-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L/7Vq4c10gfykKpvMEt9thP7qUKQrPvnR3bcvnHnvmcVMQ2ibipU1ezvMiGa/30d ngjow5Lv4uUSoQNSpsc3uA== 0000950152-99-006478.txt : 19990809 0000950152-99-006478.hdr.sgml : 19990809 ACCESSION NUMBER: 0000950152-99-006478 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST FINANCIAL BANCORP /OH/ CENTRAL INDEX KEY: 0000708955 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 311042001 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12379 FILM NUMBER: 99679466 BUSINESS ADDRESS: STREET 1: THIRD & HIGH ST CITY: HAMILTON STATE: OH ZIP: 45011 BUSINESS PHONE: 5138674700 MAIL ADDRESS: STREET 1: THIRD & HIGH ST CITY: HAMILTON STATE: OH ZIP: 45011 10-Q 1 FIRST FINANCIAL BANCORP 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JUNE 30, 1999 -------------------------------------------- OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ___________________ Commission file number 0-12379 FIRST FINANCIAL BANCORP. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Ohio 31-1042001 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 300 High Street, Hamilton, Ohio 45011 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (513) 867-4700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 30, 1999 -------------------------- ---------------------------- Common stock, No par value 42,593,864 2 FIRST FINANCIAL BANCORP. INDEX
Page No. -------- PART I-FINANCIAL INFORMATION Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 1 Consolidated Statements of Earnings - Six and Three Months Ended June 30, 1999 and 1998 2 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1999 and 1998 3 Consolidated Statements of Changes in Shareholders' Equity Six Months Ended June 30, 1999 and 1998 5 Notes to Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II-OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 18 Item 6 Exhibits and Reports on Form 8-K 19 SIGNATURES 20
3 PART I - FINANCIAL INFORMATION FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, dollars in thousands)
June 30, December 31, 1999 1998 ------------ ----------- ASSETS Cash and due from banks $ 144,856 $ 164,500 Interest-bearing deposits with other banks 3,933 2,598 Federal funds sold and securities purchased under agreements to resell 18,973 8,654 Investment securities held-to-maturity, at cost (market value - $39,832 at June 30, 1999 and $40,159 at December 31, 1998) 38,631 37,782 Investment securities available-for-sale, at market value 515,593 550,394 Loans Commercial 739,293 767,684 Real estate-construction 85,341 74,205 Real estate-mortgage 1,387,543 1,227,905 Installment 584,678 537,156 Credit card 26,252 21,306 Lease financing 38,745 29,212 ---------- ---------- Total loans 2,861,852 2,657,468 Less Unearned income 3,830 3,322 Allowance for loan losses 37,505 34,800 ---------- ---------- Net loans 2,820,517 2,619,346 Premises and equipment 58,085 57,980 Deferred income taxes 7,447 3,072 Goodwill 30,662 31,416 Other intangibles 10,802 11,164 Accrued interest and other assets 72,468 53,029 ---------- ---------- TOTAL ASSETS $3,721,967 $3,539,935 ========== ========== LIABILITIES Deposits Noninterest-bearing $ 381,206 $ 392,999 Interest-bearing 2,532,158 2,479,068 ---------- ---------- Total deposits 2,913,364 2,872,067 Short-term borrowings Federal funds purchased and securities sold under agreements to repurchase 68,357 59,159 Federal Home Loan Bank borrowings 213,450 94,678 Other 3,822 1,227 ---------- ---------- Total short-term borrowings 285,629 155,064 Long-term borrowings 131,421 120,777 Accrued interest and other liabilities 30,395 33,762 ---------- ---------- TOTAL LIABILITIES 3,360,809 3,181,670 SHAREHOLDERS' EQUITY Common stock - no par value Authorized - 160,000,000 shares Issued - 42,657,988 in 1999 and 36,320,338 in 1998 305,991 306,709 Retained earnings 59,807 50,160 Accumulated comprehensive income (2,470) 4,949 Restricted stock awards (467) (408) Treasury stock, at cost, 64,224 and 118,638 shares (1,703) (3,145) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 361,158 358,265 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,721,967 $3,539,935 ========== ==========
See notes to consolidated financial statements. 1 4 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Dollars in thousands, except per share data)
Six months ended Three months ended June 30, June 30, ------------------------ ------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- INTEREST INCOME Loans, including fees $ 118,967 $ 108,735 $ 60,479 $ 55,311 Investment securities Taxable 11,760 14,881 5,790 7,811 Tax-exempt 4,654 4,154 2,301 2,075 ----------- ----------- ----------- ----------- Total investment interest 16,414 19,035 8,091 9,886 Interest-bearing deposits with other banks 145 137 89 72 Federal funds sold and securities purchased under agreements to resell 216 470 145 235 ----------- ----------- ----------- ----------- TOTAL INTEREST INCOME 135,742 128,377 68,804 65,504 INTEREST EXPENSE Deposits 47,767 49,684 23,998 25,513 Short-term borrowings 4,018 2,109 2,467 1,015 Long-term borrowings 3,213 1,723 1,311 877 ----------- ----------- ----------- ----------- TOTAL INTEREST EXPENSE 54,998 53,516 27,776 27,405 ----------- ----------- ----------- ----------- NET INTEREST INCOME 80,744 74,861 41,028 38,099 Provision for loan losses 3,910 3,158 1,378 1,528 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 76,834 71,703 39,650 36,571 NONINTEREST INCOME Service charges on deposit accounts 7,752 6,967 4,037 3,575 Trust income 6,695 5,604 3,258 2,760 Investment securities gains (losses) 47 475 (8) 302 Other 5,593 5,087 2,704 2,457 ----------- ----------- ----------- ----------- Total noninterest income 20,087 18,133 9,991 9,094 NONINTEREST EXPENSES Salaries and employee benefits 30,160 27,882 15,153 14,068 Net occupancy expenses 3,517 3,333 1,688 1,695 Furniture and equipment expenses 3,128 2,809 1,572 1,346 Data processing expenses 3,275 3,123 1,602 1,508 Deposit insurance expense 293 236 151 115 State taxes 990 841 485 363 Amortization of intangibles 1,867 1,988 924 1,041 Merger and restructuring 6,930 0 6,930 0 Other 12,694 12,206 6,682 6,037 ----------- ----------- ----------- ----------- Total noninterest expenses 62,854 52,418 35,187 26,173 ----------- ----------- ----------- ----------- Income before income taxes 34,067 37,418 14,454 19,492 Income tax expense 12,271 12,413 5,739 6,402 ----------- ----------- ----------- ----------- NET EARNINGS $ 21,796 $ 25,005 $ 8,715 $ 13,090 =========== =========== =========== =========== Net earnings per share - basic $ 0.51 $ 0.58 $ 0.20 $ 0.31 =========== =========== =========== =========== Net earnings per share - diluted $ 0.51 $ 0.58 $ 0.20 $ 0.30 =========== =========== =========== =========== Cash dividends declared per share $ 0.30 $ 0.28 $ 0.15 $ 0.14 =========== =========== =========== =========== Average shares outstanding 42,576,824 42,757,252 42,590,211 42,755,451 =========== =========== =========== ===========
See notes to consolidated financial statements. 2 5 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, dollars in thousands)
Six months ended June 30, ------------------------ 1999 1998 --------- --------- OPERATING ACTIVITIES Net earnings $ 21,796 $ 25,005 Adjustments to reconcile net earnings to net cash provided by operating activities Provision for loan losses 3,910 3,158 Provision for depreciation and amortization 4,645 4,583 Net amortization of investment security premiums and accretion of discounts 330 186 Realized investment security gains (47) (475) Originations of mortgage loans held for sale (60,093) (92,671) Gains from sales of mortgage loans held for sale (1,662) (1,253) Proceeds from sale of mortgage loans held for sale 61,755 93,924 Deferred income taxes 181 (1,216) Increase in interest receivable (2,426) (713) Increase in cash surrender value of life insurance (12,234) (4,764) Decrease (increase) in prepaid expenses 862 (646) (Decrease) increase in accrued expenses (375) 765 (Decrease) increase in interest payable (152) 680 Other (6,217) (5,949) --------- --------- Net cash provided by operating activities 10,273 20,614 INVESTING ACTIVITIES Proceeds from sales of investment securities available-for-sale 9,989 31,179 Proceeds from calls, paydowns and maturities of investment securities available-for-sale 98,171 132,150 Purchases of investment securities available-for-sale (89,801) (210,282) Proceeds from calls, paydowns and maturities of investment securities held-to-maturity 4,180 20,282 Purchases of investment securities held-to-maturity (845) (2,000) Net increase in interest-bearing deposits with other banks (1,335) (91) Net (increase) decrease in federal funds sold and securities purchased under agreements to resell (10,319) 8,076 Net increase in loans and leases (208,610) (90,122) Recoveries from loans and leases previously charged off 2,074 711 Proceeds from disposal of other real estate owned 243 1,060 Net cash used in purchase of financial institutions 0 (12,231) Purchases of premises and equipment (4,601) (2,963) --------- --------- Net cash used in investing activities (200,854) (124,231) FINANCING ACTIVITIES Net increase in total deposits 41,297 31,001 Net increase in short-term borrowings 130,565 40,721 Net increase in long-term borrowings 10,644 17,733 Cash dividends declared (12,150) (9,932) Purchase of common stock 0 (1,101) Proceeds from exercise of stock options, net of shares purchased 581 469 --------- --------- Net cash provided by financing activities 170,937 78,891 --------- --------- DECREASE IN CASH AND CASH EQUIVALENTS (19,644) (24,726) Cash and cash equivalents at beginning of period 164,500 168,362 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 144,856 $ 143,636 ========= =========
3 6 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Six months ended June 30, -------------------- 1999 1998 ------- -------- Supplemental disclosures Interest paid $54,634 $52,882 ======= ======= Income taxes paid $13,335 $13,874 ======= ======= Recognition of deferred tax assets attributable to FASB Statement No. 115 $ 4,556 $ 524 ======= ======= Acquisition of other real estate owned through foreclosure $ 381 $ 509 ======= ======= Issuance of restricted stock awards $ 143 $ 220 ======= ======= Non-cash transfer from securities available-for- sale to securities held-to-maturity $ 4,020 $ 0 ======= =======
See notes to consolidated financial statements. 4 7 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Dollars in thousands)
Six months ended June 30, ------------------------ 1999 1998 --------- --------- Balance at December 31, 1997, as previously reported $ 286,259 Adjusted for pooling-of-interests: Sand Ridge Financial Corporation 39,681 Hebron Bancorp, Inc. 10,326 --------- Balances at January 1, as restated $ 358,265 336,266 Net earnings 21,796 25,005 Other comprehensive income, net of taxes: Change in unrealized gains on securities, available for sale (7,419) (715) --------- --------- Comprehensive income 14,377 24,290 Cash dividends declared (12,150) (9,932) Purchase of common stock 0 (2,169) Exercise of stock options, net shares purchased 582 726 Restricted stock awards 0 (3) Amortization of restricted stock awards 84 74 --------- --------- Balance at June 30 $ 361,158 $ 349,252 ========= =========
See notes to consolidated financial statements 5 8 FIRST FINANCIAL BANCORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The consolidated financial statements for interim periods are unaudited; however, in the opinion of the management of First Financial Bancorp. ("Bancorp"), all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation have been included. NOTE 1: BASIS OF PRESENTATION The consolidated financial statements of Bancorp, a bank and savings and loan holding company, include the accounts of Bancorp and its wholly-owned subsidiaries - First National Bank of Southwestern Ohio, Community First Bank & Trust, Indiana Lawrence Bank, Fidelity Federal Savings Bank, Citizens First State Bank, Home Federal Bank, A Federal Savings Bank, Union Bank & Trust Company, The Clyde Savings Bank Company, Peoples Bank and Trust Company, Bright National Bank, First Finance Mortgage Company of Southwestern Ohio (dba Community First Finance), Farmers State Bank, National Bank of Hastings, Vevay Deposit Bank, Sand Ridge Bank, and Hebron Deposit Bank. All significant intercompany transactions and accounts have been eliminated in consolidation. Intangible assets arising from the acquisition of subsidiaries are being amortized over varying periods, none of which exceeds 25 years. Core deposit balances are being amortized over varying periods, none of which exceeds 10 years. The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary to be in conformity with generally accepted accounting principles. On April 27, 1999, the shareholders approved an amendment to the Articles of Incorporation to increase the number of authorized common shares from 60,000,000 to 160,000,000. NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK In the normal course of business, Bancorp offers a variety of financial instruments with off-balance sheet risk to its customers to aid them in meeting their requirements for liquidity and credit enhancement and to reduce its own exposure to fluctuations in interest rates. These financial instruments include standby letters of credit and commitments outstanding to extend credit. Generally accepted accounting principles do not require these financial instruments to be recorded in the consolidated financial statements, and accordingly, they are not. Bancorp does not use off- balance sheet derivative financial instruments (such as interest rate swaps) as defined in the Financial Accounting Standards Board's (FASB) Statement No. 119 "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments". Bancorp's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for standby letters of credit and commitments outstanding to extend credit is represented by the contractual amounts of those instruments. Bancorp uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Following is a discussion of these transactions. 6 9 Standby letters of credit are conditional commitments issued by Bancorp to guarantee the performance of a customer to a third party. Bancorp's portfolio of standby letters of credit consists primarily of performance assurances made on behalf of customers who have a contractual commitment to produce or deliver goods or services. The risk to Bancorp arises from its obligation to make payment in the event of the customers' contractual default. As of June 30, 1999, Bancorp had issued standby letters of credit aggregating $16,427,000 compared to $18,022,000 issued as of December 31, 1998. Management conducts regular reviews of these instruments on an individual customer basis, and the results are considered in assessing the adequacy of Bancorp's allowance for loan losses. Management does not anticipate any material losses as a result of these letters of credit. Loan commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp evaluates each customer's creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by Bancorp upon extension of credit, is based on management's credit evaluation of the counterparty. The collateral held varies, but may include securities, real estate, inventory, plant, or equipment. Bancorp had commitments outstanding to extend credit totaling $460,217,000 at June 30, 1999 and $531,433,000 at December 31, 1998. Management does not anticipate any material losses as a result of these commitments. NOTE 3: BUSINESS COMBINATIONS On June 1, 1999, Bancorp issued 1,222,650 shares of its common stock for all the outstanding common stock of Hebron Bancorp, Inc. Upon consummation of the merger, Hebron Bancorp, Inc. was merged out of existence and its only subsidiary, Hebron Deposit Bank, became a wholly owned subsidiary of Bancorp. The $110 million bank is Bancorp's first presence in Kentucky. The acquisition was accounted for as a pooling of interests, and accordingly, the consolidated financial statements, including earnings per share, have been restated for the periods prior to the acquisition to include the accounts and operations of Hebron Bancorp, Inc. Also on June 1, 1999, Bancorp issued 5,115,000 shares of its common stock for all the outstanding common stock of Sand Ridge Financial Corporation. Upon consummation, Sand Ridge Financial Corporation was merged out of existence and its only subsidiary, Sand Ridge Bank, became a wholly owned subsidiary of Bancorp. The merger with this $545 million bank was accounted for as a pooling of interests, and accordingly, the consolidated financial statements, including earnings per share, have been restated for the periods prior to the acquisition to include the accounts and operations of Sand Ridge Financial Corporation. A disclosure of the separate results of operations of the combined entities for the three months and six months ended June 30, 1999 is not applicable due to the June 1, 1999 merger date. However, separate results of operations for the three and six months ended June 30, 1998 were as follows: 7 10
Six months Three months Ended Ended June 30, 1998 June 30, 1998 ------------- ------------- Net interest income Bancorp $64,226 $32,755 Sand Ridge 8,589 4,341 Hebron 2,046 1,003 ------- ------- Combined $74,861 $38,099 ======= ======= Net income Bancorp $21,171 $11,068 Sand Ridge 3,029 1,619 Hebron 805 403 ------- ------- Combined $25,005 $13,090 ======= =======
NOTE 4: MERGER AND RESTRUCTURING CHARGES In December 1998, Bancorp announced plans for a merger and restructuring charge to coincide with its mergers with Sand Ridge Financial Corporation (Sand Ridge) and Hebron Bancorp, Inc. (Hebron). As discussed in NOTE 3: BUSINESS COMBINATIONS, Bancorp completed these mergers on June 1, 1999. In the second quarter of 1999, Bancorp recorded merger and restructuring charges of approximately $6.9 million before taxes or $5.5 million after taxes. This merger and restructuring charge consists of two general components. The first component was for merger related charges of approximately $2.9 million before taxes, or $2.8 million after taxes, for investment banking and other professional services specifically associated with the Sand Ridge and Hebron mergers. Investment banking fees and other professional services such as legal, accounting, and consulting represented $2.4 million of the $2.9 million pre-tax merger charge. The remaining approximately $500,000 was incurred primarily for system conversions and personnel charges. Of the merger related charges, $2.6 million have been paid. The second component included in the overall merger and restructuring charges of $5.5 million after taxes relates to restructuring charges for the planned consolidation of some operational functions including the sale of four facilities and more effective use of existing properties. Under its restructuring plan, Bancorp also discontinued its accounts receivable financing line of business and has merged two of its affiliates, Union Trust Bank, Union City, Indiana into Community First Bank & Trust, Celina, Ohio. The restructuring component totaled approximately $4.0 million before taxes and $2.7 million after taxes. Of the $4.0 million pre-tax restructuring component, approximately $1.6 million was accrued for disposals of properties, $1.1 million was a provision for loan losses associated with the discontinuance of the accounts receivable financing line of business, and $1.3 million was related to the consolidation of operational functions and affiliate restructuring. The disposals of property are expected to be completed by year end 1999. The majority of the losses associated with the discontinuance of accounts receivable financing have been recognized. Of the $1.3 million related to operational and affiliate restructuring, approximately $300,000 has been paid. The majority of the remaining portion is expected to be paid by year end 1999. 8 11 NOTE 5: COMPREHENSIVE INCOME In 1998, Bancorp adopted SFAS No. 130, "Reporting Comprehensive Income." The statement establishes standards for the reporting and display of comprehensive income. Bancorp elected to present the required disclosures in the "Consolidated Statements of Changes in Shareholders' Equity". Disclosure of the reclassification adjustments for the six months ended June 30, 1999 are shown below.
Six months ended June 30, ---------------------- 1999 1998 ------- ------- Other comprehensive income, net of tax: Unrealized holding losses arising during period $(7,378) $ (403) Less: reclassification adjustment for gains included in net income 41 312 ------- ------- Other comprehensive income (loss) $(7,419) $ (715) ======= =======
9 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST FINANCIAL BANCORP. AND SUBSIDIARIES SELECTED QUARTERLY FINANCIAL DATA
1999 1998 ----------------------- ------------------------------------ JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NET EARNINGS $ 8,715 $ 13,081 $ 13,825 $ 12,212 $ 13,090 NET EARNINGS--ADJUSTED (a) 14,169 13,081 13,825 12,212 13,090 NET EARNINGS PER SHARE-BASIC 0.20 0.31 0.32 0.29 0.31 NET EARNINGS PER SHARE-DILUTED 0.20 0.31 0.32 0.28 0.30 NET EARNINGS PER SHARE-DILUTED-ADJUSTED (a) 0.33 0.31 0.32 0.28 0.30 AVERAGE CONSOLIDATED BALANCE SHEET ITEMS: LOANS LESS UNEARNED INCOME 2,796,591 2,657,522 2,579,649 2,491,872 2,397,119 INVESTMENT SECURITIES 558,475 577,436 604,180 618,246 640,964 OTHER EARNING ASSETS 48,240 10,678 25,382 13,828 22,008 ---------- ---------- ---------- ---------- ---------- TOTAL EARNING ASSETS 3,403,306 3,245,636 3,209,211 3,123,946 3,060,091 TOTAL ASSETS 3,640,444 3,505,738 3,465,309 3,398,206 3,314,406 DEPOSITS 2,907,268 2,827,604 2,851,581 2,770,731 2,789,183 SHAREHOLDERS' EQUITY 368,271 360,234 357,986 355,647 345,344 KEY RATIOS: AVERAGE EQUITY TO AVERAGE TOTAL ASSETS 10.12% 10.28% 10.33% 10.47% 10.42% RETURN ON AVERAGE TOTAL ASSETS 0.96% 1.51% 1.58% 1.43% 1.58% RETURN ON AVERAGE TOTAL ASSETS--ADJUSTED (a) 1.56% 1.51% 1.58% 1.43% 1.58% RETURN ON AVERAGE EQUITY 9.49% 14.73% 15.32% 13.62% 15.20% RETURN ON AVERAGE EQUITY--ADJUSTED (a) 15.36% 14.73% 15.32% 13.62% 15.20% NET INTEREST MARGIN (FULLY TAX EQUIVALENT) 4.99% 5.13% 5.01% 4.99% 5.15% (a) Excluding after-tax merger and restructuring charges of $5.5 million in the second quarter of 1999.
NET INTEREST INCOME Net interest income, the principal source of earnings, is the amount by which interest and fees generated by earning assets exceed the interest costs of liabilities obtained to fund them. For analytical purposes, interest income presented in the table below has been adjusted to a tax equivalent basis assuming a 35% marginal tax rate for interest earned on tax-exempt assets such as municipal loans, tax-free leases and investments. This is to recognize the income tax savings which facilitates a comparison between taxable and tax-exempt assets. As shown below, net interest income on a fully tax equivalent basis has increased $3,081,000 over the second quarter of 1998 and $1,286,000 over the first quarter of 1999. Continued loan growth, in all major categories of loans, contributed to higher net interest income in the second quarter of 1999.
QUARTER ENDED 1999 1998 ------------------ ----------------------------- JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) INTEREST INCOME $68,804 $66,938 $67,473 $66,820 $65,504 INTEREST EXPENSE 27,776 27,222 28,229 28,689 27,405 ------- ------- ------- ------- ------ NET INTEREST INCOME 41,028 39,716 39,244 38,131 38,099 TAX EQUIVALENT ADJUSTMENT TO INTEREST INCOME 1,312 1,338 1,253 1,189 1,160 ------- ------- ------- ------- ------- NET INTEREST INCOME (FULLY TAX EQUIVALENT) $42,340 $41,054 $40,497 $39,320 $39,259 ======= ======= ======= ======= =======
RATE/VOLUME ANALYSIS The impact of changes in volume and interest rates on net interest income is illustrated in the table on the following page. As shown, an increase in volume had a significant impact on both interest income and interest expense for the six month and three month periods ended June 30, 1999 in 10 13 comparison to 1998. The increase in volume had more impact on interest income than interest expense. The change in interest due to the combined effect of both rate and volume has been allocated to the volume and rate variance on a prorated basis.
SIX MONTHS THREE MONTHS ENDED CHANGE DUE TO: ENDED CHANGE DUE TO: JUN. 30, 1999 ------------------- JUN. 30, 1999 ------------------- OVER 1998 RATE VOLUME OVER 1998 RATE VOLUME -------- --------- ------- -------- -------- -------- (DOLLARS IN THOUSANDS) INTEREST INCOME $ 7,365 $ (6,035) $ 13,400 $ 3,300 $ (3,774) $ 7,074 INTEREST EXPENSE 1,482 (4,134) 5,616 371 (2,492) 2,863 -------- --------- ------- -------- -------- -------- NET INTEREST INCOME $ 5,883 $ (1,901) $ 7,784 $ 2,929 $ (1,282) $ 4,211 ======== ========= ======= ======== ======== ========
OPERATING RESULTS Net operating income represents net earnings before net securities transactions. Net operating income for the first six months of 1999 was $21,755,000 which was a decrease of $2,938,000 or 11.9% from that reported in the same period in 1998. This decrease in net operating income can be attributed to merger and restructuring charges of $6,930,000 as discussed in Note 4. Net operating income, excluding the merger and restructuring charges, net of tax, of $5,454,000, increased $2,516,000 or 10.2% over 1998. The increase in core net operating income (net operating income excluding the merger and restructuring charges) can be primarily attributed to an increase in net interest income of $5,883,000 or 7.86% for the first six months of 1999 compared to the same period in 1998. The increase in net interest income was driven by loan growth. Noninterest income excluding securities transactions, for the first six months of 1999 increased $2,382,000 or 13.5% over the comparable period in 1998. Continued strong growth in service charges on deposit accounts and trust fees led to the increased noninterest income. Noninterest expense excluding the merger and restructuring charge increased $3,506,000 or 6.69% primarily as a result of increased salary and benefit expenses. It is anticipated that initiatives taken in relation to the restructuring charge in the second quarter of 1999 will have a positive financial impact going forward. The disposal of unnecessary nonearning assets decreases future operating expenses such as depreciation and maintenance costs. The discontinuation of unprofitable product lines decreases risk, expenses and allows for reallocation of people and assets. The consolidation of operations provides operational synergies and allows for future growth. Reference NOTE 4: MERGER AND RESTRUCTURING CHARGES for further details. Net operating income, excluding merger and restructuring charges for the second quarter of 1999 increased $1,274,000 or 9.88% over the same period in 1998 due to the same reasons discussed above. Bancorp's adjusted diluted earnings per share on a "cash basis", which excludes the effect of amortization of goodwill and core deposits, tax effected when applicable, and merger and restructuring charges, were $0.67 for the first six months of 1999 which is a 9.84% increase over the $0.61 for the same period in 1998. Adjusted diluted earnings per share on a "cash basis" for the second quarter of 1999 were $0.35, a 9.38% increase over the $0.32 figure for the second quarter of 1998. These calculations were specifically formulated by Bancorp and may not be comparable to similarly titled measures reported by other companies. 11 14 INCOME TAXES For the first six months of 1999, income tax expense was $12,271,000 compared to $12,413,000 for the same period in 1998, or a decrease of $142,000. In 1999, $12,265,000 of the tax expense was related to operating income with a tax expense of $6,000 related to securities transactions. In the first six months of 1998, income tax expense related to operating income was $12,250,000 and $163,000 relating to securities transactions. The higher effective tax rate was primarily attributable to merger expenses not being an allowed taxable deduction. Income tax expense for the second quarter of 1999 was $5,739,000 compared to $6,402,000 for the same period in 1998, which was a decrease of $663,000. Tax expense relating to operating income totaled $5,752,000 and $6,285,000 for the quarters ended June 30, 1999 and 1998, respectively, with a tax benefit related to securities transactions of $13,000 for 1999 and a tax expense related to securities transactions of $102,000 for 1998. A tax benefit related to restructuring charges included in taxes on operating income for 1999 was $1,476,000. NET EARNINGS Net earnings for the first six months of 1999 were $3,209,000 or 12.8% below that recorded during the same period in 1998. Net earnings excluding merger and restructuring charges were $27,250,000 or 8.98% greater than the prior year for reasons discussed in the Operating Results section. Net securities gains through June 30, 1999 were $41,000 compared to $312,000 for the period ending June 30, 1998. Merger and restructuring charges, net of taxes, were $5,454,000 for 1999. Net earnings for the three months ended June 30, 1999 were $4,375,000 or 33.4% less than the same period in 1998. Net securities gains for the second quarter of 1999 and 1998 were $5,000 and $200,000, respectively. Merger and restructuring charges were $5,454,000 for the second quarter 1999. Net earnings excluding the merger and restructuring charge for the three months ended June 30, 1999 were $14,169,000, or 8.24% greater than the same period in 1998. ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is maintained at a level believed adequate by management to absorb estimated probable credit losses. Management's periodic evaluation of the adequacy of the allowance is based on Bancorp's past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. At June 30, 1999 and 1998, the recorded investment in loans that are considered to be impaired under FASB Statement No. 114 was $2,170,000 and $6,198,000, respectively, all of which were on a nonaccrual basis. The related allowance for loan losses on these impaired loans was $437,000 at June 30, 1999 and $2,160,000 at June 30, 1998. At June 30, 1999, there were $33,000 in impaired loans that, as a result of write-downs, did not have an allowance for loan losses. At June 30, 1998, there were no loans in this category. The average recorded investment in impaired loans for the respective six months and quarters ended June 30, 1999 and 1998, was approximately $3,715,000 and $3,624,000 for 1999 and $3,591,000 and $3,236,000 for 1998. For the six months and quarter ended June 30, 1999, Bancorp recognized interest income on those impaired loans of $32,000 and $14,000 compared to $60,000 and $53,000 for the same periods 12 15 in 1998. Bancorp recognizes income on impaired loans using the cash basis method. The table on the following page indicates the activity in the allowance for loan losses for the quarters presented.
QUARTER ENDED 1999 1998 --------------------- ---------------------------------- JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS) BALANCE AT BEGINNING OF PERIOD $ 36,319 $ 34,800 $ 34,169 $ 33,715 $ 32,451 ALLOWANCE ACQUIRED THROUGH MERGER 0 0 0 0 806 PROVISION FOR DISCONTINUED PRODUCT LINE 1,100 PROVISION FOR LOAN LOSSES 1,378 2,532 2,351 2,738 1,528 LOANS CHARGED OFF (2,762) (1,617) (3,148) (2,619) (1,445) RECOVERIES 1,470 604 1,428 335 375 -------- -------- -------- -------- -------- NET CHARGE OFFS (1,292) (1,013) (1,720) (2,284) (1,070) -------- -------- -------- -------- -------- BALANCE AT END OF PERIOD $ 37,505 $ 36,319 $ 34,800 $ 34,169 $ 33,715 ======== ======== ======== ======== ======== RATIOS: ALLOWANCE TO PERIOD END LOANS, NET OF UNEARNED INCOME 1.31% 1.34% 1.31% 1.34% 1.38% RECOVERIES TO CHARGE OFFS 53.22% 37.35% 45.36% 12.79% 25.95% ALLOWANCE AS A MULTIPLE OF NET CHARGE OFFS 29.03X 35.85X 20.23X 14.96X 31.51X
NONPERFORMING/UNDERPERFORMING ASSETS The table below shows the categories which are included in nonperforming and underperforming assets. Nonperforming assets increased $216,000 or 2.01% in the second quarter of 1999 when compared to the second quarter of 1998, and in that same period, accruing loans past due 90 days or more increased $2,050,000. Nonperforming assets increased $2,090,000 or 23.6% in the second quarter of 1999 when compared to the first quarter of 1999. Nonperforming and underperforming assets as a percent of loans remained consistent with prior periods. Accruing loans, including loans impaired under FASB Statement No. 114, which are past due 90 days or more where there is not a likelihood of becoming current are transferred to nonaccrual loans. However, those loans, which management feels will become current and, therefore accruing, are classified as "Accruing loans 90 days or more past due" until they become current.
QUARTER ENDED 1999 1998 ------------------- ------------------------------- JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 ------- ------- ------- ------- ------- (DOLLARS IN THOUSANDS) NONACCRUAL LOANS $ 9,219 $ 7,151 $ 7,481 $ 8,446 $ 7,620 RESTRUCTURED LOANS 1,411 1,566 691 1,280 2,512 OREO/ISF* 332 155 221 1,057 614 ------- ------- ------- ------- ------- TOTAL NONPERFORMING ASSETS 10,962 8,872 8,393 10,783 10,746 ACCRUING LOANS PAST DUE 90 DAYS OR MORE 3,796 2,446 1,839 1,993 1,746 ------- ------- ------- ------- ------- TOTAL UNDERPERFORMING ASSETS $14,758 $11,318 $10,232 $12,776 $12,492 ======= ======= ======= ======= ======= NONPERFORMING ASSETS AS A PERCENT OF LOANS, NET OF UNEARNED INCOME PLUS OREO/ISF 0.38% 0.33% 0.32% 0.42% 0.44% ======= ======= ======= ======= ======= UNDERPERFORMING ASSETS AS A PERCENT OF LOANS, NET OF UNEARNED INCOME PLUS OREO/ISF 0.52% 0.42% 0.39% 0.50% 0.51% ======= ======= ======= ======= =======
*OTHER REAL ESTATE OWNED/IN-SUBSTANCE FORECLOSURE 13 16 LIQUIDITY AND CAPITAL RESOURCES Liquidity management is the process by which Bancorp provides for the continuing flow of funds necessary to meet its financial commitments on a timely basis. These commitments include withdrawals by depositors, funding credit commitments to borrowers, shareholder dividends, paying expenses of operations, and funding capital expenditures. Liquidity is derived primarily from deposit growth, maturing loans, the maturity of investment securities, access to other funding sources and markets, and a strong capital position. The most stable source of liability-funded liquidity for both the long-term and short-term is deposit growth and retention in the core deposit base. At the end of the second quarter of 1999, Bancorp's deposit liabilities had increased by 1.44% from December 31, 1998. Another source of funding is through short-term borrowings. As part of Bancorp's asset/liability management strategy, Bancorp's short-term borrowings increased to $285,629,000 at June 30, 1999, compared to $155,064,000 at December 31, 1998, as one source of funding loan growth. The principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. At June 30, 1999, securities maturing in one year or less amounted to $49,504,000, representing 8.93% of the total of the investment securities portfolio. In addition, other types of assets, such as cash and due from banks, federal funds sold and securities purchased under agreements to resell, as well as loans and interest-bearing deposits with other banks maturing within one year, are sources of liquidity. Total asset-funded sources of liquidity at June 30, 1999, amounted to $726,008,000, representing 19.5% of total assets. Sources of long-term asset funded liquidity are derived from the maturity of investment securities and maturing loans in excess of one year. At June 30, 1999, Bancorp had classified $515,593,000 in investment securities available-for-sale, of which approximately $192,000,000 were pledged to secure public deposits. Management examines Bancorp's liquidity needs in establishing this classification in accordance with the Financial Accounting Standards Board Statement No. 115 on accounting for certain investments in debt and equity securities. Liquidity is very important and as such is both monitored and managed closely by the asset/liability committee at each affiliate. Liquidity may be used to fund capital expenditures. Capital expenditures were $4,601,000 for the first six months of 1999. In addition, remodeling is a planned and ongoing process given the 116 offices of Bancorp and its subsidiaries. Material commitments for capital expenditures as of June 30, 1999 were approximately $2,321,000. Management believes that Bancorp has sufficient liquidity to fund its current commitments. CAPITAL ADEQUACY The Federal Reserve established risk-based capital requirements for U.S. banking organizations which have been adopted by the Office of Thrift Supervision for savings and loan associations. Risk weights are assigned to on-and off-balance sheet items in arriving at risk-adjusted total assets. Regulatory capital is divided by risk-adjusted total assets, with the resulting ratios compared to minimum standards to determine whether a bank has adequate capital. Regulatory guidelines require a 4.00% Tier 1 capital ratio, and an 8.00% Total risk-based capital ratio. A minimum of 3.00% leverage ratio is required for bank holding companies that either are rated composite "1" under the BOPEC rating system or have implemented the Board's risk-based 14 17 capital market risk measure. The minimum leverage ratio for all other bank holding companies is 4.0%. Tier 1 capital consists primarily of common shareholders' equity, net of intangibles, and Total risked-based capital is Tier 1 capital plus Tier 2 supplementary capital, which is primarily the allowance for loan losses subject to certain limits. The Leverage ratio is a result of Tier 1 capital divided by average total assets less certain intangibles. Bancorp's Tier I ratio at June 30, 1999, was 12.2%, its Total risked-based capital was 13.4% and its Leverage ratio was 9.01%. While Bancorp subsidiaries' ratios are well above regulatory requirements, management will continue to monitor the asset mix, which affects these ratios due to the risk weights assigned various assets, and the allowance for loan losses, which influences the Total risk-based capital ratio. The table below illustrates the risk-based capital calculations and ratios for the last two years.
QUARTER ENDED 1999 1998 ----------------------- ------------------------------------ JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) TIER I CAPITAL: SHAREHOLDER'S EQUITY $ 361,158 $ 364,250 $ 358,265 $ 359,542 $ 349,252 LESS: NON-QUALIFYING INTANGIBLE ASSETS 38,992 39,802 40,605 41,382 42,321 LESS: UNREALIZED NET SECURITIES GAINS (LOSSES) (2,470) 3,041 4,949 6,455 3,924 ---------- ---------- ---------- ---------- ---------- TOTAL TIER I CAPITAL $ 324,636 $ 321,407 $ 312,711 $ 311,705 $ 303,007 ========== ========== ========== ========== ========== TOTAL RISK-BASED CAPITAL: TIER I CAPITAL $ 324,636 $ 321,407 $ 312,711 $ 311,705 $ 303,007 QUALIFYING ALLOWANCE FOR LOAN LOSSES 33,462 31,517 31,742 30,290 29,533 ---------- ---------- ---------- ---------- ---------- TOTAL RISK-BASED CAPITAL $ 358,098 $ 352,924 $ 344,453 $ 341,995 $ 332,540 ========== ========== ========== ========== ========== RISK WEIGHTED ASSETS $2,672,881 $2,516,585 $2,536,301 $2,419,170 $2,358,523 ========== ========== ========== ========== ========== RISK-BASED RATIOS: TIER I 12.15% 12.77% 12.33% 12.88% 12.85% ========== ========== ========== ========== ========== TOTAL RISK-BASED CAPITAL 13.40% 14.02% 13.58% 14.14% 14.10% ========== ========== ========== ========== ========== LEVERAGE 9.01% 9.27% 9.13% 9.29% 9.26% ========== ========== ========== ========== ==========
YEAR 2000 Many computer systems process transactions using two digits for the year of the transaction, rather than a full four digits. As a result, these systems may not function properly at the beginning of the year 2000 without some proactive hardware and software change. Bancorp has devoted significant time and attention to the Year 2000 issue, and will repair or replace non-compliant hardware and software prior to the new millennium. Several regulatory agencies and authorities have issued regulations and guidelines that financial institutions must use in measuring their progress toward Year 2000 preparedness. Five commonly recognized phases of Year 2000 remediation are awareness, assessment, renovation, validation and implementation. During 1997 and 1998, the awareness and assessment phases was completed for all systems and service providers. Additionally, renovation was completed for mission critical systems in 1998 and validation was completed in 1999. As in 1997 and 1998, Bancorp's Year 2000 Operating Committee continued to meet regularly during 1999 to direct and oversee all 15 18 significant Year 2000 tasks. The Operating Committee regularly updates senior management and the Board of Directors, who have pledged their full support to the Year 2000 project. Bancorp has inventoried and assessed the many hardware and software programs that must be remediated. A vendor management program is bringing those relationships into compliance. Bancorp realized in early 1997 that qualified personnel were required to guide the organization through the Year 2000 Project. Some Bancorp associates were reallocated, some new employees were hired and contract staff have been used. Our Year 2000 Loan Committee, comprised of affiliate senior lenders, has assessed the impact of Year 2000 on commercial and retail borrowers and has taken steps to mitigate the risk that is inherent in those loans. Our Asset/Liability Committee and Operating Committee have assessed and estimated the impact of liquidity and currency demands that may occur during the latter part of 1999, and the impact into the year 2000. Management of each subsidiary is taking steps to insure that they have appropriate funding resources and currency on hand to meet anticipated customer demands. As Bancorp grows and as Year 2000 approaches, Bancorp, as well as many other financial institutions, is developing plans to rely on alternative sources of funding, if needed. Many of Bancorp's affiliates have executed agreements with the Federal Home Loan Bank for their "Year 2000 Liquidity Line of Credit" with guaranteed lines of $160 million. As of June 30, 1999, three affiliates have completed the necessary legal documentation and pre-pledged collateral through eligible investment securities or loan assets to the Federal Reserve Discount Window. Other Bancorp affiliates are in the process of completing the necessary requirements respective to the Federal Reserve Discount Window. Management is also reviewing strategies to fund asset growth and provide liquidity with other alternative sources including brokered deposits and loans on life insurance policies. Management is of the opinion that its liquidity plans are adequate to fund future growth and provide liquidity on an as needed basis. Bancorp's computer systems fall into three broad categories: those processed through a service bureau relationship, those processed in-house, and those processed on a personal computer or client/server platform. The service bureau systems were renovated, validated, and implemented in 1998. The mission critical in-house systems were renovated in 1998 and validation was completed in first quarter, 1999. The mission critical personal computer and client/server systems were renovated in 1998 and have been validated. Bancorp's Year 2000 Team continues to renovate and validate those systems that are less critical in nature. Implementation follows successful validation testing and this phase was completed by mid-year, 1999. Bancorp has spent a great deal of time ensuring that it has an effective program in place to address and resolve the Year 2000 issue in a timely manner. Should Bancorp successfully complete its Year 2000 program, however, it will not be isolated from potential impact. General disruptions in the economy or at other significant service providers such as telecommunication and utility companies could adversely affect Bancorp. The amount of potential liability and lost revenue cannot be reasonably estimated at this time. 16 19 To mitigate both controlled and uncontrolled risks, Bancorp has developed contingency plans in the event any particular system may not function properly. The contingency plans for information technology systems primarily call for manual intervention where required. Management has also developed contingency plans to support our reliance on transportation, communication, outside vendors, etc. where possible. During second quarter 1999, Bancorp incurred approximately $308,000 in noninterest expense for costs related to Year 2000 issues, bringing the total amount charged to operations since 1997 to $2,439,000. An additional $432,000 was capitalized, bringing the total amount capitalized to $779,000. Based on management's current assessment and anticipated reprogramming costs, Bancorp expects to spend an additional $972,000, of which about $448,000 will be capitalized. However, there can be no assurance as to the accuracy of these estimates. This Year 2000 information is designated as a "Year 2000 Readiness Disclosure" falling under the provision of the "Year 2000 Information and Readiness Disclosure Act." FORWARD-LOOKING INFORMATION The Form 10-Q should be read in conjunction with the consolidated financial statements, notes and tables included elsewhere in this report and in the First Financial Bancorp. Annual Report on Form 10-K for the year ended December 31, 1998 (1998 Form 10-K). Management's analysis may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties which may cause actual results to differ materially. For a discussion of certain factors that may cause such forward-looking statements to differ materially from actual results, refer to the 1998 Form 10-K. ACCOUNTING AND REGULATORY MATTERS Management is not aware of any events or regulatory recommendations which, if implemented, are likely to have a material effect on Bancorp's liquidity, capital resources, or operations. 17 20 PART II-OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- On April 27, 1999, Bancorp held its annual meeting of shareholders, the results of which follow: 1) Election of four directors:
% of Total Votes Name Term Votes For Shares Voted Withheld ---- ---- --------- ------------ -------- Martin J. Bidwell 3 years 29,374,348 99.23% 227,332 Carl R. Fiora 3 years 29,458,822 99.52% 142,858 Barry J. Levey 3 years 29,421,822 99.39% 179,858 Stephen S. Marcum 3 years 29,428,650 99.42% 173,030 Steven C. Posey 3 years 29,423,947 99.40% 177,733
Directors whose terms continue beyond the Annual Meeting in 1999: Class II Term expiring in 2000: Richard L. Alderson James C. Garland Murph Knapke Stanley N. Pontius Barry S. Porter Perry D. Thatcher Class III Term expiring in 2000: Donald M. Cisle Corinne R. Finnerty F. Elden Houts The following proposals were approved by the shareholders: 2) Amend Corporation's Articles of Incorporation to increase the total number of shares the corporation is authorized to issue to 160,000,000 common shares, without par value. 27,557,701 shares, or 76.05% of the total shares outstanding, voted to adopt the amended Articles of Incorporation. Of the total shares voted, 1,740,059 shares voted against the amendment of the regulations, there were 303,920 abstentions and no broker non-votes. 3) Approval of the Corporation's 1999 Stock Incentive Plan for Officers and Employees. 18 21 23,970,468 shares, or 80.98% of the total shares voted, voted to adopt the amended Articles of Incorporation. Of the total shares voted, 2,296,956 shares voted against the amendment of the regulations, there were 270,822 abstentions and 3,063,434 broker non-votes. 4) Approval of the Corporation's 1999 Stock Option Plan for Non- Employee Directors. 23,704,854 shares, or 80.08% of the total shares voted, voted to adopt the amended Articles of Incorporation. Of the total shares voted, 2,497,554 shares voted against the amendment of the regulations and there were 308,877 abstentions, and 3,090,395 broker non-votes. No other matters were brought before the meeting for a vote. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 3 Articles of Incorporation, revised April 27, 1999 27 Financial Data Schedule (b) Reports on Form 8-K During the quarter ended June 30, 1999, the registrant filed a Form 8-K dated June 16, 1999, reporting the merger of Sand Ridge Financial Corporation for 5,115,000 shares of the Corporation's common stock. 19 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FIRST FINANCIAL BANCORP. ------------------------ (Registrant) /s/ Michael R. O'Dell /s/ C. Douglas Lefferson - ---------------------------------- -------------------------------- Michael R. O'Dell, Senior Vice C. Douglas Lefferson, President, Chief Financial Comptroller Officer and Secretary (Principal Accounting Officer) Date August 5, 1999 Date August 5, 1999 ----------------------------- ---------------------------- 20 EX-3 2 EXHIBIT 3 1 Exhibit 3 Revised April 30, 1987 Revised April 30, 1990 Revised May 7, 1991 Revised April 27, 1993 Revised April 26, 1994 Revised April 22, 1997 Revised April 28, 1998 Revised April 27, 1999 ARTICLES OF INCORPORATION OF FIRST FINANCIAL BANCORP. The undersigned, a majority of whom are citizens of the United States, desiring to form a corporation, for profit, under Sections 1701.01 et seq. of the Revised Code of Ohio, do hereby certify: FIRST. The name of said corporation shall be First Financial Bancorp. SECOND. The place in Ohio where its principal office is to be located is Hamilton, Butler County. THIRD. The purposes for which it is formed are: to organize, purchase, acquire, own, invest in, or control banks and other companies, and the shares and securities of the same, in accordance with, and to the full extent permitted by, the Bank Holding Company Act of 1956 and other applicable laws of the United States, or of this State, as now or hereafter amended, and to carry on the business of a bank holding company in accordance with such laws; and to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code. FOURTH. The total number of shares of stock which the corporation shall have authority to issue is One Hundred Sixty Million (160,000,000) shares of common stock, without par value. (a) Dividends. The holders of shares of common stock shall be entitled to receive dividends, if and when declared payable from time to time by the Board of Directors, from any funds legally available therefor. (b) Voting. Each outstanding share of the common stock of the corporation shall entitle the holder thereof to one vote and the exclusive voting power for all purposes shall be vested in the holders of common stock. (c) Preemptive Rights. No holder of shares of the common stock of the corporation shall have preemptive rights to subscribe for or to purchase any shares of the common stock of the corporation or any other securities of the corporation, whether such share or shares are now or hereafter authorized. 2 -2- (d) Purchase of Own Securities. The corporation shall be authorized to purchase or otherwise acquire, and to hold, own, pledge, transfer or otherwise dispose of, shares of its own common stock and other securities, subject, however, to the laws of the State of Ohio and to federal statutes, and without limitation to the Bank Holding Company Act of 1956 as amended and as hereinafter may be amended or supplemented. (e) The shareholders shall not have the right to vote cumulatively in the election of directors effective for the Annual Meeting occurring in 1988 and thereafter. FIFTH. The number and qualification of directors of the corporation shall be fixed from time to time by its Code of Regulations. The number of directors may be increased or decreased as therein provided but the number thereof shall in no event be less than nine. The Board of Directors shall be divided into three classes as nearly equal in number as the then total number of directors constituting the whole board permits, with the term of office of one class expiring each year. At the first annual meeting of stockholders, directors of Class I shall be elected to hold office for a term expiring at the next succeeding annual meeting, directors of Class II shall be elected to hold office for a term expiring at the second succeeding annual meeting, and directors of Class III shall be elected to hold office for a term expiring at the third succeeding annual meeting. In no event shall there be less than three directors per class. Subject to the foregoing, at each annual meeting of stockholders the successors to the class of directors whose terms shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. In the event of any increase in the number of directors of the corporation, the additional directors shall be so classified that all classes of directors shall be increased equally as nearly as may be possible. In the event of any decrease in the number of directors of the corporation, all classes of directors shall be decreased as equal as possible. No reduction in number of directors shall of itself have the effect of shortening the term of an incumbent director. SIXTH. Each person who is or was a director, officer, employee or agent of the corporation shall be indemnified by the corporation to the full extent permitted by the Revised Code of Ohio against any liability, cost or expense incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as a director, officer, employee or agent. The corporation may, but shall not be obligated to, maintain insurance, at its expense, to protect itself and any such person against any such liability, cost or expense. SEVENTH. The corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by the laws of Ohio, and all rights and powers conferred herein upon stockholders and directors are granted subject to this reservation. 3 -3- EIGHTH. The amount of capital with which the corporation shall begin business is Five Hundred ($500.00) Dollars. IN WITNESS WHEREOF, we have hereunto subscribed our names, this 20th day of July, 1982. FIRST FINANCIAL BANCORP /s/ Robert Q. Millan ------------------------------ Robert Q. Millan /s/ Richard J. Fitton ------------------------------ Richard J. Fitton /s/ Elliott D. Levey ------------------------------ Elliott D. Levey EX-27 3 EXHIBIT 27
9 0000708955 FIRST FINANCIAL BANCORP. 1,000 6-MOS 12-MOS DEC-31-1999 DEC-31-1998 JAN-01-1999 JAN-01-1998 JUN-30-1999 DEC-31-1998 144,856 164,500 3,933 2,598 18,973 8,654 0 0 515,593 550,394 38,631 37,782 0 0 2,858,022 2,654,146 37,505 34,800 3,721,967 3,539,935 2,913,364 2,872,067 285,629 155,064 161,816 33,762 0 0 0 0 0 0 305,991 306,709 361,158 51,556 3,721,967 3,539,935 118,967 224,563 16,414 37,110 361 1,093 135,742 262,766 47,767 100,590 54,998 110,434 80,744 152,332 3,910 6,247 47 1,060 62,854 107,851 0 75,653 0 0 0 0 0 0 21,796 50,973 0.51 1.19 0.51 1.19 8.39 8.67 9,219 7,481 3,796 1,839 1,411 691 332 221 34,800 31,660 2,762 3,148 1,470 1,428 37,505 34,800 37,505 34,800 0 0 0 0
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