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

CINCINNATI, Jan. 29, 2013 /PRNewswire/ -- 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%
    • 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.

"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.





















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 expenses1

43


19


(27)















Items not expected to recur:




















Acquisition-related costs1

-


78


1,167





Other items not expected to recur

952


374


2,473















Total noninterest expense 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 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:














Total 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.

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.  



































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






















Agency

$      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

-


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 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.

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;
  • 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.

 

FIRST FINANCIAL BANCORP.

CONSOLIDATED FINANCIAL HIGHLIGHTS




(Dollars in thousands, except per share)
(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.














 

FIRST FINANCIAL BANCORP.

CONSOLIDATED STATEMENTS OF INCOME


(Dollars in thousands, except per share)
(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.


 

FIRST FINANCIAL BANCORP.

CONSOLIDATED QUARTERLY STATEMENTS OF INCOME


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