$0.07


$0.26


$0.28


$0.24

Net earnings per share - diluted 

$0.26


$0.07


$0.26


$0.27


$0.24

Dividends declared per share

$0.15


$0.15


$0.27


$0.24


$0.28











KEY FINANCIAL RATIOS










Return on average assets

0.96%


0.24%


0.96%


1.01%


0.88%

Return on average shareholders' equity

8.95%


2.15%


8.53%


9.02%


7.91%

Return on average tangible shareholders' equity

10.49%


2.51%


10.00%


10.54%


9.24%











Net interest margin

3.82%


3.90%


3.91%


4.02%


4.04%

Net interest margin (fully tax equivalent) (1)

3.87%


3.94%


3.95%


4.06%


4.07%











Ending shareholders' equity as a percent of ending assets

10.64%


10.63%


11.07%


11.08%


11.05%

Ending tangible shareholders' equity as a percent of:










  Ending tangible assets

9.23%


9.20%


9.60%


9.62%


9.60%

  Risk-weighted assets

13.50%


13.59%


14.27%


14.50%


15.05%











Average shareholders' equity as a percent of average assets

10.69%


11.23%


11.19%


11.15%


11.09%

Average tangible shareholders' equity as a percent of










    average tangible assets

9.27%


9.77%


9.71%


9.70%


9.65%











Book value per share

$11.98


$11.86


$11.99


$12.05


$12.09

Tangible book value per share

$10.24


$10.10


$10.24


$10.29


$10.33











Tier 1 Ratio(2)

14.42%


14.61%


15.26%


15.41%


15.87%

Total Capital Ratio(2)

15.67%


15.88%


16.53%


16.68%


17.15%

Leverage Ratio(2)

9.94%


10.11%


10.29%


10.12%


10.00%











AVERAGE BALANCE SHEET ITEMS









Loans (3)

$3,532,311


$3,450,069


$3,410,102


$3,313,731


$3,205,781

Covered loans and FDIC indemnification asset

478,326


568,385


655,654


758,875


840,190

Investment securities

1,807,571


1,654,374


1,589,666


1,705,219


1,838,783

Interest-bearing deposits with other banks

2,922


4,906


4,010


13,890


3,056

  Total earning assets

$5,821,130


$5,677,734


$5,659,432


$5,791,715


$5,887,810

Total assets

$6,399,235


$6,232,971


$6,193,722


$6,310,602


$6,391,049

Noninterest-bearing deposits

$1,096,509


$1,129,097


$1,072,259


$1,063,102


$1,049,943

Interest-bearing deposits

3,695,177


3,720,809


3,654,311


3,792,891


3,785,402

  Total deposits

$4,791,686


$4,849,906


$4,726,570


$4,855,993


$4,835,345

Borrowings

$842,479


$583,522


$667,706


$644,058


$735,327

Shareholders' equity

$684,332


$700,063


$693,158


$703,804


$708,862











CREDIT QUALITY RATIOS (excluding covered assets)









Allowance to ending loans

1.19%


1.25%


1.33%


1.39%


1.49%

Allowance to nonaccrual loans

121.76%


116.55%


78.57%


75.87%


74.95%

Allowance to nonperforming loans

88.28%


83.17%


61.34%


62.78%


62.57%

Nonperforming loans to total loans

1.35%


1.50%


2.16%


2.22%


2.38%

Nonperforming assets to ending loans, plus OREO

1.70%


2.06%


2.50%


2.56%


2.74%

Nonperforming assets to total assets

0.95%


1.13%


1.38%


1.38%


1.40%

Net charge-offs to average loans (annualized) 

0.23%


0.41%


0.34%


0.45%


0.32%











(1)The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate.  Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax equivalent basis.  Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons.  Management also uses these measures to make peer comparisons.

(2)March 31, 2014 regulatory capital ratios are preliminary.

(3) Includes loans held for sale.

 


FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME


(Dollars in thousands, except per share)
(Unaudited)






2014


2013


First


Fourth 


Third


Second


First


Full


Quarter


Quarter


Quarter


Quarter


Quarter


Year

Interest income












  Loans, including fees

$49,147


$52,351


$52,908


$55,022


$56,025


$216,306

  Investment securities












     Taxable

10,437


9,209


8,267


8,295


8,376


34,147

     Tax-exempt

810


719


541


560


580


2,400

        Total investment securities interest

11,247


9,928


8,808


8,855


8,956


36,547

  Other earning assets

(1,406)


(2,432)


(2,185)


(1,556)


(1,472)


(7,645)

       Total interest income

58,988


59,847


59,531


62,321


63,509


245,208













Interest expense












  Deposits

3,316


3,247


2,856


3,284


3,860


13,247

  Short-term borrowings

329


257


286


305


329


1,177

  Long-term borrowings

524


539


617


654


654


2,464

      Total interest expense

4,169


4,043


3,759


4,243


4,843


16,888

      Net interest income

54,819


55,804


55,772


58,078


58,666


228,320

  Provision for loan and lease losses - uncovered

1,159


1,851


1,413


2,409


3,041


8,714

  Provision for loan and lease losses - covered

(2,192)


(5,857)


5,293


(8,283)


9,042


195

      Net interest income after provision for loan and lease losses

55,852


59,810


49,066


63,952


46,583


219,411













Noninterest income












  Service charges on deposit accounts

4,772


5,226


5,447


5,205


4,717


20,595

  Trust and wealth management fees

3,746


3,506


3,366


3,497


3,950


14,319

  Bankcard income 

2,433


2,699


2,637


3,145


2,433


10,914

  Net gains from sales of loans

396


604


751


1,089


706


3,150

  Gain on sale of investment securities

50


0


0


188


1,536


1,724

  FDIC loss sharing income

(508)


(3,385)


5,555


(7,384)


8,934


3,720

  Accelerated discount on covered loans

1,015


1,572


1,711


1,935


1,935


7,153

  Other

2,271


2,821


2,824


3,940


2,487


12,072

      Total noninterest income

14,175


13,043


22,291


11,615


26,698


73,647













Noninterest expenses












  Salaries and employee benefits

25,261


24,023


23,834


26,216


27,329


101,402

  Pension settlement charges

0


462


1,396


4,316


0


6,174

  Net occupancy

5,299


4,557


5,101


5,384


6,165


21,207

  Furniture and equipment 

2,077


2,136


2,213


2,250


2,371


8,970

  Data processing 

2,858


2,617


2,584


2,559


2,469


10,229

  Marketing

786


999


1,192


1,182


897


4,270

  Communication

623


728


865


781


833


3,207

  Professional services

1,724


1,781


1,528


1,764


1,803


6,876

  State intangible tax

644


901


1,010


1,004


1,014


3,929

  FDIC assessments

1,134


1,121


1,107


1,148


1,125


4,501

  Loss (gain) - other real estate owned

418


348


184


216


502


1,250

  Loss (gain) - covered other real estate owned

33


946


204


(2,212)


(157)


(1,219)

  Loss sharing expense

1,569


1,495


1,724


1,578


2,286


7,083

  FDIC indemnification impairment 

0


22,417


0


0


0


22,417

  Other 

5,416


5,754


5,859


7,097


6,469


25,179

      Total noninterest expenses

47,842


70,285


48,801


53,283


53,106


225,475

Income before income taxes

22,185


2,568


22,556


22,284


20,175


67,583

Income tax expense

7,081


(1,217)


7,645


6,455


6,351


19,234

      Net income

$15,104


$3,785


$14,911


$15,829


$13,824


$48,349













ADDITIONAL DATA












Net earnings per share - basic

$0.26


$0.07


$0.26


$0.28


$0.24


$0.84

Net earnings per share - diluted

$0.26


$0.07


$0.26


$0.27


$0.24


$0.83

Dividends declared per share

$0.15


$0.15


$0.27


$0.24


$0.28


$0.94













Return on average assets

0.96%


0.24%


0.96%


1.01%


0.88%


0.77%

Return on average shareholders' equity

8.95%


2.15%


8.53%


9.02%


7.91%


6.89%













Interest income

$58,988


$59,847


$59,531


$62,321


$63,509


$245,208

Tax equivalent adjustment

702


635


516


514


477


2,142

   Interest income - tax equivalent

59,690


60,482


60,047


62,835


63,986


247,350

Interest expense

4,169


4,043


3,759


4,243


4,843


16,888

   Net interest income - tax equivalent

$55,521


$56,439


$56,288


$58,592


$59,143


$230,462













Net interest margin

3.82%


3.90%


3.91%


4.02%


4.04%


3.97%

Net interest margin (fully tax equivalent) (1)

3.87%


3.94%


3.95%


4.06%


4.07%


4.01%













Full-time equivalent employees 

1,286


1,306


1,292


1,338


1,385



 

(1)The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis.  Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons.  Management also uses these measures to make peer comparisons.


 

FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF CONDITION


(Dollars in thousands)
(Unaudited)






























Mar. 31,


Dec. 31,


Sep. 30,


Jun. 30,


Mar. 31,


% Change


% Change


2014


2013


2013


2013


2013


Linked Qtr.


Comparable Qtr.

ASSETS














     Cash and due from banks

$161,515


$117,620


$177,698


$114,745


$106,249


37.3%


52.0%

     Interest-bearing deposits with other banks

9,681


25,830


10,414


2,671


1,170


(62.5%)


727.4%

     Investment securities available-for-sale

862,526


913,601


854,747


884,694


952,039


(5.6%)


(9.4%)

     Investment securities held-to-maturity

890,806


837,272


669,093


670,246


716,214


6.4%


24.4%

     Other investments

47,659


47,427


75,945


75,645


75,375


0.5%


(36.8%)

     Loans held for sale

6,171


8,114


10,704


18,650


28,126


(23.9%)


(78.1%)

     Loans














       Commercial

1,118,057


1,035,668


960,016


940,420


892,381


8.0%


25.3%

       Real estate - construction

87,996


80,741


90,089


97,246


87,542


9.0%


0.5%

       Real estate - commercial

1,513,891


1,496,987


1,493,969


1,477,226


1,433,182


1.1%


5.6%

       Real estate - residential

360,671


352,931


352,830


343,016


330,260


2.2%


9.2%

       Installment

44,911


47,133


49,273


50,781


53,509


(4.7%)


(16.1%)

       Home equity

374,427


376,454


373,839


370,206


365,943


(0.5%)


2.3%

       Credit card

34,458


35,592


34,285


33,222


32,465


(3.2%)


6.1%

       Lease financing

79,792


80,135


76,615


70,011


53,556


(0.4%)


49.0%

          Total loans, excluding covered loans

3,614,203


3,505,641


3,430,916


3,382,128


3,248,838


3.1%


11.2%

       Less














          Allowance for loan and lease losses

43,023


43,829


45,514


47,047


48,306


(1.8%)


(10.9%)

             Net loans - uncovered

3,571,180


3,461,812


3,385,402


3,335,081


3,200,532


3.2%


11.6%

       Covered loans

409,405


457,873


518,524


622,265


687,798


(10.6%)


(40.5%)

       Less














          Allowance for loan and lease losses

10,573


18,901


23,259


32,961


45,496


(44.1%)


(76.8%)

             Net loans - covered

398,832


438,972


495,265


589,304


642,302


(9.1%)


(37.9%)

                Net loans

3,970,012


3,900,784


3,880,667


3,924,385


3,842,834


1.8%


3.3%

     Premises and equipment

135,105


137,110


139,125


142,675


146,889


(1.5%)


(8.0%)

     Goodwill

95,050


95,050


95,050


95,050


95,050


0.0%


0.0%

     Other intangibles

5,566


5,924


6,249


6,620


7,078


(6.0%)


(21.4%)

     FDIC indemnification asset

39,003


45,091


78,132


88,966


112,428


(13.5%)


(65.3%)

     Accrued interest and other assets

275,995


283,390


255,617


250,228


265,565


(2.6%)


3.9%

       Total assets

$6,499,089


$6,417,213


$6,253,441


$6,274,575


$6,349,017


1.3%


2.4%















LIABILITIES














     Deposits














       Interest-bearing demand

$1,102,029


$1,125,723


$1,068,067


$1,131,466


$1,113,940


(2.1%)


(1.1%)

       Savings

1,639,495


1,612,005


1,593,895


1,601,122


1,620,874


1.7%


1.1%

       Time

956,049


952,327


926,029


978,680


1,030,124


0.4%


(7.2%)

          Total interest-bearing deposits

3,697,573


3,690,055


3,587,991


3,711,268


3,764,938


0.2%


(1.8%)

       Noninterest-bearing

1,122,816


1,147,452


1,141,016


1,059,368


1,056,409


(2.1%)


6.3%

          Total deposits

4,820,389


4,837,507


4,729,007


4,770,636


4,821,347


(0.4%)


(0.0%)

     Short-term borrowings














       Federal funds purchased and securities sold














         under agreements to repurchase

112,293


94,749


105,472


114,030


130,863


18.5%


(14.2%)

       FHLB short-term borrowings

722,800


654,000


518,200


505,900


502,200


10.5%


43.9%

          Total short-term borrowings

835,093


748,749


623,672


619,930


633,063


11.5%


31.9%

     Long-term debt

60,163


60,780


61,088


73,957


74,498


(1.0%)


(19.2%)

          Total borrowed funds

895,256


809,529


684,760


693,887


707,561


10.6%


26.5%

     Accrued interest and other liabilities

92,097


88,016


147,635


114,600


118,495


4.6%


(22.3%)

       Total liabilities

5,807,742


5,735,052


5,561,402


5,579,123


5,647,403


1.3%


2.8%















SHAREHOLDERS' EQUITY














     Common stock

573,243


577,076


577,429


576,641


575,514


(0.7%)


(0.4%)

     Retained earnings 

330,672


324,192


328,993


329,633


327,635


2.0%


0.9%

     Accumulated other comprehensive loss

(27,648)


(31,281)


(29,294)


(25,645)


(21,475)


(11.6%)


28.7%

     Treasury stock, at cost

(184,920)


(187,826)


(185,089)


(185,177)


(180,060)


(1.5%)


2.7%

       Total shareholders' equity

691,347


682,161


692,039


695,452


701,614


1.3%


(1.5%)

       Total liabilities and shareholders' equity

$6,499,089


$6,417,213


$6,253,441


$6,274,575


$6,349,017


1.3%


2.4%















 

 

FIRST FINANCIAL BANCORP.

AVERAGE CONSOLIDATED STATEMENTS OF CONDITION

 

(Dollars in thousands)

(Unaudited)

 













Quarterly Averages



Mar. 31,


Dec. 31,


Sep. 30,


Jun. 30,


Mar. 31,



2014


2013


2013


2013


2013


ASSETS











     Cash and due from banks

$123,583


$110,246


$120,154


$119,909


$111,599


     Interest-bearing deposits with other banks

2,922


4,906


4,010


13,890


3,056


     Investment securities

1,807,571


1,654,374


1,589,666


1,705,219


1,838,783


     Loans held for sale

4,924


7,990


13,349


19,722


21,096


     Loans











       Commercial

1,062,225


986,438


937,939


904,029


863,427


       Real estate - construction

83,095


79,194


93,103


93,813


81,171


       Real estate - commercial

1,491,569


1,489,858


1,488,047


1,445,626


1,411,769


       Real estate - residential

355,593


351,929


347,110


334,652


323,768


       Installment

45,642


47,733


50,130


52,313


54,684


       Home equity

374,503


374,919


371,072


367,408


365,568


       Credit card

34,663


35,673


34,176


33,785


33,300


       Lease financing

80,097


76,335


75,176


62,383


50,998


          Total loans, excluding covered loans

3,527,387


3,442,079


3,396,753


3,294,009


3,184,685


       Less











          Allowance for loan and lease losses

44,273


46,531


49,451


50,172


49,408


             Net loans - uncovered

3,483,114


3,395,548


3,347,302


3,243,837


3,135,277


       Covered loans

434,527


490,072


573,243


653,892


724,846


       Less











          Allowance for loan and lease losses

17,629


21,733


31,208


41,861


46,104


             Net loans - covered

416,898


468,339


542,035


612,031


678,742


                Net loans

3,900,012


3,863,887


3,889,337


3,855,868


3,814,019


     Premises and equipment

136,624


138,644


141,498


144,759


147,355


     Goodwill

95,050


95,050


95,050


95,050


95,050


     Other intangibles

5,723


6,075


6,428


6,831


7,346


     FDIC indemnification asset

43,799


78,313


82,411


104,983


115,344


     Accrued interest and other assets

279,027


273,486


251,819


244,371


237,401


       Total assets

$6,399,235


$6,232,971


$6,193,722


$6,310,602


$6,391,049













LIABILITIES











     Deposits











       Interest-bearing demand

$1,107,844


$1,150,275


$1,098,524


$1,141,767


$1,112,664


       Savings

1,633,910


1,637,657


1,608,351


1,639,834


1,618,239


       Time

953,423


932,877


947,436


1,011,290


1,054,499


          Total interest-bearing deposits

3,695,177


3,720,809


3,654,311


3,792,891


3,785,402


       Noninterest-bearing

1,096,509


1,129,097


1,072,259


1,063,102


1,049,943


          Total deposits

4,791,686


4,849,906


4,726,570


4,855,993


4,835,345


     Short-term borrowings











       Federal funds purchased and securities sold











          under agreements to repurchase

110,533


107,738


114,505


105,299


134,709


       Federal Home Loan Bank short-term borrowings

671,579


414,892


483,937


464,630


525,878


          Total short-term borrowings

782,112


522,630


598,442


569,929


660,587


     Long-term debt

60,367


60,892


69,264


74,129


74,740


       Total borrowed funds

842,479


583,522


667,706


644,058


735,327


     Accrued interest and other liabilities

80,738


99,480


106,288


106,747


111,515


       Total liabilities

5,714,903


5,532,908


5,500,564


5,606,798


5,682,187













SHAREHOLDERS' EQUITY











     Common stock

575,828


577,851


576,953


576,391


578,452


     Retained earnings 

324,875


337,034


329,518


329,795


330,879


     Accumulated other comprehensive loss

(29,251)


(28,380)


(28,232)


(19,204)


(19,576)


     Treasury stock, at cost

(187,120)


(186,442)


(185,081)


(183,178)


(180,893)


       Total shareholders' equity

684,332


700,063


693,158


703,804


708,862


       Total liabilities and shareholders' equity

$6,399,235


$6,232,971


$6,193,722


$6,310,602


$6,391,049













 


 

FIRST FINANCIAL BANCORP.

NET INTEREST MARGIN RATE / VOLUME ANALYSIS (1)

 

(Dollars in thousands)

(Unaudited)

 



 Quarterly Averages 
















Mar. 31, 2014


Dec. 31, 2013


Mar. 31, 2013



 Linked Qtr. Income Variance 


 Comparable Qtr. Income Variance 



Balance


Yield


Balance


Yield


Balance


Yield



Rate


Volume


Total


Rate


Volume


Total

Earning assets


























   Investment securities


$     1,807,571


2.52%


$    1,654,374


2.38%


$     1,838,783


1.98%



$       595


$       724


$    1,319


$    2,485


$     (194)


$    2,291

   Interest-bearing deposits with other banks


2,922


1.39%


4,906


0.57%


3,056


0.53%



10


(7)


3


6


0


6

   Gross loans, including covered loans and

   indemnification asset(2)


4,010,637


4.83%


4,018,454


4.93%


4,045,971


5.47%



(1,025)


(1,156)


(2,181)


(6,397)


(421)


(6,818)

      Total earning assets


5,821,130


4.11%


5,677,734


4.18%


5,887,810


4.37%



(420)


(439)


(859)


(3,906)


(615)


(4,521)



























Nonearning assets


























   Allowance for loan and lease losses


(61,902)




(68,264)




(95,512)
















   Cash and due from banks


123,583




110,246




111,599
















   Accrued interest and other assets


516,424




513,255




487,152
















      Total assets


$     6,399,235




$    6,232,971




$     6,391,049










































Interest-bearing liabilities


























   Deposits:


























   Interest-bearing demand


$     1,107,844


0.12%


$    1,150,275


0.19%


$     1,112,664


0.12%














   Savings


1,633,910


0.20%


1,637,657


0.15%


1,618,239


0.10%














   Time


953,423


0.94%


932,877


0.90%


1,054,499


1.20%














   Total interest-bearing deposits


3,695,177


0.36%


3,720,809


0.35%


3,785,402


0.41%



$       166


$       (97)


$         69


$     (463)


$       (81)


$     (544)

   Borrowed funds


























     Short-term borrowings


782,112


0.17%


522,630


0.20%


660,587


0.20%



(32)


104


72


(51)


51


0

     Long-term debt


60,367


3.52%


60,892


3.51%


74,740


3.55%



1


(16)


(15)


(5)


(125)


(130)

       Total borrowed funds


842,479


0.41%


583,522


0.54%


735,327


0.54%



(31)


88


57


(56)


(74)


(130)

     Total interest-bearing liabilities


4,537,656


0.37%


4,304,331


0.37%


4,520,729


0.43%



135


(9)


126


(519)


(155)


(674)



























Noninterest-bearing liabilities


























   Noninterest-bearing demand deposits


1,096,509




1,129,097




1,049,943
















   Other liabilities


80,738




99,480




111,515
















   Shareholders' equity


684,332




700,063




708,862
















      Total liabilities & shareholders' equity


$     6,399,235




$    6,232,971




$     6,391,049










































Net interest income(1)


$          54,819




$         55,804




$          58,666





$      (555)


$     (430)


$     (985)


$  (3,387)


$     (460)


$  (3,847)

Net interest spread(1)




3.74%




3.81%




3.94%














Net interest margin(1)




3.82%




3.90%




4.04%








































(1)Not tax equivalent.

(2)Loans held for sale and nonaccrual loans are both included in gross loans.

 

 


 

FIRST FINANCIAL BANCORP.

CREDIT QUALITY

(excluding covered assets)

 

(Dollars in thousands)

(Unaudited)

 












Mar. 31,


Dec. 31,


Sep. 30,


Jun. 30,


Mar. 31,


2014


2013


2013


2013


2013











ALLOWANCE FOR LOAN AND LEASE LOSS ACTIVITY









Balance at beginning of period

$43,829


$45,514


$47,047


$48,306


$47,777

  Provision for uncovered loan and lease losses

1,159


1,851


1,413


2,409


3,041

  Gross charge-offs










    Commercial 

656


293


1,482


859


781

    Real estate - construction

0


1


0


0


0

    Real estate - commercial

543


3,113


2,174


2,044


995

    Real estate - residential

257


218


249


326


223

    Installment

128


39


99


97


100

    Home equity

544


706


411


591


701

    Other

296


398


696


277


410

      Total gross charge-offs 

2,424


4,768


5,111


4,194


3,210

  Recoveries










    Commercial 

39


194


92


67


319

    Real estate - construction

0


46


490


0


136

    Real estate - commercial

114


634


1,264


57


39

    Real estate - residential

27


96


98


5


4

    Installment

77


66


57


110


77

    Home equity

103


136


95


225


52

    Other

99


60


69


62


71

      Total recoveries

459


1,232


2,165


526


698

  Total net charge-offs

1,965


3,536


2,946


3,668


2,512

Ending allowance for uncovered loan and lease losses

$43,023


$43,829


$45,514


$47,047


$48,306











NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES (ANNUALIZED)









  Commercial 

0.24%


0.04%


0.59%


0.35%


0.22%

  Real estate - construction

0.00%


(0.23%)


(2.09%)


0.00%


(0.68%)

  Real estate - commercial

0.12%


0.66%


0.24%


0.55%


0.27%

  Real estate - residential

0.26%


0.14%


0.17%


0.38%


0.27%

  Installment

0.45%


(0.22%)


0.33%


(0.10%)


0.17%

  Home equity

0.48%


0.60%


0.34%


0.40%


0.72%

  Other

0.70%


1.20%


2.27%


0.90%


1.63%

     Total net charge-offs 

0.23%


0.41%


0.34%


0.45%


0.32%











COMPONENTS OF NONPERFORMING LOANS, NONPERFORMING ASSETS, AND UNDERPERFORMING ASSETS



  Nonaccrual loans(1)










    Commercial 

$7,097


$7,934


$8,554


$12,925


$16,296

    Real estate - construction

223


223


1,099


1,104


2,094

    Real estate - commercial

16,758


17,286


35,549


35,055


33,871

    Real estate - residential

8,157


8,606


9,346


9,369


8,295

    Installment

399


574


421


249


341

    Home equity

2,700


2,982


2,871


2,813


3,059

    Lease financing

0


0


86


496


496

   Nonaccrual loans

35,334


37,605


57,926


62,011


64,452

  Accruing troubled debt restructurings (TDRs)

13,400


15,094


16,278


12,924


12,757

   Total nonperforming loans

48,734


52,699


74,204


74,935


77,209

  Other real estate owned (OREO)

12,743


19,806


11,804


11,798


11,993

   Total nonperforming assets

61,477


72,505


86,008


86,733


89,202

  Accruing loans past due 90 days or more

208


218


265


158


157

   Total underperforming assets

$61,685


$72,723


$86,273


$86,891


$89,359

Total classified assets

$103,471


$110,509


$120,423


$129,832


$130,436











CREDIT QUALITY RATIOS (excluding covered assets)










Allowance for loan and lease losses to










Nonaccrual loans

121.76%


116.55%


78.57%


75.87%


74.95%

Nonperforming loans

88.28%


83.17%


61.34%


62.78%


62.57%

Total ending loans

1.19%


1.25%


1.33%


1.39%


1.49%

Nonperforming loans to total loans

1.35%


1.50%


2.16%


2.22%


2.38%

Nonperforming assets to










Ending loans, plus OREO

1.70%


2.06%


2.50%


2.56%


2.74%

Total assets

0.95%


1.13%


1.38%


1.38%


1.40%

Nonperforming assets, excluding accruing TDRs to










Ending loans, plus OREO

1.33%


1.63%


2.03%


2.17%


2.34%

Total assets

0.74%


0.89%


1.12%


1.18%


1.20%











(1)  Nonaccrual loans include nonaccrual TDRs of $14.6 million, $13.0 million, $13.0 million, $19.9 million, and $22.3 million, as of March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013, respectively.  


 

 


 

FIRST FINANCIAL BANCORP.

CAPITAL ADEQUACY

 

(Dollars in thousands, except per share)

(Unaudited)

 













Mar. 31,


Dec. 31,


Sep. 30,


Jun. 30,


Mar. 31,



2014


2013


2013


2013


2013


PER COMMON SHARE











Market Price











  High

$18.20


$17.59


$16.47


$16.05


$16.07


  Low

$15.98


$14.56


$14.89


$14.52


$14.46


  Close

$17.98


$17.43


$15.17


$14.90


$16.05













Average shares outstanding - basic

57,091,604


57,152,425


57,201,390


57,291,994


57,439,029


Average shares outstanding - diluted

57,828,179


57,863,433


58,012,588


58,128,349


58,283,467


Ending shares outstanding

57,709,937


57,533,046


57,702,444


57,698,344


58,028,923













REGULATORY CAPITAL

Preliminary










Tier 1 Capital

$631,099


$624,850


$631,846


$630,819


$632,020


Tier 1 Ratio

14.42%


14.61%


15.26%


15.41%


15.87%


Total Capital

$685,926


$679,074


$684,363


$682,927


$682,974


Total Capital Ratio

15.67%


15.88%


16.53%


16.68%


17.15%


Total Capital in excess of minimum 











  requirement

$335,806


$336,982


$353,118


$355,435


$364,376


Total Risk-Weighted Assets

$4,376,505


$4,276,152


$4,140,561


$4,093,644


$3,982,479


Leverage Ratio

9.94%


10.11%


10.29%


10.12%


10.00%













OTHER CAPITAL RATIOS











Ending shareholders' equity to ending











  assets

10.64%


10.63%


11.07%


11.08%


11.05%


Ending tangible shareholders' equity











  to ending tangible assets

9.23%


9.20%


9.60%


9.62%


9.60%


Average shareholders' equity to











  average assets

10.69%


11.23%


11.19%


11.15%


11.09%


Average tangible shareholders' equity











  to average tangible assets

9.27%


9.77%


9.71%


9.70%


9.65%













REPURCHASE PROGRAM(1)











Shares repurchased

40,255


209,745


0


291,400


249,000


Average share repurchase price

$17.32


$16.39


N/A


$15.47


$15.39


Total cost of shares repurchased

$697


$3,438


N/A


$4,508


$3,831













(1)Represents share repurchases as part of publicly announced plans.

N/A=Not applicable

 

SUPPLEMENTAL INFORMATION ON COVERED ASSETS

ACCELERATED DISCOUNT ON LOAN PREPAYMENTS AND DISPOSITIONS

During the first quarter, First Financial recognized approximately $1.0 million in accelerated discount on covered loans, net of the related adjustment on the FDIC indemnification asset.  Accelerated discount is recognized when covered loans, which are recorded on the Company's balance sheet at an amount less than the unpaid principal balance, prepay at an amount greater than their recorded book value.  Prepayments can occur through either customer driven payments before the maturity date or loan sales.  The amount of discount attributable to the credit loss component of each loan varies and the recognized amount is offset by a related reduction in the FDIC indemnification asset.

NET INTEREST MARGIN IMPACT

Net interest margin is affected by certain activity related to the covered loan portfolio.  The majority of these loans are accounted for under FASB ASC Topic 310-30 and, as such, the Company is required to periodically update its forecast of expected cash flows from these loans.  Impairment, as a result of a decrease in expected cash flows, is recognized as provision expense in the period it is measured and has no impact on net interest margin.  Improvements in expected cash flows, in excess of any prior impairment, are recognized on a prospective basis through an upward adjustment to the yield earned on the portfolio.  Impairment and improvement are both partially offset by the impact of changes in the value of the FDIC indemnification asset.  Impairment is partially offset by an increase to the FDIC indemnification asset as a result of FDIC loss sharing income.  Improvement, which is reflected as a higher yield, is partially offset by a lower yield earned on the FDIC indemnification asset until the next periodic valuation of the loans and the indemnification asset.  The weighted average yield of the acquired loan portfolio may also be subject to change as loans with higher yields pay down more quickly or slowly than loans with lower yields.

The following table shows the estimated yield earned by the Company on its covered and uncovered loan portfolios and the FDIC indemnification asset for the three months ended March 31, 2014.









Table VII


For the Three Months Ended





March 31, 2014





Average





(Dollars in thousands)


Balance


Yield










Loans, excluding covered loans 1


$     3,532,311


4.34%










Covered loan portfolio accounted for under ASC Topic 310-302


378,321


10.21%










Covered loan portfolio accounted for under ASC Topic 310-203


56,206


13.48%










FDIC indemnification asset2


43,799


(13.11%)










Total


$     4,010,637


4.83%










Yield earned on total covered loans




10.63%










Yield earned on total covered loans and FDIC indemnification asset




8.46%

















1  Includes loans with loss share coverage removed







2  Future yield adjustments subject to change based on required, periodic valuation procedures



3  Includes loans with revolving privileges which are scoped out of ASC Topic 310-30 and certain loans



   which the Company elected to treat under the cost recovery method of accounting




COVERED ASSETS

The following table presents the covered loan portfolio as of March 31, 2014, December 31, 2013 and March 31, 2013.
















Table VIII















As of




March 31, 2014


December 31, 2013


March 31, 2013






Percent




Percent




Percent



(Dollars in thousands)

Balance


of Total


Balance


of Total


Balance


of Total

















Commercial

$      34,385


8.4%


$      42,316


9.2%


$      90,424


13.1%

















Real estate - construction

8,480


2.1%


8,556


1.9%


9,866


1.4%

















Real estate - commercial

234,797


57.4%


268,633


58.7%


425,950


61.9%

















Real estate - residential

77,768


19.0%


80,733


17.6%


95,991


14.0%

















Installment

5,106


1.2%


5,641


1.2%


7,640


1.1%

















Home equity

46,319


11.3%


49,624


10.8%


55,021


8.0%

















Other

2,550


0.6%


2,370


0.5%


2,906


0.4%

















Total

$    409,405


100.0%


$    457,873


100.0%


$    687,798


100.0%
















As of March 31, 2014, 10.2% of the Company's total loans were covered loans.  During the first quarter, the total balance of covered loans decreased $48.5 million, or 10.6%, compared to the prior quarter.  Of this decline, $27.4 million consisted of covered loans classified as likely to exit and resulted from the continued successful execution of resolution strategies.  As required under the loss sharing agreements, First Financial must file quarterly certifications with the FDIC on all covered loans.  The payment of claims is subject to the FDIC's review for compliance with the loss sharing agreements and to date, all certifications have been filed in a timely manner and without significant issues.  The Company's loss sharing agreements with the FDIC related to non-single-family loans expire during the third quarter 2014 and the agreements related to single-family loans expire in the third quarter 2019.

Covered OREO decreased $4.1 million, or 15.0%, during the first quarter to $23.0 million as of March 31, 2014, driven primarily by $4.8 million of resolutions and valuation adjustments.  The Company recognized an immaterial net loss on sales of covered OREO during the quarter, which was offset by a corresponding increase in FDIC loss sharing income of approximately 80% of the net loss recognized.

ALLOWANCE FOR LOAN AND LEASE LOSSES - COVERED

Under the applicable accounting guidance, the allowance for loan losses related to covered loans is a result of impairment identified in ongoing valuation procedures and is generally recognized in the current period as provision expense.  However, if improvement is noted in a loan pool that had previously experienced impairment, the amount of improvement is recognized as a reduction to the applicable period's provision expense.  Additional improvement beyond previously recorded impairment is reflected as a yield adjustment on a prospective basis.  The timing inherent in this accounting treatment may result in earnings volatility in future periods.

The following table presents activity in the allowance for loan losses related to covered loans for the three months ended March 31, 2014 and for the trailing three quarters.












Table IX





















As of or for the Three Months Ended




March 31,


December 31,


September 30,


June 30,



(Dollars in thousands)

2014


2013


2013


2013













Balance at beginning of period

$      18,901


$      23,259


$      32,961


$      45,496













Provision for loan and lease losses - covered

(2,192)


(5,857)


5,293


(8,283)













Total gross charge-offs

(7,240)


(3,850)


(21,009)


(4,681)













Total recoveries

1,104


5,349


6,014


429













Total net (charge-offs) / recoveries

(6,136)


1,499


(14,995)


(4,252)













Ending allowance for loan and lease losses - covered

$      10,573


$      18,901


$      23,259


$      32,961












As a percentage of total covered loans, the allowance for loan losses totaled 2.58% as of March 31, 2014 compared to 4.13% as of December 31, 2013.

Net charge-offs on covered loans during the first quarter were $6.1 million compared to net recoveries of $1.5 million for the fourth quarter 2014.  During the first quarter, the Company recognized a negative provision expense of $2.2 million compared to a negative provision expense of $5.9 million for the linked quarter.  The difference between provision expense and net charge-offs / recoveries primarily relates to the quarterly re-estimation of cash flow expectations required under FASB ASC Topic 310-30.

In addition to the provision expense, the Company incurred loss sharing and covered asset expenses of $1.6 million, consisting primarily of credit expenses, and an immaterial amount of net losses related to covered OREO.  The negative FDIC loss sharing income of $0.5 million for the quarter reflects the quarterly re-estimation of expected cash flows and the corresponding offset related to the loss sharing and covered asset expenses and the net losses on sales of covered OREO.

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