EX-99.1 2 a8k4q12earningsreleaseex991.htm EXHIBIT 99.1 8K 4Q12 Earnings release Ex 99.1

EXHIBIT 99.1

First Financial Bancorp Reports Fourth Quarter and
Full Year 2012 Financial Results

Cincinnati, Ohio - January 29, 2013 - First Financial Bancorp (Nasdaq: FFBC) (“First Financial” or the “Company”) announced today financial and operational results for the fourth quarter 2012 and for the twelve month period ended December 31, 2012.

Fourth quarter 2012 net income was $16.3 million and earnings per diluted common share were $0.28. This compares with third quarter 2012 net income of $16.2 million and earnings per diluted common share of $0.28 and fourth quarter 2011 net income of $17.9 million and earnings per diluted common share of $0.31.

For the twelve month period ended December 31, 2012, net income was $67.3 million and earnings per diluted common share were $1.14 as compared to net income of $66.7 million and earnings per diluted common share of $1.14 for the twelve month period ended December 31, 2011.

The board of directors has authorized a regular dividend of $0.15 per common share and a variable dividend of $0.13 per common share for the next regularly scheduled dividend, payable on April 1, 2013 to shareholders of record as of March 1, 2013. This is a continuation of the 100% dividend payout ratio first announced in the second quarter 2011 and is expected to continue through 2013 unless the Company's capital position materially changes or capital deployment opportunities arise.

Under the announced share repurchase plan, the Company repurchased 460,500 shares during the fourth quarter at an average price of $14.78 per share. When combined with the regular and variable dividends paid to shareholders, First Financial returned 110.8% of 2012 full year net income to shareholders during the year. Additionally, the Company has repurchased 84,000 shares during the first quarter 2013 at an average price of $14.83 per share.

▪
89th consecutive quarter of profitability
▪
Quarterly adjusted pre-tax, pre-provision income of $28.6 million, an increase of $4.2 million, or 17.1%, compared to the linked quarter
▪
Continued solid performance
•
Quarterly return on average assets of 1.03%; full year return on average assets of 1.07%
•
Quarterly return on average risk-weighted assets of 1.68%; full year return on average risk-weighted assets of 1.78%
•
Quarterly return on average shareholders' equity of 9.06%; full year return on average shareholders' equity of 9.43%
▪
Capital ratios remain strong
•
Tangible common equity to tangible assets of 9.50%
•
Tier 1 capital ratio of 16.32%
•
Total risk-based capital ratio of 17.60%
▪
Quarterly net interest margin increased to 4.27% from 4.21% for the linked quarter
•
Results included a $2.2 million prepayment fee; excluding this item net interest margin was 4.11% for the quarter
•
Adjusted yield on the uncovered portfolio increased 3 bps during the quarter to 4.73%

1

•
Cost of interest-bearing deposits declined 8 bps during the quarter to 0.49%
▪
Total uncovered loan portfolio growth of 14.7% on an annualized basis
•
Strong growth in C&I, commercial real estate, specialty finance and residential mortgage balances
•
Uncovered loan growth exceeded covered loan decline by $35.6 million
▪
Significant core deposit growth during the fourth quarter
•
Non-time deposits increased 15.1% on an annualized basis
•
Growth driven by the commercial and retail lines of business
▪
Total classified assets declined $4.3 million, or 3.3%, compared to the linked quarter and $33.3 million, or 20.5%, compared to December 31, 2011

Implementation of the efficiency plan announced in the third quarter continues as previously disclosed with regard to estimated annualized cost savings and timing. During the fourth quarter, the Company announced that it will be consolidating 10 banking centers located in Ohio and Indiana effective February 15, 2013. The estimated annual pre-tax operating costs associated with these locations are included in the identified $17.1 million of annualized cost savings. Also during the quarter, the Company incurred certain pre-tax expenses not expected to recur of $1.0 million, or $0.01 per diluted share after taxes. Approximately $0.6 million was related to employee benefit expenses associated with the efficiency plan and $0.3 million was related to real estate expenses associated with previously announced banking center consolidation and closure plans. Additionally, the Company recognized pre-tax gains of $1.0 million resulting from the sales of investment securities, or $0.01 per diluted share after taxes.

Claude Davis, President and Chief Executive Officer, commented, “While 2012 presented a variety of challenges, we ended the year on a strong note as we experienced solid growth in both our uncovered loan portfolio and core deposit base. We were especially pleased that for the first time since the Irwin transaction in 2009, uncovered loan growth exceeded the decline in covered loans as total loan balances increased $35.6 million during the fourth quarter.

“During the fourth quarter, total uncovered loans increased $113.0 million, or 14.7% on an annualized basis, and increased $210.6 million, or 7.1%, compared to the prior year. As in recent quarters, the level of early payoffs remained elevated; however, our strong pipeline at the end of the third quarter translated into fourth quarter originations and renewals resulting in one of our best quarters in recent years. We had a particularly strong December driven by new business in our traditional commercial and franchise lending businesses. We are optimistic that this momentum will carry over into 2013 as the pipeline continued to look solid at the end of the year, with specialty finance expected to contribute meaningfully to first quarter originations.

“Over the last several years, we have made significant investments intended to create long-term franchise value for all stakeholders in the Company, including the branch acquisitions we made during 2011 and the build-outs of our specialty finance and mortgage origination platforms. We recognize that we face a revenue headwind as the current interest rate and economic environments combined with our declining covered loan portfolio creates challenges for achieving earnings growth and positive operating leverage over the next several quarters. The strategic initiatives we have implemented, as well as the efficiency plan we are executing on, are evidence of our commitment to build the premier community banking franchise serving our markets.

“During 2012, these investments in the franchise began to payoff. Almost 45% of our year-over-year growth in uncovered loans came from the Indianapolis and Dayton markets as we achieved significant growth in both our commercial and retail lines of business. While the earnings impact of this growth was muted due to the interest rate environment, our sales efforts in these markets have laid the groundwork for continued success as we aggressively pursue new client relationships. Additionally, the deposit relationships we added as part of the branch acquisitions contributed to the growth in core noninterest income as fee revenue from deposit products increased 9.6% during the year.


2

“Our business credit and equipment finance products also enjoyed tremendous growth as outstanding balances increased over 80% during the year, demonstrating our ability to adapt to the ever-changing needs of our client base. Furthermore, mortgage originations, both those we sell in the secondary market as well as those retained on our balance sheet, increased over 67% during 2012. Fee revenue from our mortgage business, which is still early in its full development, increased 51% year-over-year.”

NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the fourth quarter 2012 was $62.0 million as compared to $59.8 million for the third quarter 2012 and $65.5 million as compared to the year-over-year period. Compared to the linked quarter, total interest income increased $1.3 million, or 2.0%, and total interest expense declined $0.8 million, or 12.9%. Net interest margin was 4.27% for the fourth quarter 2012 as compared to 4.21% for the third quarter 2012 and 4.32% for the fourth quarter 2011.

Interest income earned on loans increased $0.9 million, or 1.4%, compared to the prior quarter. Included in the quarterly increase was a prepayment fee of $2.2 million related to the early payoff of one relationship. Excluding this prepayment fee, net interest margin was 4.11%, a decline of 10 bps compared to the linked quarter. Net of the prepayment fee, the lower interest income earned on loans and decline in net interest margin was driven primarily by an 8.3% decrease in the average balance of covered loans outstanding and, to a lesser extent, a decline in the yield earned on the portfolio.

The covered loan activity was partially offset by growth in average uncovered loan balances of $78.0 million, or 2.6% on a linked quarter basis. Excluding the impact of the prepayment fee, the yield earned on the uncovered portfolio during the quarter was approximately 4.73%, a 3 bp increase compared to the linked quarter.

Interest income earned from investment securities increased as a result of a $140.6 million, or 8.8%, increase in average balances compared to the linked quarter. However, the impact on net interest margin was muted as the portfolio yield declined 10 bps to 1.99% as investment rates remain low in the current environment.

Interest expense and net interest margin continued to benefit from the impact of deposit pricing and rationalization strategies as the average balance of interest-bearing deposits declined 2.5% compared to the prior quarter, driven by a $133.7 million, or 10.6%, decrease in average time deposit balances during the quarter. The cost of funds related to interest-bearing deposits decreased 8 bps to 49 bps compared to 57 bps for the linked quarter.

NONINTEREST INCOME
The following table presents noninterest income for the three months ended December 31, 2012, September 30, 2012 and December 31, 2011 highlighting the estimated impact of covered loan activity and other transition items on the Company's reported balance.



3

 
 
 
 
 
 
 
 
 
Table I
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
 
December 31,
 
September 30,
 
December 31,
 
 
(Dollars in thousands)
2012
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Total noninterest income
$
26,121

 
$
30,830

 
$
29,640

 
 
   Certain significant components of noninterest income
 
 
 
 
 
 
 
      Items likely to recur:
 
 
 
 
 
 
 
        Accelerated discount on covered loans 1, 2
2,455

 
3,798

 
4,775

 
 
        FDIC loss sharing income
5,754

 
8,496

 
7,433

 
 
        Income (loss) related to transition/non-strategic operations
192

 
(32
)
 
64

 
 
      Items not expected to recur:
 
 
 
 
 
 
 
        Other items not expected to recur
1,011

 
2,617

 
2,270

 
 
   Total noninterest income excluding items noted above
$
16,709

 
$
15,951

 
$
15,098


 
 
 
 
 
 
 
 
 
1  See Selected Financial Information for additional information
 
 
 
 
 
 
 
2  Net of the corresponding valuation adjustment on the FDIC indemnification asset
 

Excluding the items highlighted in Table I, noninterest income earned in the fourth quarter 2012 was $16.7 million compared to $16.0 million in the third quarter 2012 and $15.1 million in the fourth quarter 2011. There were no individually significant items driving the increase compared to the linked quarter. Other items not expected to recur consist of $1.0 million of gains on sales of investment securities which are discussed in more detail in Investments.

NONINTEREST EXPENSE
The following table presents noninterest expense for the three months ended December 31, 2012, September 30, 2012 and December 31, 2011, including the estimated effect of covered asset activity, acquired-non-strategic operations and acquisition-related costs.

 
 
 
 
 
 
 
 
 
Table II
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
 
December 31,
 
September 30,
 
December 31,
 
 
(Dollars in thousands)
2012
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Total noninterest expense
$
53,474

 
$
55,286

 
$
54,668

 
 
   Certain significant components of noninterest expense
 
 
 
 
 
 
 
      Items likely to recur:
 
 
 
 
 
 
 
        Loss share and covered asset expense
2,251

 
3,559

 
2,522

 
 
        FDIC loss share support
798

 
951

 
1,333

 
 
        Acquired-non-strategic operating expenses 1
43

 
19

 
(27
)
 
 
      Items not expected to recur:
 
 
 
 
 
 
 
        Acquisition-related costs 1
—

 
78

 
1,167

 
 
       Other items not expected to recur
952

 
374

 
2,473

 
 
   Total noninterest income excluding items noted above
$
49,430

 
$
50,305

 
$
47,200

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1  See Selected Financial Information for additional information
 
 
 
 
 
 

Excluding the items highlighted in Table II, noninterest expense in the fourth quarter 2012 was $49.4 million as compared to $50.3 million in the third quarter 2012 and $47.2 million in the fourth quarter 2011. The decrease of $0.9 million compared to the linked quarter was due to lower uncovered OREO and collection expenses, partially offset by higher data processing and professional services expenses. Loss share and covered asset expense includes $2.3 million of credit-related expenses, offset by a small amount of net recoveries on covered OREO. Other items not expected to recur include $0.6 million of

4

employee benefit expenses associated with the efficiency plan and $0.3 million of real estate expenses associated with previously announced banking center consolidation and closure plans.

INCOME TAXES
For the fourth quarter 2012, income tax expense was $9.2 million, resulting in an effective tax rate of 36.1%, compared with income tax expense of $8.9 million and an effective tax rate of 35.4% during the third quarter 2012 and $10.4 million and an effective tax rate of 36.8% during the comparable year-over-year period.

CREDIT QUALITY - EXCLUDING COVERED ASSETS
The following table presents certain credit quality metrics related to the Company's uncovered loan portfolio as of December 31, 2012 and the trailing four quarters.

 
 
 
 
 
 
 
 
 
 
 
 
 
Table III
 
 
 
 
 
 
 
 
 
 
 
 
As of or for the Three Months Ended
 
 
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
 
(Dollars in thousands)
2012
 
2012
 
2012
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total nonaccrual loans
$
50,930

 
$
49,404

 
$
63,093

 
$
55,945

 
$
54,299

 
 
Troubled debt restructurings - accruing
10,856

 
11,604

 
9,909

 
9,495

 
4,009

 
 
Troubled debt restructurings - nonaccrual
14,111

 
13,017

 
10,185

 
17,205

 
18,071

 
 
Total troubled debt restructurings
24,967

 
24,621

 
20,094

 
26,700

 
22,080

 
 
Total nonperforming loans
75,897

 
74,025

 
83,187

 
82,645

 
76,379

 
 
Total nonperforming assets
88,423

 
87,937

 
98,875

 
97,681

 
87,696

 
 
Nonperforming assets as a % of:
 
 
 
 
 
 
 
 
 
 
 
   Period-end loans plus OREO
2.77
%
 
2.86
%
 
3.27
%
 
3.28
%
 
2.94
%
 
 
   Total assets
1.36
%
 
1.41
%
 
1.57
%
 
1.52
%
 
1.31
%
 
 
Nonperforming assets ex. accruing TDRs as a % of:
 
 
 
 
 
 
 
 
 
 
   Period-end loans plus OREO
2.43
%
 
2.48
%
 
2.94
%
 
2.96
%
 
2.81
%
 
 
   Total assets
1.19
%
 
1.22
%
 
1.42
%
 
1.37
%
 
1.25
%
 
 
Nonperforming loans as a % of total loans
2.39
%
 
2.41
%
 
2.76
%
 
2.79
%
 
2.57
%
 
 
Provision for loan and lease losses - uncovered
$
3,882

 
$
3,613

 
$
8,364

 
$
3,258

 
$
5,164

 
 
Allowance for uncovered loan & lease losses
$
47,777

 
$
49,192

 
$
50,952

 
$
49,437

 
$
52,576

 
 
Allowance for loan & lease losses as a % of:
 
 
 
 
 
 
 
 
 
 
 
   Period-end loans
1.50
%
 
1.60
%
 
1.69
%
 
1.67
%
 
1.77
%
 
 
   Nonaccrual loans
93.8
%
 
99.6
%
 
80.8
%
 
88.4
%
 
96.8
%
 
 
   Nonaccrual loans plus nonaccrual TDRs
73.5
%
 
78.8
%
 
69.5
%
 
67.6
%
 
72.7
%
 
 
   Nonperforming loans
63.0
%
 
66.5
%
 
61.3
%
 
59.8
%
 
68.8
%
 
 
Total net charge-offs
$
5,297

 
$
5,373

 
$
6,849

 
$
6,397

 
$
7,125

 
 
Annualized net-charge-offs as a % of average
 
 
 
 
 
 
 
 
 
 
 
   loans & leases
0.68
%
 
0.71
%
 
0.93
%
 
0.87
%
 
0.95
%
 
 
 
 
 
 
 
 
 
 
 
 
 

Net Charge-offs
For the fourth quarter 2012, net charge-offs declined slightly to $5.3 million, or 1.4%, compared to the linked quarter. Net charge-offs for the fourth quarter included approximately $1.1 million of consumer loan charge-offs, primarily home equity loans, resulting from recent guidance by the Office of the Comptroller of the Currency (“OCC”) clarifying that loans to consumer borrowers that have been discharged in bankruptcy where the borrower has not reaffirmed the debt are considered troubled debt restructurings and should be reported as nonaccrual loans and recorded at the lesser of the remaining loan balance or the fair value of the collateral securing the loan. There were no other individually significant items included in net charge-offs during the fourth quarter and the total amount was driven primarily by activity in the commercial real estate portfolio.


5

Nonperforming Assets
Nonaccrual loans, including nonaccrual troubled debt restructurings, increased $2.6 million, or 4.2%, to $65.0 million as of December 31, 2012 from $62.4 million as of September 30, 2012 driven primarily by $2.3 million of additions resulting from the previously mentioned OCC guidance on troubled debt restructurings as well as a $7.0 million addition related to a single commercial relationship where the Company believes the total exposure is collateralized substantially in excess of the outstanding balance. These additions were offset by resolution strategies related to credits in the commercial real estate and home equity portfolios, including collections, writedowns, transfers to OREO, dispositions and net charge-offs.

OREO decreased $1.4 million, or 10.0%, to $12.5 million during the fourth quarter as resolutions and valuation adjustments of $2.5 million exceeded $1.1 million of additions during the quarter. There were no individually material items included in either the additions or resolutions for the quarter.

Classified assets as of December 31, 2012 totaled $129.0 million as compared to $133.4 million for the linked quarter and $162.4 million as of December 31, 2011, representing declines of 3.3% and 20.5%, respectively. Classified assets, which have declined for nine consecutive quarters, are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse.

Delinquent Loans
As of December 31, 2012, loans 30-to-89 days past due decreased to $16.3 million, or 0.51% of period-end loans, as compared to $17.0 million, or 0.55%, as of September 30, 2012 and $20.4 million, or 0.69%, as of December 31, 2011.

Provision Expense and Allowance for Loan & Lease Losses
Fourth quarter 2012 provision expense related to uncovered loans and leases was $3.9 million as compared to $3.6 million during the linked quarter and $5.2 million during the comparable year-over-year quarter. Provision expense is a result of the Company's modeling efforts to estimate the period-end allowance for loan and lease losses. As a percentage of net charge-offs, fourth quarter 2012 provision expense equaled 73.3%. Excluding the $1.1 million of charge-offs related to consumer loans resulting from the OCC guidance, fourth quarter provision equaled 91.6% of net charge-offs.

The allowance for loan and lease losses declined $1.4 million, or 2.9%, compared to the prior quarter as a result of a decline in reserves related to resolved nonaccrual loans. Furthermore, the additions to nonaccrual loans discussed above required no reserves at December 31, 2012 as those resulting from the OCC guidance were recorded at the lesser of the remaining loan balance or the fair value of the underlying collateral and the Company believes the single commercial relationship is collateralized substantially in excess of the outstanding balance.

LOANS (EXCLUDING COVERED LOANS)
The following table presents the loan portfolio, not including covered loans, as of December 31, 2012, September 30, 2012 and December 31, 2011.


6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table IV
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
 
 
 
 
Percent
 
 
 
Percent
 
 
 
Percent
 
 
(Dollars in thousands)
Balance
 
of Total
 
Balance
 
of Total
 
Balance
 
of Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
861,033

 
27.1
%
 
$
834,858

 
27.2
%
 
$
856,981

 
28.9
%
 
 
Real estate - construction
73,517

 
2.3
%
 
91,897

 
3.0
%
 
114,974

 
3.9
%
 
 
Real estate - commercial
1,417,008

 
44.6
%
 
1,338,636

 
43.7
%
 
1,233,067

 
41.5
%
 
 
Real estate - residential
318,210

 
10.0
%
 
299,654

 
9.8
%
 
287,980

 
9.7
%
 
 
Installment
56,810

 
1.8
%
 
59,191

 
1.9
%
 
67,543

 
2.3
%
 
 
Home equity
367,500

 
11.6
%
 
368,876

 
12.0
%
 
358,960

 
12.1
%
 
 
Credit card
34,198

 
1.1
%
 
31,604

 
1.0
%
 
31,631

 
1.1
%
 
 
Lease financing
50,788

 
1.6
%
 
41,343

 
1.3
%
 
17,311

 
0.6
%
 
 
Total
$
3,179,064

 
100.0
%
 
$
3,066,059

 
100.0
%
 
$
2,968,447

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Loans, excluding covered loans, totaled $3.2 billion as of December 31, 2012, increasing $113.0 million, or 14.7% on an annualized basis, compared to the linked quarter and $210.6 million, or 7.1%, compared to December 31, 2011. The increase relative to both the linked and comparable quarters was driven by growth in commercial lending, including the C&I, commercial real estate and specialty finance portfolios, as well as growth in residential mortgage lending.

INVESTMENTS
The following table presents a summary of the total investment portfolio at December 31, 2012.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table V
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2012
 
 
 
 
Securities
 
Securities
 
Other
 
Total
 
Percent
 
Tax Equiv.
 
 
(Dollars in thousands)
HTM
 
AFS
 
Investments
 
Securities
 
of Portfolio
 
Yield
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agencies
 
$
20,512

 
$
72,984

 
—

 
$
93,496

 
5.0
%
 
1.57
%
 
 
CMO - fixed rate
 
471,780

 
451,182

 
—

 
922,962

 
49.2
%
 
1.96
%
 
 
CMO - variable rate
 
—

 
167,582

 
—

 
167,582

 
8.9
%
 
0.77
%
 
 
MBS - fixed rate
 
111,896

 
196,351

 
—

 
308,247

 
16.4
%
 
2.82
%
 
 
MBS - variable rate
 
157,215

 
52,115

 
—

 
209,330

 
11.2
%
 
2.17
%
 
 
Municipal
 
9,352

 
35,997

 
—

 
45,349

 
2.4
%
 
4.41
%
 
 
Corporate
 
—

 
43,949

 
—

 
43,949

 
2.3
%
 
2.84
%
 
 
Other AFS securities
 
—

 
11,936

 
—

 
11,936

 
0.6
%
 
2.84
%
 
 
Regulatory stock
 
—

 
—

 
71,492

 
71,492

 
3.8
%
 
4.28
%
 
 
 
 
$
770,755

 
$
1,032,096

 
$
71,492

 
$
1,874,343

 
100.0
%
 
2.15
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
The investment portfolio increased $290.9 million, or 18.4%, during the fourth quarter 2012 as $564.5 million of purchases were offset by sales, amortizations and paydowns, including continued elevated prepayment activity related to fixed rate MBS. The Company sold $152.4 million of lower-yielding agency MBS during the quarter in order to reduce liquidity, interest rate cap and prepayment risks, recognizing a pre-tax gain of $1.0 million. As of December 31, 2012, the overall duration of the investment portfolio increased to 2.8 years compared to 1.8 years as of September 30, 2012. The yield earned on the portfolio during the quarter declined to 1.99% from 2.09% for the linked quarter. As of

7

December 31, 2012, the market value of the portfolio classified as available-for-sale resulted in a net unrealized gain of $15.0 million which is included in other comprehensive income.

A portion of the purchases made during the quarter were funded by wholesale borrowings under a strategy to pre-fund the investment portfolio based on the portfolio's expected cash flows over the next twelve months. The increase in total short-term borrowings of $253.4 million during the fourth quarter approximates the borrowings under this strategy and had a weighted average cost of funds of 0.17%.

DEPOSITS
Non-time deposit balances totaled $3.9 billion as of December 31, 2012, representing an increase of $141.9 million, or 15.1% on an annualized basis, compared to September 30, 2012. The increase was driven primarily by a $100.6 million increase in commercial balances and a $69.6 million increase in retail balances, offset by a decline of $35.2 million in public fund balances.

Total time deposit balances decreased $130.7 million, or 10.9%, compared to the linked quarter as the Company continued to focus on reducing non-core relationship deposits in connection with its deposit rationalization strategies.

The Company's rationalization strategies related to deposit pricing continued to have a positive impact as the total cost of deposit funding declined to 38 bps for the quarter, a decrease of 15.6% compared to the prior quarter and 40.6% compared to the fourth quarter 2011. The composition of the Company's deposit base continues to improve as non-time deposits comprised 78.4% of total deposits as of December 31, 2012 compared to 70.7% as of December 31, 2011.

CAPITAL MANAGEMENT
The following table presents First Financial's regulatory and other capital ratios as of December 31, 2012, September 30, 2012 and December 31, 2011.

 
 
 
 
 
 
 
 
 
 
 
Table VI
 
 
 
 
 
 
 
 
 
 
As of
 
 
 
 
 
December 31,
 
September 30,
 
December 31,
 
"Well-Capitalized"
 
 
 
2012
 
2012
 
2011
 
Minimum
 
 
 
 
 
 
 
 
 
 
 
 
Leverage Ratio
10.25
%
 
10.54
%
 
9.87
%
 
5.00
%
 
 
Tier 1 Capital Ratio
16.32
%
 
16.93
%
 
17.47
%
 
6.00
%
 
 
Total Risk-Based Capital Ratio
17.60
%
 
18.21
%
 
18.74
%
 
10.00
%
 
 
Ending tangible shareholders' equity
 
 
 
 
 
 
 
 
 
   to ending tangible assets
9.50
%
 
9.99
%
 
9.23
%
 
N/A

 
 
Ending tangible common shareholders'
 
 
 
 
 
 
 
 
 
   equity to ending tangible assets
9.50
%
 
9.99
%
 
9.23
%
 
N/A

 
 
 
 
 
 
 
 
 
 
 

The Company's tangible common equity and regulatory capital ratios decreased during the quarter primarily due to the increases in tangible assets and risk-weighted assets resulting from the higher balances of investment securities and uncovered loans and, to a lesser extent, the decrease in shareholders' equity resulting from share repurchases. As of December 31, 2012, tangible book value per common share was $10.47, consistent with September 30, 2012 and compared to $10.41 as of December 31, 2011. Regulatory capital ratios as of December 31, 2012 are considered preliminary pending the filing of the Company's regulatory reports.



8

Teleconference / Webcast Information
First Financial's senior management will host a conference call to discuss the Company's financial and operating results on Wednesday, January 30, 2013 at 9:00 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 February 14, 2013 at (877) 344-7529 (U.S. toll free) and +1 (412) 317-0088 (International); conference number 10023463. The webcast will be archived on the Investor Relations section of the Company's website through January 30, 2014.


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.



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 (the ''Act''). In addition, certain statements in future filings by First Financial with the SEC, in press releases, and in oral and written statements made by or with the approval of First Financial which are not statements of historical fact constitute forward-looking statements within the meaning of the 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. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

▪
management's ability to effectively execute its business plan;
▪
the risk that the strength of the United States economy in general and the strength of the local economies in which we conduct operations may continue to deteriorate resulting in, among other things, a further deterioration in credit quality or a reduced demand for credit, including the resultant effect on our loan portfolio, allowance for loan and lease losses and overall financial performance;
▪
U.S. fiscal debt and budget matters;
▪
the ability of financial institutions to access sources of liquidity at a reasonable cost;
▪
the impact of recent upheaval in the financial markets and the effectiveness of domestic and international governmental actions taken in response, and the effect of such governmental actions on us, our competitors and counterparties, financial markets generally and availability of credit specifically, and the U.S. and international economies, including potentially higher FDIC premiums arising from increased payments from FDIC insurance funds as a result of depository institution failures;
▪
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);
▪
the effect of the current low interest rate environment or changes in interest rates on our net interest margin and our loan originations and securities holdings;
▪
our ability to keep up with technological changes;
▪
failure or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers;
▪
our ability to comply with the terms of loss sharing agreements with the FDIC;

9

▪
mergers and acquisitions, including costs or difficulties related to the integration of acquired companies and the wind-down of non-strategic operations that may be greater than expected, such as the risks and uncertainties associated with the Irwin Mortgage Corporation bankruptcy proceedings and other acquired subsidiaries;
▪
the risk that exploring merger and acquisition opportunities may detract from management's time and ability to successfully manage our Company;
▪
expected cost savings in connection with the consolidation of recent acquisitions may not be fully realized or realized within the expected time frames, and deposit attrition, customer loss and revenue loss following completed acquisitions may be greater than expected;
▪
our ability to increase market share and control expenses;
▪
the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board and the SEC;
▪
adverse changes in the securities, debt and/or derivatives markets;
▪
our success in recruiting and retaining the necessary personnel to support business growth and expansion and maintain sufficient expertise to support increasingly complex products and services;
▪
monetary and fiscal policies of the Board of Governors of the Federal Reserve System (Federal Reserve) and the U.S. government and other governmental initiatives affecting the financial services industry;
▪
our ability to manage loan delinquency and charge-off rates and changes in estimation of the adequacy of the allowance for loan and lease losses; and
▪
the costs and effects of litigation and of unexpected or adverse outcomes in such litigation.

In addition, please refer to our Annual Report on Form 10-K for the year ended December 31, 2011, as well as our other filings with the SEC, for a more detailed discussion of these risks and uncertainties and other factors. Such forward-looking statements are meaningful only on the date when such statements are made, and First Financial 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.



About First Financial Bancorp
First Financial Bancorp is a Cincinnati, Ohio based bank holding company. As of December 31, 2012, the Company had $6.5 billion in assets, $3.9 billion in loans, $5.0 billion in deposits and $710 million in shareholders' equity. The Company's subsidiary, First Financial Bank, N.A., founded in 1863, provides banking and financial services products through its three lines of business: commercial, retail and wealth management. The commercial and retail units provide traditional banking services to business and consumer clients. First Financial Wealth Management provides wealth planning, portfolio management, trust and estate, brokerage and retirement plan services and had approximately $2.3 billion in assets under management as of December 31, 2012. The Company's strategic operating markets are located in Ohio, Indiana and Kentucky where it operates 124 banking centers. Additional information about the Company, including its products, services and banking locations is available at www.bankatfirst.com.


Contact Information
Investors/Analysts                    Media
Kenneth Lovik                        Jenny Keighley
Vice President, Investor Relations and            Assistant Vice President, Media Relations Manager
Corporate Development                    (513) 979-5852
(513) 979-5837                        jennifer.keighley@bankatfirst.com
kenneth.lovik@bankatfirst.com



10


Selected Financial Information
December 31, 2012
(unaudited)


Contents
Page
Consolidated Financial Highlights
2
Consolidated Statements of Income
3
Consolidated Quarterly Statements of Income
4 - 5
Consolidated Statements of Condition
6
Average Consolidated Statements of Condition
7
Net Interest Margin Rate / Volume Analysis
8 - 9
Credit Quality
10
Capital Adequacy
11
Supplemental Information on Covered Assets and Acquisition-Related Items
12 - 15




FIRST FINANCIAL BANCORP.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended,
 
Twelve months ended,
 
Dec. 31,
 
Sep. 30,
 
Jun. 30,
 
Mar. 31,
 
Dec. 31,
 
Dec. 31,
 
2012
 
2012
 
2012
 
2012
 
2011
 
2012
 
2011
RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
16,265

 
$
16,242

 
$
17,802

 
$
16,994

 
$
17,941

 
$
67,303

 
$
66,739

Net earnings per share - basic
$
0.28

 
$
0.28

 
$
0.31

 
$
0.29

 
$
0.31

 
$
1.16

 
$
1.16

Net earnings per share - diluted
$
0.28

 
$
0.28

 
$
0.30

 
$
0.29

 
$
0.31

 
$
1.14

 
$
1.14

Dividends declared per share
$
0.28

 
$
0.30

 
$
0.29

 
$
0.31

 
$
0.27

 
$
1.18

 
$
0.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
KEY FINANCIAL RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets
1.03
%
 
1.05
%
 
1.13
%
 
1.05
%
 
1.09
%
 
1.07
%
 
1.06
%
Return on average shareholders' equity
9.06
%
 
9.01
%
 
9.98
%
 
9.67
%
 
9.89
%
 
9.43
%
 
9.37
%
Return on average tangible shareholders' equity
10.58
%
 
10.53
%
 
11.68
%
 
11.37
%
 
11.59
%
 
11.01
%
 
11.01
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
4.27
%
 
4.21
%
 
4.49
%
 
4.51
%
 
4.32
%
 
4.37
%
 
4.55
%
Net interest margin (fully tax equivalent) (1)
4.29
%
 
4.23
%
 
4.50
%
 
4.52
%
 
4.34
%
 
4.39
%
 
4.57
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending shareholders' equity as a percent of ending assets
10.93
%
 
11.48
%
 
11.41
%
 
11.14
%
 
10.68
%
 
10.93
%
 
10.68
%
Ending tangible shareholders' equity as a percent of:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending tangible assets
9.50
%
 
9.99
%
 
9.91
%
 
9.66
%
 
9.23
%
 
9.50
%
 
9.23
%
Risk-weighted assets
15.57
%
 
16.16
%
 
16.39
%
 
16.42
%
 
16.63
%
 
15.57
%
 
16.63
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average shareholders' equity as a percent of average assets
11.35
%
 
11.62
%
 
11.32
%
 
10.91
%
 
11.05
%
 
11.30
%
 
11.33
%
Average tangible shareholders' equity as a percent of
 
 
 
 
 
 
 
 
 
 
 
 
 
    average tangible assets
9.88
%
 
10.12
%
 
9.84
%
 
9.43
%
 
9.58
%
 
9.83
%
 
9.81
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Book value per share
$
12.24

 
$
12.24

 
$
12.25

 
$
12.21

 
$
12.22

 
$
12.24

 
$
12.22

Tangible book value per share
$
10.47

 
$
10.47

 
$
10.47

 
$
10.41

 
$
10.41

 
$
10.47

 
$
10.41

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Tier 1 Ratio (2)
16.32
%
 
16.93
%
 
17.14
%
 
17.18
%
 
17.47
%
 
16.32
%
 
17.47
%
Total Capital Ratio (2)
17.60
%
 
18.21
%
 
18.42
%
 
18.45
%
 
18.74
%
 
17.60
%
 
18.74
%
Leverage Ratio (2)
10.25
%
 
10.54
%
 
10.21
%
 
9.94
%
 
9.87
%
 
10.25
%
 
9.87
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AVERAGE BALANCE SHEET ITEMS
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans (3)
$
3,107,760

 
$
3,037,734

 
$
2,995,296

 
$
2,979,508

 
$
2,983,354

 
$
3,030,308

 
$
2,847,370

Covered loans and FDIC indemnification asset
920,102

 
1,002,622

 
1,100,014

 
1,179,670

 
1,287,776

 
1,050,114

 
1,443,365

Investment securities
1,746,961

 
1,606,313

 
1,713,503

 
1,664,643

 
1,257,574

 
1,682,821

 
1,149,772

Interest-bearing deposits with other banks
5,146

 
11,390

 
4,454

 
126,330

 
485,432

 
36,674

 
361,591

  Total earning assets
$
5,779,969

 
$
5,658,059

 
$
5,813,267

 
$
5,950,151

 
$
6,014,136

 
$
5,799,917

 
$
5,802,098

Total assets
$
6,294,084

 
$
6,166,667

 
$
6,334,973

 
$
6,478,931

 
$
6,515,756

 
$
6,318,181

 
$6,284,961
Noninterest-bearing deposits
$
1,112,072

 
$
1,052,421

 
$
1,044,405

 
$
931,347

 
$
860,863

 
$
1,035,319

 
$
766,366

Interest-bearing deposits
3,912,854

 
4,013,148

 
4,210,079

 
4,545,151

 
4,630,412

 
4,169,175

 
4,458,012

  Total deposits
$
5,024,926

 
$
5,065,569

 
$
5,254,484

 
$
5,476,498

 
$
5,491,275

 
$
5,204,494

 
$
5,224,378

Borrowings
$
439,308

 
$
257,340

 
$
234,995

 
$
161,911

 
$
174,939

 
$
273,798

 
$
204,414

Shareholders' equity
$
714,373

 
$
716,797

 
$
717,111

 
$
706,547

 
$
719,964

 
$
713,717

 
$
712,252

 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY RATIOS (excluding covered assets)
 
 
 
 
 
 
 
 
 
 
 
 
Allowance to ending loans
1.50
%
 
1.60
%
 
1.69
%
 
1.67
%
 
1.77
%
 
1.50
%
 
1.77
%
Allowance to nonaccrual loans
93.81
%
 
99.57
%
 
80.76
%
 
88.37
%
 
96.83
%
 
93.81
%
 
96.83
%
Allowance to nonperforming loans
62.95
%
 
66.45
%
 
61.25
%
 
59.82
%
 
68.84
%
 
62.95
%
 
68.84
%
Nonperforming loans to total loans
2.39
%
 
2.41
%
 
2.76
%
 
2.79
%
 
2.57
%
 
2.39
%
 
2.57
%
Nonperforming assets to ending loans, plus OREO
2.77
%
 
2.86
%
 
3.27
%
 
3.28
%
 
2.94
%
 
2.77
%
 
2.94
%
Nonperforming assets to total assets
1.36
%
 
1.41
%
 
1.57
%
 
1.52
%
 
1.31
%
 
1.36
%
 
1.31
%
Net charge-offs to average loans (annualized)
0.68
%
 
0.71
%
 
0.93
%
 
0.87
%
 
0.95
%
 
0.79
%
 
0.84
%

(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) December 31, 2012 regulatory capital ratios are preliminary.
(3) Includes loans held for sale.



2

FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 
 
 
 
 
Three months ended,
 
Twelve months ended,
 
Dec. 31,
 
Dec. 31,
 
2012
 
2011
 
% Change
 
2012
 
2011
 
% Change
Interest income
 
 
 
 
 
 
 
 
 
 
 
  Loans, including fees
$
60,389

 
$
69,658

 
(13.3
)%
 
$
249,751

 
$
285,689

 
(12.6
)%
  Investment securities
 
 
 
 
 
 
 
 
 
 
 
     Taxable
8,410

 
6,945

 
21.1
 %
 
37,664

 
28,239

 
33.4
 %
     Tax-exempt
370

 
201

 
84.1
 %
 
736

 
767

 
(4.0
)%
        Total investment securities interest
8,780

 
7,146

 
22.9
 %
 
38,400

 
29,006

 
32.4
 %
  Other earning assets
(1,564
)
 
(1,819
)
 
(14.0
)%
 
(7,221
)
 
(5,878
)
 
22.8
 %
       Total interest income
67,605

 
74,985

 
(9.8
)%
 
280,930

 
308,817

 
(9.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
 
 
 
 
  Deposits
4,798

 
8,791

 
(45.4
)%
 
24,625

 
40,781

 
(39.6
)%
  Short-term borrowings
159

 
25

 
536.0
 %
 
262

 
163

 
60.7
 %
  Long-term borrowings
672

 
693

 
(3.0
)%
 
2,702

 
3,586

 
(24.7
)%
  Subordinated debentures and capital securities
0

 
0

 
N/M

 
0

 
391

 
(100.0
)%
      Total interest expense
5,629

 
9,509

 
(40.8
)%
 
27,589

 
44,921

 
(38.6
)%
      Net interest income
61,976

 
65,476

 
(5.3
)%
 
253,341

 
263,896

 
(4.0
)%
  Provision for loan and lease losses - uncovered
3,882

 
5,164

 
(24.8
)%
 
19,117

 
19,210

 
(0.5
)%
  Provision for loan and lease losses - covered
5,283

 
6,910

 
(23.5
)%
 
30,903

 
64,081

 
(51.8
)%
      Net interest income after provision for loan and lease losses
52,811

 
53,402

 
(1.1
)%
 
203,321

 
180,605

 
12.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest income
 
 
 
 
 
 
 
 
 
 
 
  Service charges on deposit accounts
5,431

 
4,920

 
10.4
 %
 
21,215

 
19,206

 
10.5
 %
  Trust and wealth management fees
3,409

 
3,531

 
(3.5
)%
 
13,951

 
14,340

 
(2.7
)%
  Bankcard income
2,526

 
2,490

 
1.4
 %
 
10,028

 
9,291

 
7.9
 %
  Net gains from sales of loans
1,179

 
1,172

 
0.6
 %
 
4,570

 
4,258

 
7.3
 %
  FDIC loss sharing income
5,754

 
7,433

 
(22.6
)%
 
35,346

 
60,888

 
(41.9
)%
  Accelerated discount on covered loans
2,455

 
4,775

 
(48.6
)%
 
13,662

 
20,521

 
(33.4
)%
  Gain on sale of investment securities
1,011

 
2,541

 
(60.2
)%
 
3,628

 
2,541

 
42.8
 %
  Other
4,356

 
2,778

 
56.8
 %
 
20,021

 
11,486

 
74.3
 %
      Total noninterest income
26,121

 
29,640

 
(11.9
)%
 
122,421

 
142,531

 
(14.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expenses
 
 
 
 
 
 
 
 
 
 
 
  Salaries and employee benefits
28,033

 
26,447

 
6.0
 %
 
113,154

 
106,914

 
5.8
 %
  Net occupancy
5,122

 
5,893

 
(13.1
)%
 
20,682

 
21,410

 
(3.4
)%
  Furniture and equipment
2,291

 
2,425

 
(5.5
)%
 
9,190

 
9,945

 
(7.6
)%
  Data processing
2,526

 
1,559

 
62.0
 %
 
8,837

 
5,716

 
54.6
 %
  Marketing
1,566

 
1,567

 
(0.1
)%
 
5,550

 
5,794

 
(4.2
)%
  Communication
814

 
864

 
(5.8
)%
 
3,409

 
3,203

 
6.4
 %
  Professional services
1,667

 
2,252

 
(26.0
)%
 
7,269

 
9,636

 
(24.6
)%
  State intangible tax
942

 
436

 
116.1
 %
 
3,899

 
3,583

 
8.8
 %
  FDIC assessments
1,085

 
1,192

 
(9.0
)%
 
4,682

 
5,676

 
(17.5
)%
  Loss (gain) - other real estate owned
569

 
773

 
26.4
 %
 
3,250

 
3,971

 
(18.2
)%
  (Gain) loss - covered other real estate owned
(54
)
 
784

 
(106.9
)%
 
2,446

 
9,224

 
(73.5
)%
  Loss sharing expense
2,305

 
1,738

 
32.6
 %
 
10,725

 
3,600

 
197.9
 %
  Other
6,608

 
8,738

 
(24.4
)%
 
28,904

 
29,425

 
(1.8
)%
      Total noninterest expenses
53,474

 
54,668

 
(2.2
)%
 
221,997

 
218,097

 
1.8
 %
Income before income taxes
25,458

 
28,374

 
(10.3
)%
 
103,745

 
105,039

 
(1.2
)%
Income tax expense
9,193

 
10,433

 
(11.9
)%
 
36,442

 
38,300

 
(4.9
)%
      Net income
$
16,265

 
$
17,941

 
(9.3
)%
 
$
67,303

 
$
66,739

 
0.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
ADDITIONAL DATA
 
 
 
 
 
 
 
 
 
 
 
Net earnings per share - basic
$
0.28

 
$
0.31

 
 
 
$
1.16

 
$
1.16

 
 
Net earnings per share - diluted
$
0.28

 
$
0.31

 
 
 
$
1.14

 
$
1.14

 
 
Dividends declared per share
$
0.28

 
$
0.27

 
 
 
$
1.18

 
$
0.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets
1.03
%
 
1.09
%
 
 
 
1.07
%
 
1.06
%
 
 
Return on average shareholders' equity
9.06
%
 
9.89
%
 
 
 
9.43
%
 
9.37
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
67,605

 
$
74,985

 
(9.8
)%
 
$
280,930

 
$
308,817

 
(9.0
)%
Tax equivalent adjustment
366

 
265

 
38.1
 %
 
1,055

 
979

 
7.8
 %
   Interest income - tax equivalent
67,971

 
75,250

 
(9.7
)%
 
281,985

 
309,796

 
(9.0
)%
Interest expense
5,629

 
9,509

 
(40.8
)%
 
27,589

 
44,921

 
(38.6
)%
   Net interest income - tax equivalent
$
62,342

 
$
65,741

 
(5.2
)%
 
$
254,396

 
$
264,875

 
(4.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
4.27
%
 
4.32
%
 
 
 
4.37
%
 
4.55
%
 
 
Net interest margin (fully tax equivalent) (1)
4.29
%
 
4.34
%
 
 
 
4.39
%
 
4.57
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Full-time equivalent employees
1,439

 
1,508

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
 
 
 
 
N/M = Not meaningful.
 
 
 
 
 
 
 
 
 
 
 


3

FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
2012
 
Fourth
 
Third
 
Second
 
First
 
 
 
% Change
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
YTD
 
Linked Qtr.
Interest income
 
 
 
 
 
 
 
 
 
 
 
  Loans, including fees
$
60,389

 
$
59,536

 
$
63,390

 
$
66,436

 
$
249,751

 
1.4
 %
  Investment securities
 
 
 
 
 
 
 
 
 
 
 
     Taxable
8,410

 
8,358

 
10,379

 
10,517

 
37,664

 
0.6
 %
     Tax-exempt
370

 
111

 
121

 
134

 
736

 
233.3
 %
        Total investment securities interest
8,780

 
8,469

 
10,500

 
10,651

 
38,400

 
3.7
 %
  Other earning assets
(1,564
)
 
(1,700
)
 
(1,967
)
 
(1,990
)
 
(7,221
)
 
(8.0
)%
       Total interest income
67,605

 
66,305

 
71,923

 
75,097

 
280,930

 
2.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
 
 
 
 
  Deposits
4,798

 
5,730

 
6,381

 
7,716

 
24,625

 
(16.3
)%
  Short-term borrowings
159

 
54

 
37

 
12

 
262

 
194.4
 %
  Long-term borrowings
672

 
675

 
675

 
680

 
2,702

 
(0.4
)%
      Total interest expense
5,629

 
6,459

 
7,093

 
8,408

 
27,589

 
(12.9
)%
      Net interest income
61,976

 
59,846

 
64,830

 
66,689

 
253,341

 
3.6
 %
  Provision for loan and lease losses - uncovered
3,882

 
3,613

 
8,364

 
3,258

 
19,117

 
7.4
 %
  Provision for loan and lease losses - covered
5,283

 
6,622

 
6,047

 
12,951

 
30,903

 
(20.2
)%
      Net interest income after provision for loan and lease losses
52,811

 
49,611

 
50,419

 
50,480

 
203,321

 
6.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest income
 
 
 
 
 
 
 
 
 
 
 
  Service charges on deposit accounts
5,431

 
5,499

 
5,376

 
4,909

 
21,215

 
(1.2
)%
  Trust and wealth management fees
3,409

 
3,374

 
3,377

 
3,791

 
13,951

 
1.0
 %
  Bankcard income
2,526

 
2,387

 
2,579

 
2,536

 
10,028

 
5.8
 %
  Net gains from sales of loans
1,179

 
1,319

 
1,132

 
940

 
4,570

 
(10.6
)%
  FDIC loss sharing income
5,754

 
8,496

 
8,280

 
12,816

 
35,346

 
(32.3
)%
  Accelerated discount on covered loans
2,455

 
3,798

 
3,764

 
3,645

 
13,662

 
(35.4
)%
  Gain on sale of investment securities
1,011

 
2,617

 
0

 
0

 
3,628

 
(61.4
)%
  Other
4,356

 
3,340

 
9,037

 
3,288

 
20,021

 
30.4
 %
      Total noninterest income
26,121

 
30,830

 
33,545

 
31,925

 
122,421

 
(15.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest expenses
 
 
 
 
 
 
 
 
 
 
 
  Salaries and employee benefits
28,033

 
27,212

 
29,048

 
28,861

 
113,154

 
3.0
 %
  Net occupancy
5,122

 
5,153

 
5,025

 
5,382

 
20,682

 
(0.6
)%
  Furniture and equipment
2,291

 
2,332

 
2,323

 
2,244

 
9,190

 
(1.8
)%
  Data processing
2,526

 
2,334

 
2,076

 
1,901

 
8,837

 
8.2
 %
  Marketing
1,566

 
1,592

 
1,238

 
1,154

 
5,550

 
(1.6
)%
  Communication
814

 
788

 
913

 
894

 
3,409

 
3.3
 %
  Professional services
1,667

 
1,304

 
2,151

 
2,147

 
7,269

 
27.8
 %
  State intangible tax
942

 
961

 
970

 
1,026

 
3,899

 
(2.0
)%
  FDIC assessments
1,085

 
1,164

 
1,270

 
1,163

 
4,682

 
(6.8
)%
  Loss - other real estate owned
569

 
1,372

 
313

 
996

 
3,250

 
(58.5
)%
  (Gain) loss - covered other real estate owned
(54
)
 
(25
)
 
1,233

 
1,292

 
2,446

 
116.0
 %
  Loss sharing expense
2,305

 
3,584

 
3,085

 
1,751

 
10,725

 
(35.7
)%
  Other
6,608

 
7,515

 
7,814

 
6,967

 
28,904

 
(12.1
)%
      Total noninterest expenses
53,474

 
55,286

 
57,459

 
55,778

 
221,997

 
(3.3
)%
Income before income taxes
25,458

 
25,155

 
26,505

 
26,627

 
103,745

 
1.2
 %
Income tax expense
9,193

 
8,913

 
8,703

 
9,633

 
36,442

 
3.1
 %
      Net income
$
16,265

 
$
16,242

 
$
17,802

 
$
16,994

 
$
67,303

 
0.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
ADDITIONAL DATA
 
 
 
 
 
 
 
 
 
 
 
Net earnings per share - basic
$
0.28

 
$
0.28

 
$
0.31

 
$
0.29

 
$
1.16

 
 
Net earnings per share - diluted
$
0.28

 
$
0.28

 
$
0.30

 
$
0.29

 
$
1.14

 
 
Dividends declared per share
$
0.28

 
$
0.30

 
$
0.29

 
$
0.31

 
$
1.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets
1.03
%
 
1.05
%
 
1.13
%
 
1.05
%
 
1.07
%
 
 
Return on average shareholders' equity
9.06
%
 
9.01
%
 
9.98
%
 
9.67
%
 
9.43
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
67,605

 
$
66,305

 
$
71,923

 
$
75,097

 
$
280,930

 
2.0
 %
Tax equivalent adjustment
366

 
255

 
216

 
218

 
1,055

 
43.5
 %
   Interest income - tax equivalent
67,971

 
66,560

 
72,139

 
75,315

 
281,985

 
2.1
 %
Interest expense
5,629

 
6,459

 
7,093

 
8,408

 
27,589

 
(12.9
)%
   Net interest income - tax equivalent
$
62,342

 
$
60,101

 
$
65,046

 
$
66,907

 
$
254,396

 
3.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin
4.27
%
 
4.21
%
 
4.49
%
 
4.51
%
 
4.37
%
 
 
Net interest margin (fully tax equivalent) (1)
4.29
%
 
4.23
%
 
4.50
%
 
4.52
%
 
4.39
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Full-time equivalent employees
1,439

 
1,475

 
1,525

 
1,513

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.
 
 
 
 
 
 
 
 
 
 
 
 


4

FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
2011
 
 
Fourth
 
Third
 
Second
 
First
 
Full
 
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Year
Interest income
 
 
 
 
 
 
 
 
 
 
  Loans, including fees
 
$
69,658

 
$
70,086

 
$
71,929

 
$
74,016

 
$
285,689

  Investment securities
 
 
 
 
 
 
 
 
 
 
     Taxable
 
6,945

 
7,411

 
7,080

 
6,803

 
28,239

     Tax-exempt
 
201

 
176

 
192

 
198

 
767

        Total investment securities interest
 
7,146

 
7,587

 
7,272

 
7,001

 
29,006

  Other earning assets
 
(1,819
)
 
(1,721
)
 
(1,384
)
 
(954
)
 
(5,878
)
       Total interest income
 
74,985

 
75,952

 
77,817

 
80,063

 
308,817

 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
 
 
 
  Deposits
 
8,791

 
9,823

 
10,767

 
11,400

 
40,781

  Short-term borrowings
 
25

 
44

 
49

 
45

 
163

  Long-term borrowings
 
693

 
867

 
937

 
1,089

 
3,586

  Subordinated debentures and capital securities
 
0

 
0

 
197

 
194

 
391

      Total interest expense
 
9,509

 
10,734

 
11,950

 
12,728

 
44,921

      Net interest income
 
65,476

 
65,218

 
65,867

 
67,335

 
263,896

  Provision for loan and lease losses - uncovered
 
5,164

 
7,643

 
5,756

 
647

 
19,210

  Provision for loan and lease losses - covered
 
6,910

 
7,260

 
23,895

 
26,016

 
64,081

      Net interest income after provision for loan and lease losses
 
53,402

 
50,315

 
36,216

 
40,672

 
180,605

 
 
 
 
 
 
 
 
 
 
 
Noninterest income
 
 
 
 
 
 
 
 
 
 
  Service charges on deposit accounts
 
4,920

 
4,793

 
4,883

 
4,610

 
19,206

  Trust and wealth management fees
 
3,531

 
3,377

 
3,507

 
3,925

 
14,340

  Bankcard income
 
2,490

 
2,318

 
2,328

 
2,155

 
9,291

  Net gains from sales of loans
 
1,172

 
1,243

 
854

 
989

 
4,258

  FDIC loss sharing income
 
7,433

 
8,377

 
21,643

 
23,435

 
60,888

  Accelerated discount on covered loans
 
4,775

 
5,207

 
4,756

 
5,783

 
20,521

  Gain on sale of investment securities
 
2,541

 
0

 
0

 
0

 
2,541

  Other
 
2,778

 
2,800

 
3,147

 
2,761

 
11,486

      Total noninterest income
 
29,640

 
28,115

 
41,118

 
43,658

 
142,531

 
 
 
 
 
 
 
 
 
 
 
Noninterest expenses
 
 
 
 
 
 
 
 
 
 
  Salaries and employee benefits
 
26,447

 
27,774

 
25,123

 
27,570

 
106,914

  Net occupancy
 
5,893

 
4,164

 
4,493

 
6,860

 
21,410

  Furniture and equipment
 
2,425

 
2,386

 
2,581

 
2,553

 
9,945

  Data processing
 
1,559

 
1,466

 
1,453

 
1,238

 
5,716

  Marketing
 
1,567

 
1,584

 
1,402

 
1,241

 
5,794

  Communication
 
864

 
772

 
753

 
814

 
3,203

  Professional services
 
2,252

 
2,062

 
3,095

 
2,227

 
9,636

  State intangible tax
 
436

 
546

 
1,236

 
1,365

 
3,583

  FDIC assessments
 
1,192

 
1,211

 
1,152

 
2,121

 
5,676

  Loss (gain) - other real estate owned
 
773

 
(287
)
 
163

 
3,322

 
3,971

  Loss - covered other real estate owned
 
784

 
2,707

 
2,621

 
3,112

 
9,224

  Loss sharing expense
 
1,738

 
1,048

 
755

 
59

 
3,600

  Other
 
8,738

 
7,709

 
7,670

 
5,308

 
29,425

      Total noninterest expenses
 
54,668

 
53,142

 
52,497

 
57,790

 
218,097

Income before income taxes
 
28,374

 
25,288

 
24,837

 
26,540

 
105,039

Income tax expense
 
10,433

 
9,670

 
8,864

 
9,333

 
38,300

      Net income
 
$
17,941

 
$
15,618

 
$
15,973

 
$
17,207

 
$
66,739

 
 
 
 
 
 
 
 
 
 
 
ADDITIONAL DATA
 
 
 
 
 
 
 
 
 
 
Net earnings per share - basic
 
$
0.31

 
$
0.27

 
$
0.28

 
$
0.30

 
$
1.16

Net earnings per share - diluted
 
$
0.31

 
$
0.27

 
$
0.27

 
$
0.29

 
$
1.14

Dividends declared per share
 
$
0.27

 
$
0.27

 
$
0.12

 
$
0.12

 
$
0.78

 
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.09
%
 
1.01
%
 
1.03
%
 
1.11
%
 
1.06
%
Return on average shareholders' equity
 
9.89
%
 
8.54
%
 
9.05
%
 
10.04
%
 
9.37
%
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
$
74,985

 
$
75,952

 
$
77,817

 
$
80,063

 
$
308,817

Tax equivalent adjustment
 
265

 
236

 
240

 
238

 
979

   Interest income - tax equivalent
 
75,250

 
76,188

 
78,057

 
80,301

 
309,796

Interest expense
 
9,509

 
10,734

 
11,950

 
12,728

 
44,921

   Net interest income - tax equivalent
 
$
65,741

 
$
65,454

 
$
66,107

 
$
67,573

 
$
264,875

 
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
4.32
%
 
4.55
%
 
4.61
%
 
4.73
%
 
4.55
%
Net interest margin (fully tax equivalent) (1)
 
4.34
%
 
4.57
%
 
4.62
%
 
4.75
%
 
4.57
%
 
 
 
 
 
 
 
 
 
 
 
Full-time equivalent employees
 
1,508

 
1,377

 
1,374

 
1,483

 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

5


FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dec. 31,
 
Sep. 30,
 
Jun. 30,
 
Mar. 31,
 
Dec. 31,
 
% Change
 
% Change
 
2012
 
2012
 
2012
 
2012
 
2011
 
Linked Qtr.
 
Comparable Qtr.
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
     Cash and due from banks
$
134,502

 
$
154,181

 
$
126,392

 
$
125,949

 
$
149,653

 
(12.8
)%
 
(10.1
)%
     Interest-bearing deposits with other banks
24,341

 
21,495

 
9,187

 
24,101

 
375,398

 
13.2
 %
 
(93.5
)%
     Investment securities available-for-sale
1,032,096

 
689,680

 
724,518

 
736,309

 
1,441,846

 
49.6
 %
 
(28.4
)%
     Investment securities held-to-maturity
770,755

 
822,319

 
873,538

 
917,758

 
2,664

 
(6.3
)%
 
              N/M

     Other investments
71,492

 
71,492

 
71,492

 
71,492

 
71,492

 
0.0
 %
 
0.0
 %
     Loans held for sale
16,256

 
23,530

 
20,971

 
21,052

 
24,834

 
(30.9
)%
 
(34.5
)%
     Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
       Commercial
861,033

 
834,858

 
823,890

 
831,101

 
856,981

 
3.1
 %
 
0.5
 %
       Real estate - construction
73,517

 
91,897

 
86,173

 
104,305

 
114,974

 
(20.0
)%
 
(36.1
)%
       Real estate - commercial
1,417,008

 
1,338,636

 
1,321,446

 
1,262,775

 
1,233,067

 
5.9
 %
 
14.9
 %
       Real estate - residential
318,210

 
299,654

 
292,503

 
288,922

 
287,980

 
6.2
 %
 
10.5
 %
       Installment
56,810

 
59,191

 
61,590

 
63,793

 
67,543

 
(4.0
)%
 
(15.9
)%
       Home equity
367,500

 
368,876

 
365,413

 
359,711

 
358,960

 
(0.4
)%
 
2.4
 %
       Credit card
34,198

 
31,604

 
31,486

 
31,149

 
31,631

 
8.2
 %
 
8.1
 %
       Lease financing
50,788

 
41,343

 
30,109

 
21,794

 
17,311

 
22.8
 %
 
193.4
 %
          Total loans, excluding covered loans
3,179,064

 
3,066,059

 
3,012,610

 
2,963,550

 
2,968,447

 
3.7
 %
 
7.1
 %
       Less
 
 
 
 
 
 
 
 
 
 
 
 
 
          Allowance for loan and lease losses
47,777

 
49,192

 
50,952

 
49,437

 
52,576

 
(2.9
)%
 
(9.1
)%
             Net loans - uncovered
3,131,287

 
3,016,867

 
2,961,658

 
2,914,113

 
2,915,871

 
3.8
 %
 
7.4
 %
       Covered loans
748,116

 
825,515

 
903,862

 
986,619

 
1,053,244

 
(9.4
)%
 
(29.0
)%
       Less
 
 
 
 
 
 
 
 
 
 
 
 
 
          Allowance for loan and lease losses
45,190

 
48,895

 
48,327

 
46,156

 
42,835

 
(7.6
)%
 
5.5
 %
             Net loans - covered
702,926

 
776,620

 
855,535

 
940,463

 
1,010,409

 
(9.5
)%
 
(30.4
)%
                Net loans
3,834,213

 
3,793,487

 
3,817,193

 
3,854,576

 
3,926,280

 
1.1
 %
 
(2.3
)%
     Premises and equipment
146,716

 
146,603

 
142,744

 
141,664

 
138,096

 
0.1
 %
 
6.2
 %
     Goodwill
95,050

 
95,050

 
95,050

 
95,050

 
95,050

 
0.0
 %
 
0.0
 %
     Other intangibles
7,648

 
8,327

 
9,195

 
10,193

 
10,844

 
(8.2
)%
 
(29.5
)%
     FDIC indemnification asset
119,607

 
130,476

 
146,765

 
156,397

 
173,009

 
(8.3
)%
 
(30.9
)%
     Accrued interest and other assets
244,372

 
278,447

 
245,632

 
262,027

 
262,345

 
(12.2
)%
 
(6.9
)%
       Total assets
$
6,497,048

 
$
6,235,087

 
$
6,282,677

 
$
6,416,568

 
$
6,671,511

 
4.2
 %
 
(2.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
     Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
       Interest-bearing demand
$
1,160,815

 
$
1,112,843

 
$
1,154,852

 
$
1,289,490

 
$
1,317,339

 
4.3
 %
 
(11.9
)%
       Savings
1,623,614

 
1,568,818

 
1,543,619

 
1,613,244

 
1,724,659

 
3.5
 %
 
(5.9
)%
       Time
1,068,637

 
1,199,296

 
1,331,758

 
1,491,132

 
1,654,662

 
(10.9
)%
 
(35.4
)%
          Total interest-bearing deposits
3,853,066

 
3,880,957

 
4,030,229

 
4,393,866

 
4,696,660

 
(0.7
)%
 
(18.0
)%
       Noninterest-bearing
1,102,774

 
1,063,654

 
1,071,520

 
1,007,049

 
946,180

 
3.7
 %
 
16.6
 %
          Total deposits
4,955,840

 
4,944,611

 
5,101,749

 
5,400,915

 
5,642,840

 
0.2
 %
 
(12.2
)%
     Federal funds purchased and securities sold
 
 
 
 
 
 
 
 
 
 
 
 
 
         under agreements to repurchase
122,570

 
88,190

 
73,919

 
78,619

 
99,431

 
39.0
 %
 
23.3
 %
     FHLB short-term borrowings
502,000

 
283,000

 
176,000

 
0

 
0

 
77.4
 %
 
N/M

          Total short-term borrowings
624,570

 
371,190

 
249,919

 
78,619

 
99,431

 
68.3
 %
 
528.1
 %
     Long-term debt
75,202

 
75,521

 
75,120

 
75,745

 
76,544

 
(0.4
)%
 
(1.8
)%
          Total borrowed funds
699,772

 
446,711

 
325,039

 
154,364

 
175,975

 
56.6
 %
 
297.7
 %
     Accrued interest and other liabilities
131,011

 
127,799

 
139,101

 
146,596

 
140,475

 
2.5
 %
 
(6.7
)%
       Total liabilities
5,786,623

 
5,519,121

 
5,565,889

 
5,701,875

 
5,959,290

 
4.8
 %
 
(2.9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
     Common stock
579,293

 
578,129

 
576,929

 
575,675

 
579,871

 
0.2
 %
 
(0.1
)%
     Retained earnings
330,004

 
330,014

 
331,315

 
330,563

 
331,351

 
0.0
 %
 
(0.4
)%
     Accumulated other comprehensive loss
(18,677
)
 
(18,855
)
 
(18,172
)
 
(18,687
)
 
(21,490
)
 
(0.9
)%
 
(13.1
)%
     Treasury stock, at cost
(180,195
)
 
(173,322
)
 
(173,284
)
 
(172,858
)
 
(177,511
)
 
4.0
 %
 
1.5
 %
       Total shareholders' equity
710,425

 
715,966

 
716,788

 
714,693

 
712,221

 
(0.8
)%
 
(0.3
)%
       Total liabilities and shareholders' equity
$
6,497,048

 
$
6,235,087

 
$
6,282,677

 
$
6,416,568

 
$
6,671,511

 
4.2
 %
 
(2.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N/M = Not meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 


6


FIRST FINANCIAL BANCORP.
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
Quarterly Averages
 
Year-to-Date Averages
 
Dec. 31,
 
Sep. 30,
 
Jun. 30,
 
Mar. 31,
 
Dec. 31,
 
Dec. 31,
 
2012
 
2012
 
2012
 
2012
 
2011
 
2012
 
2011
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
     Cash and due from banks
$
118,619

 
$
118,642

 
$
121,114

 
$
123,634

 
$
121,603

 
$
120,492

 
$
115,692

     Interest-bearing deposits with other banks
5,146

 
11,390

 
4,454

 
126,330

 
485,432

 
36,674

 
361,591

     Investment securities
1,746,961

 
1,606,313

 
1,713,503

 
1,664,643

 
1,257,574

 
1,682,821

 
1,149,772

     Loans held for sale
18,054

 
26,035

 
19,554

 
19,722

 
21,067

 
20,848

 
13,805

     Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
       Commercial
819,262

 
811,998

 
827,722

 
850,092

 
851,006

 
827,205

 
811,474

       Real estate - construction
85,219

 
92,051

 
99,087

 
112,945

 
135,825

 
97,278

 
143,751

       Real estate - commercial
1,373,781

 
1,322,369

 
1,279,869

 
1,235,613

 
1,206,678

 
1,303,155

 
1,155,209

       Real estate - residential
307,580

 
293,423

 
290,335

 
287,749

 
293,158

 
294,803

 
269,541

       Installment
58,283

 
60,691

 
62,846

 
65,302

 
68,945

 
61,768

 
66,467

       Home equity
368,605

 
365,669

 
361,166

 
358,360

 
360,389

 
363,470

 
347,312

       Credit card
32,954

 
31,977

 
31,383

 
31,201

 
30,759

 
31,882

 
29,275

       Lease financing
44,022

 
33,521

 
23,334

 
18,524

 
15,527

 
29,899

 
10,536

          Total loans, excluding covered loans
3,089,706

 
3,011,699

 
2,975,742

 
2,959,786

 
2,962,287

 
3,009,460

 
2,833,565

       Less
 
 
 
 
 
 
 
 
 
 
 
 
 
          Allowance for loan and lease losses
50,172

 
51,486

 
50,353

 
53,513

 
55,157

 
51,378

 
56,282

             Net loans - uncovered
3,039,534

 
2,960,213

 
2,925,389

 
2,906,273

 
2,907,130

 
2,958,082

 
2,777,283

       Covered loans
794,838

 
866,486

 
950,226

 
1,020,220

 
1,113,876

 
907,520

 
1,255,403

       Less
 
 
 
 
 
 
 
 
 
 
 
 
 
          Allowance for loan and lease losses
48,553

 
51,150

 
47,964

 
47,152

 
51,330

 
48,711

 
41,544

             Net loans - covered
746,285

 
815,336

 
902,262

 
973,068

 
1,062,546

 
858,809

 
1,213,859

                Net loans
3,785,819

 
3,775,549

 
3,827,651

 
3,879,341

 
3,969,676

 
3,816,891

 
3,991,142

     Premises and equipment
148,047

 
145,214

 
143,261

 
140,377

 
128,168

 
144,238

 
119,646

     Goodwill
95,050

 
95,050

 
95,050

 
95,050

 
77,158

 
95,050

 
58,253

     Other intangibles
8,001

 
8,702

 
9,770

 
10,506

 
9,094

 
9,240

 
6,067

     FDIC indemnification asset
125,264

 
136,136

 
149,788

 
159,450

 
173,900

 
142,594

 
187,962

     Accrued interest and other assets
243,123

 
243,636

 
250,828

 
259,878

 
272,084

 
249,333

 
281,031

       Total assets
$
6,294,084

 
$
6,166,667

 
$
6,334,973

 
$
6,478,931

 
$
6,515,756

 
$
6,318,181

 
$
6,284,961

 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
 
     Deposits
 
 
 
 
 
 
 
 
 
 
 
 
 
       Interest-bearing demand
$
1,145,800

 
$
1,164,111

 
$
1,192,868

 
$
1,285,196

 
$
1,388,903

 
$
1,196,764

 
$
1,191,064

       Savings
1,640,427

 
1,588,708

 
1,610,411

 
1,682,507

 
1,617,588

 
1,630,426

 
1,624,840

       Time
1,126,627

 
1,260,329

 
1,406,800

 
1,577,448

 
1,623,921

 
1,341,985

 
1,642,108

          Total interest-bearing deposits
3,912,854

 
4,013,148

 
4,210,079

 
4,545,151

 
4,630,412

 
4,169,175

 
4,458,012

       Noninterest-bearing
1,112,072

 
1,052,421

 
1,044,405

 
931,347

 
860,863

 
1,035,319

 
766,366

          Total deposits
5,024,926

 
5,065,569

 
5,254,484

 
5,476,498

 
5,491,275

 
5,204,494

 
5,224,378

     Federal funds purchased and securities sold
 
 
 
 
 
 
 
 
 
 
 
 
 
          under agreements to repurchase
100,087

 
81,147

 
80,715

 
85,891

 
98,268

 
86,980

 
96,060

     FHLB short-term borrowings
263,895

 
100,758

 
78,966

 
0

 
0

 
111,295

 
0

          Total short-term borrowings
363,982

 
181,905

 
159,681

 
85,891

 
98,268

 
198,275

 
96,060

     Long-term debt
75,326

 
75,435

 
75,314

 
76,020

 
76,671

 
75,523

 
98,185

     Other long-term debt
0

 
0

 
0

 
0

 
0

 
0

 
10,169

       Total borrowed funds
439,308

 
257,340

 
234,995

 
161,911

 
174,939

 
273,798

 
204,414

     Accrued interest and other liabilities
115,477

 
126,961

 
128,383

 
133,975

 
129,578

 
126,172

 
143,917

       Total liabilities
5,579,711

 
5,449,870

 
5,617,862

 
5,772,384

 
5,795,792

 
5,604,464

 
5,572,709

 
 
 
 
 
 
 
 
 
 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
     Common stock
578,691

 
577,547

 
576,276

 
578,514

 
579,321

 
577,759

 
578,725

     Retained earnings
331,414

 
330,368

 
332,280

 
324,370

 
323,624

 
329,615

 
320,579

     Accumulated other comprehensive loss
(19,612
)
 
(17,756
)
 
(18,242
)
 
(20,344
)
 
(5,396
)
 
(18,987
)
 
(8,758
)
     Treasury stock, at cost
(176,120
)
 
(173,362
)
 
(173,203
)
 
(175,993
)
 
(177,585
)
 
(174,670
)
 
(178,294
)
       Total shareholders' equity
714,373

 
716,797

 
717,111

 
706,547

 
719,964

 
713,717

 
712,252

       Total liabilities and shareholders' equity
$
6,294,084

 
$
6,166,667

 
$
6,334,973

 
$
6,478,931

 
$
6,515,756

 
$
6,318,181

 
$
6,284,961

 
 
 
 
 
 
 
 
 
 
 
 
 
 


7


FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS (1)
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
 Quarterly Averages
 
Year-to-Date Averages
 
 
Dec. 31, 2012
 
Sep. 30, 2012
 
Dec. 31, 2011
 
Dec. 31, 2012
 
Dec. 31, 2011
 
 
Balance
 
Yield
 
Balance
 
Yield
 
Balance
 
Yield
 
Balance
 
Yield
 
Balance
 
Yield
Earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Investment securities
 
$
1,746,961

 
1.99
%
 
$
1,606,313

 
2.09
%
 
$
1,257,574

 
2.25
%
 
$
1,682,821

 
2.28
%
 
$
1,149,772

 
2.52
%
    Interest-bearing deposits with other banks
 
5,146

 
0.54
%
 
11,390

 
0.45
%
 
485,432

 
0.25
%
 
36,674

 
0.30
%
 
361,591

 
0.31
%
    Gross loans (2)
 
4,027,862

 
5.79
%
 
4,040,356

 
5.68
%
 
4,271,130

 
6.27
%
 
4,080,422

 
5.94
%
 
4,290,735

 
6.49
%
       Total earning assets
 
5,779,969

 
4.64
%
 
5,658,059

 
4.65
%
 
6,014,136

 
4.95
%
 
5,799,917

 
4.84
%
 
5,802,098

 
5.32
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonearning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Allowance for loan and lease losses
 
(98,725
)
 
 
 
(102,636
)
 
 
 
(106,487
)
 
 
 
(100,089
)
 
 
 
(97,826
)
 
 
    Cash and due from banks
 
118,619

 
 
 
118,642

 
 
 
121,603

 
 
 
120,492

 
 
 
115,692

 
 
    Accrued interest and other assets
 
494,221

 
 
 
492,602

 
 
 
486,504

 
 
 
497,861

 
 
 
464,997

 
 
       Total assets
 
$
6,294,084

 
 
 
$
6,166,667

 
 
 
$
6,515,756

 
 
 
$
6,318,181

 
 
 
$
6,284,961

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Total interest-bearing deposits
 
$
3,912,854

 
0.49
%
 
$
4,013,148

 
0.57
%
 
$
4,630,412

 
0.75
%
 
$
4,169,175

 
0.59
%
 
$
4,458,012

 
0.91
%
    Borrowed funds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Short-term borrowings
 
363,982

 
0.17
%
 
181,905

 
0.12
%
 
98,268

 
0.10
%
 
198,275

 
0.13
%
 
96,060

 
0.17
%
    Long-term debt
 
75,326

 
3.54
%
 
75,435

 
3.55
%
 
76,671

 
3.59
%
 
75,523

 
3.58
%
 
98,185

 
3.65
%
    Other long-term debt
 
0

 
     N/M

 
0

 
     N/M

 
0

 
     N/M

 
0

 
     N/M

 
10,169

 
3.85
%
       Total borrowed funds
 
439,308

 
0.75
%
 
257,340

 
1.12
%
 
174,939

 
1.63
%
 
273,798

 
1.08
%
 
204,414

 
2.03
%
       Total interest-bearing liabilities
 
4,352,162

 
0.51
%
 
4,270,488

 
0.60
%
 
4,805,351

 
0.79
%
 
4,442,973

 
0.62
%
 
4,662,426

 
0.96
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Noninterest-bearing demand deposits
 
1,112,072

 
 
 
1,052,421

 
 
 
860,863

 
 
 
1,035,319

 
 
 
766,366

 
 
    Other liabilities
 
115,477

 
 
 
126,961

 
 
 
129,578

 
 
 
126,172

 
 
 
143,917

 
 
    Shareholders' equity
 
714,373

 
 
 
716,797

 
 
 
719,964

 
 
 
713,717

 
 
 
712,252

 
 
       Total liabilities & shareholders' equity
 
$
6,294,084

 
 
 
$
6,166,667

 
 
 
$
6,515,756

 
 
 
$
6,318,181

 
 
 
$
6,284,961

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income (1)
 
$
61,976

 
 
 
$
59,846

 
 
 
$
65,476

 
 
 
$
253,341

 


 
$
263,896

 


Net interest spread (1)
 
 
 
4.13
%
 
 
 
4.05
%
 
 
 
4.16
%
 
 
 
4.22
%
 
 
 
4.36
%
Net interest margin (1)
 
 
 
4.27
%
 
 
 
4.21
%
 
 
 
4.32
%
 
 
 
4.37
%
 
 
 
4.55
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Not tax equivalent.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Loans held for sale, nonaccrual loans, covered loans, and indemnification asset are included in gross loans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N/M = Not meaningful.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

8

FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS (1)
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Linked Qtr. Income Variance
 
 Comparable Qtr. Income Variance
 
Year-to-Date Income Variance
 
 
Rate
 
Volume
 
Total
 
Rate
 
Volume
 
Total
 
Rate
 
Volume
 
Total
Earning assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Investment securities
 
$
(396
)
 
$
707

 
$
311

 
$
(826
)
 
$
2,460

 
$
1,634

 
$
(2,770
)
 
$
12,164

 
$
9,394

    Interest-bearing deposits with other banks
 
2

 
(8
)
 
(6
)
 
348

 
(653
)
 
(305
)
 
(36
)
 
(983
)
 
(1,019
)
    Gross loans (2)
 
1,177

 
(182
)
 
995

 
(5,157
)
 
(3,552
)
 
(8,709
)
 
(23,767
)
 
(12,495
)
 
(36,262
)
       Total earning assets
 
783

 
517

 
1,300

 
(5,635
)
 
(1,745
)
 
(7,380
)
 
(26,573
)
 
(1,314
)
 
(27,887
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Total interest-bearing deposits
 
$
(809
)
 
$
(123
)
 
$
(932
)
 
$
(3,113
)
 
$
(880
)
 
$
(3,993
)
 
$
(14,450
)
 
$
(1,706
)
 
$
(16,156
)
    Borrowed funds
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Short-term borrowings
 
25

 
80

 
105

 
18

 
116

 
134

 
(36
)
 
135

 
99

    Long-term debt
 
(2
)
 
(1
)
 
(3
)
 
(9
)
 
(12
)
 
(21
)
 
(73
)
 
(811
)
 
(884
)
    Other long-term debt
 
0

 
0

 
0

 
0

 
0

 
0

 
0

 
(391
)
 
(391
)
       Total borrowed funds
 
23

 
79

 
102

 
9

 
104

 
113

 
(109
)
 
(1,067
)
 
(1,176
)
       Total interest-bearing liabilities
 
(786
)
 
(44
)
 
(830
)
 
(3,104
)
 
(776
)
 
(3,880
)
 
(14,559
)
 
(2,773
)
 
(17,332
)
           Net interest income (1)
 
$
1,569

 
$
561

 
$
2,130

 
$
(2,531
)
 
$
(969
)
 
$
(3,500
)
 
$
(12,014
)
 
$
1,459

 
$
(10,555
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Not tax equivalent.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2) Loans held for sale, nonaccrual loans, covered loans, and indemnification asset are included in gross loans.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



9


FIRST FINANCIAL BANCORP.
CREDIT QUALITY
(excluding covered assets)
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dec. 31,
 
Sep. 30,
 
Jun. 30,
 
Mar. 31,
 
Dec. 31,
 
Full Year
 
Full Year
 
2012
 
2012
 
2012
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ALLOWANCE FOR LOAN AND LEASE LOSS ACTIVITY
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
49,192

 
$
50,952

 
$
49,437

 
$
52,576

 
$
54,537

 
$
52,576

 
$
57,235

  Provision for uncovered loan and lease losses
3,882

 
3,613

 
8,364

 
3,258

 
5,164

 
19,117

 
19,210

  Gross charge-offs
 
 
 
 
 
 
 
 
 
 
 
 
 
    Commercial
657

 
1,340

 
1,129

 
1,186

 
1,742

 
4,312

 
3,436

    Real estate - construction
0

 
180

 
717

 
1,787

 
2,105

 
2,684

 
6,279

    Real estate - commercial
2,221

 
2,736

 
3,811

 
2,244

 
2,505

 
11,012

 
10,382

    Real estate - residential
454

 
565

 
191

 
604

 
473

 
1,814

 
1,551

    Installment
267

 
134

 
116

 
60

 
115

 
577

 
526

    Home equity
1,722

 
380

 
915

 
644

 
488

 
3,661

 
2,183

    Other
227

 
469

 
259

 
297

 
363

 
1,252

 
1,441

      Total gross charge-offs
5,548

 
5,804

 
7,138

 
6,822

 
7,791

 
25,312

 
25,798

  Recoveries
 
 
 
 
 
 
 
 
 
 
 
 
 
    Commercial
71

 
202

 
48

 
72

 
348

 
393

 
762

    Real estate - construction
0

 
0

 
0

 
0

 
5

 
0

 
32

    Real estate - commercial
46

 
38

 
68

 
113

 
68

 
265

 
309

    Real estate - residential
3

 
33

 
9

 
28

 
3

 
73

 
45

    Installment
53

 
72

 
75

 
123

 
96

 
323

 
363

    Home equity
32

 
31

 
28

 
24

 
71

 
115

 
117

    Other
46

 
55

 
61

 
65

 
75

 
227

 
301

      Total recoveries
251

 
431

 
289

 
425

 
666

 
1,396

 
1,929

  Total net charge-offs
5,297

 
5,373

 
6,849

 
6,397

 
7,125

 
23,916

 
23,869

     Ending allowance for uncovered loan and lease losses
$
47,777

 
$
49,192

 
$
50,952

 
$
49,437

 
$
52,576

 
$
47,777

 
$
52,576

 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES (ANNUALIZED)
 
 
 
 
 
 
 
 
 
 
  Commercial
0.28
%
 
0.56
%
 
0.53
%
 
0.53
 %
 
0.65
%
 
0.47
%
 
0.33
%
  Real estate - construction
0.00
%
 
0.78
%
 
2.91
%
 
6.36
 %
 
6.13
%
 
2.76
%
 
4.35
%
  Real estate - commercial
0.63
%
 
0.81
%
 
1.18
%
 
0.69
 %
 
0.80
%
 
0.82
%
 
0.87
%
  Real estate - residential
0.58
%
 
0.72
%
 
0.25
%
 
0.81
 %
 
0.64
%
 
0.59
%
 
0.56
%
  Installment
1.46
%
 
0.41
%
 
0.26
%
 
(0.39
)%
 
0.11
%
 
0.41
%
 
0.25
%
  Home equity
1.82
%
 
0.38
%
 
0.99
%
 
0.70
 %
 
0.46
%
 
0.98
%
 
0.59
%
  Other
0.94
%
 
2.51
%
 
1.46
%
 
1.88
 %
 
2.47
%
 
1.66
%
 
2.86
%
     Total net charge-offs
0.68
%
 
0.71
%
 
0.93
%
 
0.87
 %
 
0.95
%
 
0.79
%
 
0.84
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COMPONENTS OF NONPERFORMING LOANS, NONPERFORMING ASSETS, AND UNDERPERFORMING ASSETS
 
 
 
 
  Nonaccrual loans
 
 
 
 
 
 
 
 
 
 
 
 
 
    Commercial
$
10,562

 
$
4,563

 
$
12,065

 
$
5,936

 
$
7,809

 
$
10,562

 
$
7,809

    Real estate - construction
950

 
2,536

 
7,243

 
7,005

 
10,005

 
950

 
10,005

    Real estate - commercial
31,002

 
33,961

 
36,116

 
35,581

 
28,349

 
31,002

 
28,349

    Real estate - residential
5,045

 
5,563

 
5,069

 
5,131

 
5,692

 
5,045

 
5,692

    Installment
376

 
284

 
319

 
377

 
371

 
376

 
371

    Home equity
2,499

 
2,497

 
2,281

 
1,915

 
2,073

 
2,499

 
2,073

    Lease financing
496

 
0

 
0

 
0

 
0

 
496

 
0

      Nonaccrual loans
50,930

 
49,404

 
63,093

 
55,945

 
54,299

 
50,930

 
54,299

  Troubled debt restructurings (TDRs)
 
 
 
 
 
 
 
 
 
 
 
 
 
    Accruing
10,856

 
11,604

 
9,909

 
9,495

 
4,009

 
10,856

 
4,009

    Nonaccrual
14,111

 
13,017

 
10,185

 
17,205

 
18,071

 
14,111

 
18,071

       Total TDRs
24,967

 
24,621

 
20,094

 
26,700

 
22,080

 
24,967

 
22,080

     Total nonperforming loans
75,897

 
74,025

 
83,187

 
82,645

 
76,379

 
75,897

 
76,379

  Other real estate owned (OREO)
12,526

 
13,912

 
15,688

 
15,036

 
11,317

 
12,526

 
11,317

     Total nonperforming assets
88,423

 
87,937

 
98,875

 
97,681

 
87,696

 
88,423

 
87,696

  Accruing loans past due 90 days or more
212

 
108

 
143

 
203

 
191

 
212

 
191

     Total underperforming assets
$
88,635

 
$
88,045

 
$
99,018

 
$
97,884

 
$
87,887

 
$
88,635

 
$
87,887

Total classified assets
$
129,040

 
$
133,382

 
$
145,621

 
$
154,684

 
$
162,372

 
$
129,040

 
$
162,372

 
 
 
 
 
 
 
 
 
 
 
 
 
 
CREDIT QUALITY RATIOS (excluding covered assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan and lease losses to
 
 
 
 
 
 
 
 
 
 
 
 
 
     Nonaccrual loans
93.81
%
 
99.57
%
 
80.76
%
 
88.37
 %
 
96.83
%
 
93.81
%
 
96.83
%
     Nonaccrual loans plus nonaccrual TDRs
73.46
%
 
78.81
%
 
69.53
%
 
67.58
 %
 
72.65
%
 
73.46
%
 
72.65
%
     Nonperforming loans
62.95
%
 
66.45
%
 
61.25
%
 
59.82
 %
 
68.84
%
 
62.95
%
 
68.84
%
     Total ending loans
1.50
%
 
1.60
%
 
1.69
%
 
1.67
 %
 
1.77
%
 
1.50
%
 
1.77
%
Nonperforming loans to total loans
2.39
%
 
2.41
%
 
2.76
%
 
2.79
 %
 
2.57
%
 
2.39
%
 
2.57
%
Nonperforming assets to
 
 
 
 
 
 
 
 
 
 
 
 
 
     Ending loans, plus OREO
2.77
%
 
2.86
%
 
3.27
%
 
3.28
 %
 
2.94
%
 
2.77
%
 
2.94
%
     Total assets
1.36
%
 
1.41
%
 
1.57
%
 
1.52
 %
 
1.31
%
 
1.36
%
 
1.31
%
Nonperforming assets, excluding accruing TDRs to
 
 
 
 
 
 
 
 
 
 
 
 
 
     Ending loans, plus OREO
2.43
%
 
2.48
%
 
2.94
%
 
2.96
 %
 
2.81
%
 
2.43
%
 
2.81
%
     Total assets
1.19
%
 
1.22
%
 
1.42
%
 
1.37
 %
 
1.25
%
 
1.19
%
 
1.25
%


10


FIRST FINANCIAL BANCORP.
CAPITAL ADEQUACY
(Dollars in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Twelve months ended,
 
Dec. 31,
 
Sep. 30,
 
Jun. 30,
 
Mar. 31,
 
Dec. 31,
 
Dec. 31,
 
Dec. 31,
 
2012
 
2012
 
2012
 
2012
 
2011
 
2012
 
2011
PER COMMON SHARE
 
 
 
 
 
 
 
 
 
 
 
 
 
Market Price
 
 
 
 
 
 
 
 
 
 
 
 
 
  High
$
16.95

 
$
17.86

 
$
17.70

 
$
18.28

 
$
17.06

 
$
18.28

 
$
18.91

  Low
$
13.90

 
$
15.58

 
$
14.88

 
$
16.11

 
$
13.40

 
$
13.90

 
$
13.34

  Close
$
14.62

 
$
16.91

 
$
15.98

 
$
17.30

 
$
16.64

 
$
14.62

 
$
16.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average shares outstanding - basic
57,800,988

 
57,976,943

 
57,933,281

 
57,795,258

 
57,744,662

 
57,876,685

 
57,691,979

Average shares outstanding - diluted
58,670,666

 
58,940,179

 
58,958,279

 
58,881,043

 
58,672,575

 
58,868,792

 
58,693,205

Ending shares outstanding
58,046,235

 
58,510,916

 
58,513,393

 
58,539,458

 
58,267,054

 
58,046,235

 
58,267,054

 
 
 
 
 
 
 
 
 
 
 
 
 
 
REGULATORY CAPITAL
Preliminary
 
 
 
 
 
 
 
 
 
Preliminary
 
 
Tier 1 Capital
$
637,176

 
$
641,828

 
$
640,644

 
$
637,612

 
$
636,836

 
$
637,176

 
$
636,836

Tier 1 Ratio
16.32
%
 
16.93
%
 
17.14
%
 
17.18
%
 
17.47
%
 
16.32
%
 
17.47
%
Total Capital
$
686,961

 
$
690,312

 
$
688,401

 
$
684,838

 
$
683,255

 
$
686,961

 
$
683,255

Total Capital Ratio
17.60
%
 
18.21
%
 
18.42
%
 
18.45
%
 
18.74
%
 
17.60
%
 
18.74
%
Total Capital in excess of minimum
 
 
 
 
 
 
 
 
 
 
 
 
 
  requirement
$
374,633

 
$
387,115

 
$
389,367

 
$
387,954

 
$
391,623

 
$
374,633

 
$
391,623

Total Risk-Weighted Assets
$
3,904,096

 
$
3,789,957

 
$
3,737,920

 
$
3,711,053

 
$
3,645,403

 
$
3,904,096

 
$
3,645,403

Leverage Ratio
10.25
%
 
10.54
%
 
10.21
%
 
9.94
%
 
9.87
%
 
10.25
%
 
9.87
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER CAPITAL RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending shareholders' equity to ending assets
10.93
%
 
11.48
%
 
11.41
%
 
11.14
%
 
10.68
%
 
10.93
%
 
10.68
%
Ending tangible shareholders' equity to ending tangible assets
9.50
%
 
9.99
%
 
9.91
%
 
9.66
%
 
9.23
%
 
9.50
%
 
9.23
%
Average shareholders' equity to average assets
11.35
%
 
11.62
%
 
11.32
%
 
10.91
%
 
11.05
%
 
11.30
%
 
11.33
%
Average tangible shareholders' equity to average tangible assets
9.88
%
 
10.12
%
 
9.84
%
 
9.43
%
 
9.58
%
 
9.83
%
 
9.81
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REPURCHASE PROGRAM (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares repurchased
460,500

 
0

 
0

 
0

 
0

 
460,500

 
0

Average share repurchase price
$
14.78

 
N/A

 
N/A

 
N/A

 
N/A

 
$
14.78

 
N/A

Total cost of shares repurchased
$
6,806

 
N/A

 
N/A

 
N/A

 
N/A

 
$
6,806

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Represents share repurchases as part of publicly announced plans.
 
 
 
 
N/A=Not applicable
 
 
 
 
 
 
 
 
 
 
 
 
 

11

SUPPLEMENTAL INFORMATION ON COVERED ASSETS AND ACQUISITION-RELATED ITEMS

To assist in analyzing the effect of the Company's 2009 FDIC assisted transactions and 2011 branch transactions on its financial results, supplemental information that segregates the estimated impact on pre-tax earnings of certain acquisition-related items and provides additional detail on the covered loan portfolio follows.

SUMMARY OF SIGNIFICANT ACQUISITION-RELATED ITEMS
The following table illustrates the estimated income and expense effects of certain direct acquisition-related items for the three months ended December 31, 2012, September 30, 2012 and December 31, 2011.

 
 
 
 
 
 
 
 
 
Table VII
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
 
December 31,
 
September 30,
 
December 31,
 
 
(Dollars in thousands)
2012
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
Income effect:
 
 
 
 
 
 
 
   Accelerated discount on covered loans 1, 2
$
2,455

 
$
3,798

 
$
4,775

 
 
   Acquired-non-strategic net interest income
6,939

 
7,931

 
8,954

 
 
   FDIC loss sharing income 1
5,754

 
8,496

 
7,433

 
 
   Service charges on deposit accounts related to
 
 
 
 
 
 
 
      acquired-non-strategic operations
34

 
35

 
53

 
 
   Other income (loss) related to transition/non-strategic operations
158

 
(67
)
 
11

 
 
      Total income effect
$
15,340

 
$
20,193

 
$
21,226

 
 
 
 
 
 
 
 
 
 
Expense effect:
 
 
 
 
 
 
 
   Provision for loan and lease losses - covered
$
5,283

 
$
6,622

 
$
6,910

 
 
   Loss share and covered asset expense 3
2,251

 
3,559

 
2,522

 
 
   FDIC loss share support 3
798

 
951

 
1,333

 
 
   Acquired-non-strategic operating expenses: 3
43

 
19

 
(27
)
 
 
   Acquisition-related costs: 3
—

 
78

 
1,167

 
 
      Total expense effect
$
8,375

 
$
11,229

 
$
11,905

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 Included in noninterest income
 
 
 
 
 
 
 
2  Net of the corresponding valuation adjustment on the FDIC indemnification asset
 
 
3  Included in noninterest expense
 
 
 
 
 
 
 
ACCELERATED DISCOUNT ON LOAN PREPAYMENTS AND DISPOSITIONS
During the fourth quarter 2012, First Financial recognized approximately $2.5 million in accelerated discount from acquired loans, net of the corresponding adjustment on the FDIC indemnification asset. Accelerated discount is recognized when acquired 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. Accelerated discount recognized during the quarter resulted primarily from loan prepayments.

OPERATING EXPENSES AND OTHER ACQUISITION-RELATED COSTS
Acquired-non-strategic operating expenses and acquisition-related costs have declined significantly as costs associated with acquisitions, including market exit costs and professional services and other resolution expenses related to non-strategic acquired subsidiaries, have continued to wind down over the past several quarters.


12

NET INTEREST MARGIN IMPACT

Net interest margin is affected by certain activity related to the acquired loan portfolio. The majority of these loans are accounted for under 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 December 31, 2012.

 
 
 
 
 
 
 
 
Table VIII
 
For the Three Months Ended
 
 
 
 
December 31, 2012
 
 
 
 
Average
 
 
 
 
(Dollars in thousands)
 
Balance
 
Yield
 
 
Loans, excluding covered loans 1
 
$
3,107,760

 
5.01%
 
 
Covered loan portfolio accounted for under ASC Topic 310-30 2
 
717,003

 
10.43%
 
 
Covered loan portfolio accounted for under ASC Topic 310-20 3
 
77,835

 
11.55%
 
 
FDIC indemnification asset 2
 
125,264

 
(4.99)%
 
 
Total
 
$
4,027,862

 
5.79%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 

The yield related to uncovered loans was impacted by the $2.2 million prepayment fee discussed above in Net Interest Income and Net Interest Margin. Excluding this item, the yield earned on the uncovered loan portfolio during the fourth quarter was 4.73%.

LOSS SHARE AGREEMENTS
As of December 31, 2012, 19.0% of the Company's total loans were covered loans. As required under the loss-share agreements, First Financial must file monthly certifications with the FDIC on single-family residential loans and quarterly certifications on all other loans. To date, all certifications have been filed in a timely manner and without significant issues.


13

COVERED LOAN PORTFOLIO
The following table presents the covered loan portfolio as of December 31, 2012, September 30, 2012 and December 31, 2011.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table IX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
 
 
 
 
Percent
 
 
 
Percent
 
 
 
Percent
 
 
(Dollars in thousands)
Balance
 
of Total
 
Balance
 
of Total
 
Balance
 
of Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
102,126

 
13.7
%
 
$
121,745

 
14.7
%
 
$
195,892

 
18.6
%
 
 
Real estate - construction
10,631

 
1.4
%
 
12,898

 
1.6
%
 
17,120

 
1.6
%
 
 
Real estate - commercial
465,555

 
62.2
%
 
512,320

 
62.1
%
 
637,044

 
60.5
%
 
 
Real estate - residential
100,694

 
13.5
%
 
105,113

 
12.7
%
 
121,117

 
11.5
%
 
 
Installment
8,674

 
1.2
%
 
9,892

 
1.2
%
 
13,176

 
1.3
%
 
 
Home equity
57,458

 
7.7
%
 
60,502

 
7.3
%
 
64,978

 
6.2
%
 
 
Other
2,978

 
0.4
%
 
3,045

 
0.4
%
 
3,917

 
0.4
%
 
 
Total
$
748,116

 
100.0
%
 
$
825,515

 
100.0
%
 
$
1,053,244

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

During the fourth quarter 2012, the total balance of covered loans decreased $77.4 million, or 9.4%, as compared to the previous quarter.

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 December 31, 2012, September 30, 2012, June 30, 2012 and March 31, 2012.


 
 
 
 
 
 
 
 
 
 
 
Table X
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of or for the Three Months Ended
 
 
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
(Dollars in thousands)
2012
 
2012
 
2012
 
2012
 
 
Balance at beginning of period
$
48,895

 
$
48,327

 
$
46,156

 
$
42,835

 
 
Provision for loan and lease losses - covered
5,283

 
6,622

 
6,047

 
12,951

 
 
   Total gross charge-offs
(9,568
)
 
(9,058
)
 
(5,163
)
 
(10,118
)
 
 
   Total recoveries
580

 
3,004

 
1,287

 
488

 
 
Total net charge-offs
(8,988
)
 
(6,054
)
 
(3,876
)
 
(9,630
)
 
 
Ending allowance for loan and lease losses - covered
$
45,190

 
$
48,895

 
$
48,327

 
$
46,156

 
 
 
 
 
 
 
 
 
 
 

The Company has established an allowance for loan losses associated with covered loans based on estimated valuation procedures performed each quarter. As a percentage of total covered loans, the allowance for loan losses totaled 6.04% as of December 31, 2012 compared to 5.92% as of September 30, 2012.

14


Net charge-offs on covered loans during the fourth quarter 2012 were $9.0 million compared to $6.1 million for the third quarter 2012, an increase of $2.9 million, or 48.5%. During the fourth quarter 2012, the Company recognized provision expense of $5.3 million, representing a decrease of $1.3 million, or 20.2%, compared to the linked quarter. The difference between provision expense and net charge-offs primarily relates to the quarterly re-estimation of cash flow expectations required under ASC Topic 310-30. The net present value of expected cash flows is influenced by both the amount and timing of such cash flows.

In addition to the provision expense, the Company incurred loss share and covered asset expenses of $2.3 million, consisting primarily of credit expenses offset by a small amount of gains related to covered OREO. The receivable due from the FDIC under loss share agreements of $5.8 million related to total credit costs incurred was recognized as FDIC loss share income and a corresponding increase to the FDIC indemnification asset.


15