FIRST FINANCIAL BANCORP. 
By CINCINNATI, Jan. 25, 2012 /PRNewswire/ -- First Financial Bancorp (Nasdaq: FFBC) ("First Financial" or the "Company") announced today financial and operational results for the fourth quarter 2011 and for the twelve month period ended December 31, 2011.
Fourth quarter 2011 net income was $17.9 million and earnings per diluted common share were $0.31. This compares with third quarter 2011 net income of $15.6 million and earnings per diluted common share of $0.27 and fourth quarter 2010 net income of $14.3 million and earnings per diluted common share of $0.24.
The board of directors has also authorized a regular dividend of $0.12 per common share and a variable dividend of $0.19 per common share for the next regularly scheduled dividend, payable on April 2, 2012 to shareholders of record as of March 2, 2012. This is a continuation of the 100% dividend payout ratio first announced in the second quarter 2011 and is expected to continue until capital ratios migrate closer to the Company's previously stated thresholds or capital utilization rates exceed capital generation rates.
For the twelve month period ended December 31, 2011, net income and net income available to common shareholders were $66.7 million and earnings per diluted common share were $1.14 as compared to net income of $59.3 million, net income available to common shareholders of $57.4 million and earnings per diluted common share of $0.99 for the twelve month period ended December 31, 2010.
-- 85th consecutive quarter of profitability
-- Strong quarterly and annual growth in diluted earnings per common share
-- Fourth quarter 2011 increased 14.8% compared to linked quarter
-- Full year 2011 increased 15.2% compared to full year 2010
-- Quarterly adjusted pre-tax, pre-provision income remained solid,
totaling $31.5 million, or 1.92% of average assets
-- Continued strong performance
-- Quarterly return on average assets of 1.09%; full year return on
average assets of 1.06%
-- Quarterly return on risk-weighted assets of 1.95%; full year return
on risk-weighted assets of 1.83%
-- Quarterly return on average shareholders' equity of 9.89%; full year
return on average shareholders' equity of 9.37%
-- Strong loan growth in key uncovered loan portfolios compared to the
third quarter 2011
-- Commercial loan balances increased 16.6% on an annualized basis
-- Commercial real estate balances increased 10.2% on an annualized
basis
-- Flagstar branch acquisition closed and fully integrated on December 2,
2011
-- Assumed total deposits of $464.7 million, including $342.0 million
of deposits associated with branch locations and $122.7 million of
public deposits
-- Recognized goodwill of $26.1 million and core deposit intangible
asset of $3.0 million
-- Capital ratios remain high after closing of Flagstar branch acquisition
and continuation of variable dividend
-- Tangible common equity to tangible assets of 9.23%
-- Tier 1 capital ratio of 17.47%
-- Total risk-based capital of 18.74%
-- Quarterly net interest margin remained strong at 4.32%
-- Yield on covered loans continues to enhance net interest margin
-- Strategic initiatives related to deposits continued to produce
positive results as cost of deposit funding declined 12 bps compared
to third quarter 2011
-- Lower credit costs driven by performance in the uncovered loan portfolio
-- Quarterly total provision for loan and lease losses declined 19%
compared to the linked quarter
-- Annual total provision for loan and lease losses declined 13.9%
compared to 2010
-- Continued downward trend in nonperforming and classified assets
-- Total nonperforming assets declined $10.1 million, or 10.4%,
compared to the fourth quarter 2010
-- Nonperforming assets to total assets declined to 1.31% as compared
to 1.40% as of September 30, 2011 and 1.57% as of December 31, 2010
-- Total classified assets declined $10.2 million, or 5.9%, compared to
the linked quarter and $39.8 million, or 19.7%, compared to December
31, 2010
-- Balance sheet risk remains low
-- FDIC loss share coverage on 26.2% of loan portfolio
-- 100% risk-weighted assets continue to represent less than 50% of
balance sheet
During the quarter, the Company incurred certain pre-tax expenses that are not expected to recur of $3.5 million, or $0.04 per diluted share after taxes. Approximately $1.0 million, or $0.01 per fully diluted share after taxes, was related to its acquisition of retail banking centers from Flagstar Bank ("Flagstar") and approximately $2.5 million, or $0.03 per fully diluted share after taxes, was related to lease termination and other real estate expenses associated with exit and transition activities. Additionally, the Company recognized pre-tax gains of $2.5 million resulting from the sales of investment securities, or $0.03 per diluted share after taxes.
Claude Davis, President and Chief Executive Officer, commented, "During 2011, we maintained a prudent balance between capitalizing on growth opportunities and focusing on the execution of our community bank business model. We produced solid and consistent earnings throughout the year driven by a continued focus on operating efficiency, implementation of deposit rationalization strategies and lower credit costs. As a result, our diluted earnings per common share totaled $0.31 for the fourth quarter and $1.14 for the year, representing increases of 29.2% and 15.2%, respectively, over the comparable periods in 2010.
"Related to the acquisitions we made during the year, we closed the Flagstar branch transaction during the fourth quarter and successfully completed the conversion of the acquired relationships and operations. Combined with the Liberty branch transaction that closed near the end of the third quarter, we added 38 new banking centers with approximately $730 million of new client deposits as of December 31, 2011. The vast majority of these new banking centers is located in the metropolitan areas of Dayton and Indianapolis and will allow us to accelerate our growth plans in these key strategic markets within our footprint.
"Loan growth was challenging during much of 2011 as the local economies within our strategic markets continue to experience headwinds in their recovery. Our total uncovered loan portfolio increased 5.4% year-over-year, benefiting from the performing loans we acquired as part of the Liberty acquisition. During the fourth quarter, we were able to capitalize on our strong commercial and commercial real estate pipeline as total originations and renewals increased significantly. As a result, the commercial and commercial real estate portfolios exhibited strong growth increasing 16.6% and 10.2%, respectively, on an annualized basis compared to the linked quarter. Excluding loans acquired from Liberty, the commercial and commercial real estate portfolios increased 6.4% and 4.7%, respectively, compared to December 31, 2010. While we still face challenges in continuing to build off our recent success in growing the C&I and commercial real estate portfolios, the level of existing commitments and pipeline of new business opportunities remains healthy and leaves us well-positioned as we enter 2012."
SECTION I - RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income on a fully tax-equivalent basis for the fourth quarter 2011 was $65.7 million as compared to $65.5 million for the third quarter 2011 and $68.1 million as compared to the year-over-year period. Compared to the linked quarter, total interest income decreased $1.0 million, or 1.3% during the fourth quarter 2011 as a result of lower interest income earned on both loans and investment securities. The lower interest income earned on loans was driven primarily by a 6.9% decrease in the balance of average covered loans outstanding, partially offset by a 6.1% increase in average uncovered loan balances during the quarter resulting from loans acquired in connection with the acquisition of retail banking centers from Liberty Savings Bank ("Liberty"), which occurred late in the third quarter 2011, as well as strong organic growth in the commercial and commercial real estate portfolios. While the average balance of investment securities increased during the quarter, the yield on the portfolio declined 26 bps, resulting in lower interest income earned compared to the third quarter. The decline in total interest income was offset by the decrease in total interest expense of $1.2 million, or 11.4%, due primarily to lower interest expense on deposits.
For the twelve month period ended December 31, 2011, net interest income on a fully tax-equivalent basis was $264.9 million as compared to $276.4 million for the comparable period in 2010. The decrease was driven by a decline in average covered loan balances of 26.8% and the reduced yield on the FDIC indemnification asset, offset partially by higher interest income from investments and lower funding costs.
NET INTEREST MARGIN
Net interest margin was 4.32% for the fourth quarter 2011 as compared to 4.55% for the third quarter 2011 and 4.65% for the fourth quarter 2010. Net interest margin was negatively impacted by an increase in interest-earning assets from acquisitions and the continued amortization and paydowns in the covered loan portfolio. However, yields remained strong on covered loans, helping to offset the decline in the balance outstanding. Also offsetting the decline in covered loan balances was the yield earned on the higher average uncovered loan balances. Average cash balances remained elevated during the quarter as cash received in connection with the Liberty and Flagstar acquisitions had yet to be fully deployed through investment purchases, placing additional pressure on net interest margin. The Company used some cash from the acquisitions to purchase $416.6 million of investment securities, not including securities purchased as part of the duration extension strategy discussed in Investments below. The majority of these purchases did not occur until midway through the quarter or later including $228.8 million that did not settle until very late in the quarter. A full quarter's impact of these late settlement purchases would have benefited net interest margin by 8 bps. Additionally, strategic initiatives related to deposits implemented during the third quarter continued to offset the impact of lower earning asset yields as the cost of interest-bearing deposits continued to decline, decreasing 14 bps during the fourth quarter.
Net interest margin for the twelve month period ended December 31, 2011 decreased to 4.55% as compared to 4.66% for the twelve month period ended December 31, 2010. The year-over-year decrease was driven primarily by the substantial decline in the average balance of the higher yielding covered loan portfolio, partially offset by an increase in the average balance of investment securities and a significant decline in the cost of deposit and other interest-bearing liability funding.
NONINTEREST INCOME
The following table presents noninterest income for the three months ended December 31, 2011, September 30, 2011 and December 31, 2010 as well as for the twelve months ended December 31, 2011 and 2010 highlighting the estimated impact of covered loan activity and other transition items on the Company's reported balance.
Table I
For the Twelve
For the Three Months Ended Months Ended
-------------------------- ---------------
September December December
December 31, 30, December 31, 31, 31,
(Dollars in thousands) 2011 2011 2010 2011 2010
---------------------- ---- ---- ---- ---- ----
Total noninterest income $29,640 $28,115 $34,534 $142,531 $146,831
Certain significant components of
noninterest income
Items likely to recur:
----------------------
Accelerated discount on
covered loans (1, 2) 4,775 5,207 6,113 20,521 29,067
FDIC loss sharing income 7,433 8,377 11,306 60,888 51,844
Other acquired-non-
strategic items 64 98 527 (875) 1,127
Transition-related items - - - - 366
Items expected not to recur:
----------------------------
Gain on sale of insurance
business - - - - 1,356
Other items not expected to
recur 2,270 288 551 2,531 3,349
Total excluding items noted
above $15,098 $14,145 $16,037 $59,466 $59,722
======= ======= ======= ======= =======
(1) See Section II for additional information
(2) Net of the corresponding valuation adjustment on the FDIC indemnification asset
During the quarterly periods presented above, excluding reimbursements due from the FDIC resulting from loss share agreements, covered loan activity continued to positively impact noninterest income due to loan sales and prepayments. This activity is discussed in more detail in Section II.
Excluding the items highlighted in Table I, estimated noninterest income earned in the fourth quarter 2011 was $15.1 million as compared to $14.1 million in the third quarter 2011 and $16.0 million in the fourth quarter 2010. The increase compared to the linked quarter was due to higher service charges on deposits and bankcard income resulting from the Liberty and Flagstar transactions as well as higher trust and wealth management fees and a credit valuation adjustment related to client derivatives. Included in other items not expected to recur are $2.5 million of gains on sales of investment securities which are discussed in more detail in Investments.
On a comparable basis, estimated noninterest income for the twelve months ended December 31, 2011 was $59.5 million as compared to $59.7 million for the twelve months ended December 31, 2010.
NONINTEREST EXPENSE
The following table presents noninterest expense for the three months ended December 31, 2011, September 30, 2011 and December 31, 2010 as well as for the twelve months ended December 31, 2011 and 2010 including the estimated effect of acquired-non-strategic operations, acquisition-related costs and other transition items.
Table II
For the Twelve Months
For the Three Months Ended Ended
-------------------------- ----------------------
December
December 31, September 30, December 31, December 31, 31,
(Dollars in thousands) 2011 2011 2010 2011 2010
---------------------- ---- ---- ---- ---- ----
Total noninterest expense $54,668 $53,142 $56,290 $218,097 $233,680
Certain significant
components of noninterest
expense
Items likely to recur:
----------------------
Acquired-non-strategic
operating expenses (1) (27) (407) 4,052 6,150 8,089
Transition-related items
(1) - (111) 684 246 9,114
FDIC loss share support 1,333 1,382 1,160 4,867 3,578
Loss share and covered
asset expense 2,521 3,755 616 12,823 616
Items expected not to
recur:
---------------------
Acquisition-related costs
(1) 1,167 1,875 412 3,234 6,725
FHLB prepayment penalty - - - - 8,029
Other items not expected to
recur 2,473 1,874 1,787 9,449 5,686
Total excluding items noted
above $47,201 $44,774 $47,579 $181,328 $191,843
======= ======= ======= ======== ========
(1) See Section II for additional information
Noninterest expense continued to be affected by items related to the Company's acquired-non-strategic operations, as discussed in more detail in Section II.
Excluding the items highlighted in Table II, estimated noninterest expense in the fourth quarter 2011 was $47.2 million as compared to $44.8 million in the third quarter 2011 and $47.6 million in the fourth quarter 2010. The increase of $2.4 million compared to the linked quarter was due to higher salaries and employee benefits expense, occupancy costs and core deposit intangible amortization resulting from the Liberty and Flagstar transactions as well as higher professional services fees and valuation adjustments to uncovered OREO. Loss share and covered asset expense includes $0.8 million of losses on covered OREO and $1.7 million of other credit-related expenses. Included in acquisition-related costs are $1.0 million of expenses related to the Flagstar acquisition and included in other items not expected to recur are $2.5 million of lease termination and other real estate expenses associated with exit and transition activities.
On a comparable basis, estimated noninterest expense for the twelve months ended December 31, 2011 was $181.3 million as compared to $191.8 million for the twelve months ended December 31, 2010. The decrease of $10.5 million, or 5.5%, was primarily attributable to lower salaries and benefits, occupancy costs and FDIC assessments.
Certain wind-down costs related to subsidiaries acquired in 2009 are expected to continue through much of 2012.
INCOME TAXES
For the fourth quarter 2011, income tax expense was $10.4 million, resulting in an effective tax rate of 36.8%, compared with income tax expense of $9.7 million and an effective tax rate of 38.2% during the third quarter 2011 and $8.1 million and an effective tax rate of 36.2% during the comparable year-over-year period. The decrease in the effective tax rate during the fourth quarter 2011 compared to the linked quarter was due to typical adjustments made during the third quarter resulting from the completion of the 2010 federal and state tax returns.
For the twelve month period ended December 31, 2011, income tax expense was $38.3 million, resulting in an effective tax rate of 36.5%, compared with income tax expense of $32.7 million and an effective tax rate of 35.6% during the twelve months ended December 31, 2010.
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, 2011 and for the trailing four quarters.
Table III
As of or for the Three Months Ended
-----------------------------------
December September December
31, 30, June 30, March 31, 31,
(Dollars
in
thousands) 2011 2011 2011 2011 2010
Total
nonaccrual
loans $54,299 $59,150 $56,536 $62,048 $62,302
Restructured
loans -
accruing 4,009 4,712 3,039 3,923 3,508
Restructured
loans -
nonaccrual 18,071 12,571 14,443 14,609 14,105
Total
restructured
loans 22,080 17,283 17,482 18,532 17,613
Total
nonperforming
loans 76,379 76,433 74,018 80,580 79,915
Total
nonperforming
assets 87,696 88,436 90,331 95,533 97,822
Nonperforming
assets
as a %
of:
Period-
end
loans
plus
OREO 2.94% 3.00% 3.22% 3.42% 3.45%
Total
assets 1.31% 1.40% 1.50% 1.51% 1.57%
Nonperforming
loans as
a % of
total
loans 2.57% 2.60% 2.65% 2.90% 2.84%
Provision
for loan
and lease
losses -
uncovered $5,164 $7,643 $5,756 $647 $9,741
Allowance
for
uncovered
loan &
lease
losses $52,576 $54,537 $53,671 $53,645 $57,235
Allowance
for loan
& lease
losses as
a % of:
Period-
end
loans 1.77% 1.86% 1.92% 1.93% 2.03%
Nonaccrual
loans
(1) 96.8% 92.2% 94.9% 86.5% 91.9%
Nonperforming
loans 68.8% 71.4% 72.5% 66.6% 71.6%
Total net
charge-
offs $7,125 $6,777 $5,730 $4,237 $9,755
Annualized
net-
charge-
offs as
a % of
average
loans &
leases 0.95% 0.96% 0.83% 0.61% 1.39%
(1) Excludes nonaccrual restructured loans
Net Charge-offs
Fourth quarter 2011 net charge-offs were $7.1 million, or 0.95% of average loans and leases, compared with $6.8 million, or 0.96%, for the linked quarter and $9.8 million, or 1.39%, for the comparable year-over-year quarter. Significant items driving net charge-offs for the quarter included $1.7 million related to two separate residential development credits, $1.0 million related to a multifamily real estate loan, $0.5 million related to a commercial real estate credit and $0.4 million related to a commercial loan.
For the twelve months ended December 31, 2011, net charge-offs were $23.9 million, or 0.84% of average loans and leases, as compared to $35.6 million, or 1.27%, for the twelve months ended December 31, 2010.
Nonperforming Assets
Nonperforming loans totaled $76.4 million and nonperforming assets totaled $87.7 million as of December 31, 2011 compared with $76.4 million and $88.4 million, respectively, for the linked quarter and $79.9 million and $97.8 million, respectively, for the comparable year-over-year quarter. Nonaccrual loans, including nonaccrual restructured loans, totaled $72.4 million as of December 31, 2011 compared to $71.7 million as of September 30, 2011, representing an increase of $0.6 million, or 0.9%, as additions were essentially offset by credits removed from nonaccrual status due to the finalization of resolution strategies.
New accounting guidance related to troubled debt restructurings took effect during the third quarter 2011 and was applied by the Company in its accounting for loans classified as restructured. The increase of $5.5 million in nonaccrual restructured loans during the fourth quarter 2011 was driven primarily by renewals and term extensions of loans in various stages of resolution that were already on nonaccrual status. This activity was the primary reason for the decline of $4.9 million in nonaccrual loans not classified as restructured.
OREO decreased $0.7 million, or 5.7%, during the fourth quarter driven primarily by a $0.5 million valuation adjustment related to a single commercial property.
Classified assets as of December 31, 2011 totaled $162.4 million as compared to $172.6 million for the linked quarter and $202.1 million as of December 31, 2010, representing declines of 5.9% and 19.7%, respectively. Classified assets, which have declined for six consecutive quarters, are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse.
Delinquent Loans
Loans 30-to-89 days past due totaled $20.4 million, or 0.69% of period end loans, as of December 31, 2011. This compares to $19.5 million, or 0.66%, as of September 30, 2011 and $22.3 million, or 0.79%, as of December 31, 2010. The increase of $0.9 million, or 4.7%, compared to the linked quarter resulted from higher delinquencies in the commercial real estate portfolios, partially offset by a decrease in commercial delinquencies.
Provision for Loan & Lease Losses
Fourth quarter 2011 provision expense related to uncovered loans and leases was $5.2 million as compared to $7.6 million during the linked quarter and $9.7 million during the comparable year-over-year quarter. Provision expense for the full year 2011 totaled $19.2 million, representing a decline of 42.8% compared to the full year 2010. Provision expense is a result of the Company's modeling efforts to estimate the period end allowance for loan and lease losses. The decreases relative to the linked and comparable quarters as well as for the full year are driven primarily by the positive migration trends in classified assets as well as the impact on the loan portfolio of improving macro-economic trends. As a percentage of net charge-offs, fourth quarter 2011 provision expense equaled 72.5%.
Allowance for Loan and Lease Losses
As of December 31, 2011, the allowance for uncovered loan and lease losses was $52.6 million as compared to $54.5 million as of September 30, 2011 and $57.2 million as of December 31, 2010. As a percentage of period-end loans, the allowance for loan and lease losses was 1.77% as of December 31, 2011 as compared to 1.86% as of September 30, 2011 and 2.03% as of December 31, 2010. The allowance for loan and lease losses as of December 31, 2011 reflects management's estimate of credit risk inherent in the Company's uncovered loan portfolio at that time.
LOANS (EXCLUDING COVERED LOANS)
The following table presents the loan portfolio, not including covered loans, as of December 31, 2011, September 30, 2011 and December 31, 2010.
Table IV
As of
-----
December 31, September 30,
2011 2011 December 31, 2010
------------- -------------- -----------------
Percent Percent Percent
(Dollars in of of of
thousands) Balance Total Balance Total Balance Total
----------- ------- ------ ------- ------ ------- ------
Commercial $856,981 28.9% $822,552 28.0% $800,253 28.4%
Real estate -
construction 114,974 3.9% 136,651 4.7% 163,543 5.8%
Real estate -
commercial 1,233,067 41.5% 1,202,035 40.9% 1,139,931 40.5%
Real estate -
residential 287,980 9.7% 300,165 10.2% 269,173 9.6%
Installment 67,543 2.3% 70,034 2.4% 69,711 2.5%
Home equity 358,960 12.1% 362,919 12.4% 341,310 12.1%
Credit card 31,631 1.1% 30,435 1.0% 29,563 1.0%
Lease financing 17,311 0.6% 12,870 0.4% 2,609 0.1%
Total $2,968,447 100.0% $2,937,661 100.0% $2,816,093 100.0%
========== ===== ========== ===== ========== =====
Loans, excluding covered loans, totaled $3.0 billion at the end of the fourth quarter 2011, representing a $30.8 million increase, or 4.2% on an annualized basis, compared to the third quarter 2011. Commercial loan origination activity was strong as balances increased $34.4 million, or 16.6% on an annualized basis, during the quarter. The commercial real estate portfolio experienced growth as well increasing $31.0 million during the quarter, or 10.2% on an annualized basis.
As of December 31, 2011, total uncovered loan balances increased $152.4 million, or 5.4%, as compared to December 31, 2010. Excluding loan balances acquired in connection with the Liberty acquisition, total uncovered loans increased $38.3 million, or 1.4%, during 2011. Compared to balances as of December 31, 2010 and excluding loans acquired from Liberty, the commercial and commercial real estate portfolios increased 6.4% and 4.7%, respectively, during 2011.
During the fourth quarter 2011, the Company sold approximately $7.3 million of loans originated by its franchise finance unit at a premium, recognizing a gain of approximately $0.3 million. As a liquid secondary market exists for these types of credits, the sale was conducted to lessen credit and geographic concentration risk within the franchise portfolio.
INVESTMENTS
The following table presents a summary of the total investment portfolio at December 31, 2011.
Table V
As of December 31, 2011
-----------------------
Percent
Book of Book Cost Market Gain/
(Dollars in
thousands) Value Total Yield Basis Value (Loss)
----------- ----- ----- ----- ----- ----- ------
Agencies $46,190 3.0% 3.16 99.96 100.90 $433
CMOs (agency) 682,867 45.0% 2.03 101.82 102.68 5,772
CMOs (private) 30 0.0% 1.08 100.00 100.35 -
MBSs (agency) 680,571 44.9% 3.05 103.01 105.11 13,593
1,409,658 93.0% 2.56 102.33 103.78 19,798
Municipal 11,960 0.8% 7.16 99.71 102.59 343
Other (1) 94,384 6.2% 3.77 102.62 103.10 444
106,344 7.0% 4.15 102.29 103.04 787
Total investment
portfolio $1,516,002 100.0% 2.67 102.33 103.73 $20,585
========== ===== ==== ====== ====== =======
Net Unrealized
Gain/(Loss) $20,585
Aggregate Gains 22,707
Aggregate Losses (2,122)
Net Unrealized Gain/(Loss)
% of Book Value 1.36%
(1) Other includes $71.5 million of regulatory stock
The investment portfolio increased $321.6 million during the fourth quarter 2011 as cash received as part of the Liberty and Flagstar transactions was used to purchase securities, offset by amortizations and paydowns in the portfolio. In addition to $190.7 million of cash received in connection with the Liberty transaction that had yet to be deployed as of September 30, 2011, the Company received $429.9 million upon closing of the Flagstar transaction during the quarter. The Company purchased $578.2 million of securities, consisting primarily of agency MBS, with a weighted average yield of 2.38% and duration of 3.5 years. However, $161.6 million of those purchases were executed as part of a strategy to increase the duration of the portfolio under which $162.6 million of shorter duration securities were sold and replaced with the longer duration purchases. The Company recognized a pre-tax gain of $2.5 million in connection with the securities that were sold. As of December 31, 2011, the overall duration of the investment portfolio increased to 2.4 years from 1.0 years as of September 30, 2011.
The Company also began to diversify its portfolio during the quarter as a portion of the purchases consisted of investment grade single issuer trust preferred securities. These securities have a weighted average yield of 6.17%. The Company has purchased a limited amount of these securities during the first quarter 2012 and will continue to do so in future periods on a selective basis. The maximum targeted exposure related to these types of securities is 10% of the total investment portfolio.
During the first quarter 2012, the Company has continued to deploy cash balances in the investment portfolio, purchasing $131.4 million of securities, primarily agency MBS, with a weighted average yield of 2.75% and duration of 3.9 years. The addition of longer duration securities during the fourth quarter 2011 and first quarter 2012 was executed in conjunction with the Company's overall asset/liability objectives and interest rate risk modeling activities, and, to a lesser extent, market and rate expectations.
DEPOSITS
Non-time deposit balances totaled $4.0 billion as of December 31, 2011, representing an increase of $347.1 million compared to September 30, 2011. The growth was driven in large measure by deposits assumed in connection with the Flagstar acquisition, accounting for $272.4 million of the quarterly increase. Excluding the Flagstar activity, non-time deposit accounts increased $74.7 million, or 8.1% on an annualized basis. Compared to balances as of December 31, 2010, total non-time deposits increased $636.8 million, or 19.0%. Excluding deposits assumed related to the Liberty and Flagstar transactions, non-time deposit accounts increased $203.5 million, or 6.1%, during 2011.
Total time deposit balances decreased slightly during the fourth quarter as compared to the linked quarter, which include balances assumed from Flagstar totaling $159.6 million as of December 31, 2011. In connection with the Company's deposit rationalization strategies and efforts to reduce non-core relationship deposits, time deposit balances declined $163.0 million during the fourth quarter excluding the Flagstar accounts. For the full year 2011 and excluding balances assumed from both Liberty and Flagstar, time deposit balances declined $433.4 million, or 24.1%.
The Company's deposit rationalization strategies related to deposit pricing continued to have a positive impact as the cost of funds related to interest bearing deposits declined to 75 bps for the fourth quarter compared to 89 bps for the linked quarter and 116 bps for the fourth quarter 2010. The Company's total cost of deposit funding declined to 64 bps for the quarter, a decrease of 15.8% compared to the prior quarter and 35.4% compared to the fourth quarter 2010.
CAPITAL MANAGEMENT
The following table presents First Financial's regulatory and other capital ratios as of December 31, 2011, September 30, 2011 and December 31, 2010.
Table VI
As of
-----
December September December "Well-
31, 30, 31, Capitalized"
2011 2011 2010 Minimum
---- ---- ---- -------
Leverage Ratio 9.87% 10.87% 10.89% 5.00%
Tier 1 Capital Ratio 17.47% 18.81% 18.45% 6.00%
Total Risk-Based Capital
Ratio 18.74% 20.08% 19.72% 10.00%
Ending tangible
shareholders' equity
to ending tangible assets 9.23% 10.38% 10.33% N/A
Ending tangible common
shareholders'
equity to ending tangible
assets 9.23% 10.38% 10.33% N/A
Regulatory capital ratios and tangible common equity decreased during the fourth quarter 2011 primarily as a result of the goodwill and core deposit intangible asset recognized in connection with the Flagstar transaction, which totaled $26.1 million and $3.0 million, respectively. Furthermore, shareholders' equity was negatively impacted by an increase in accumulated other comprehensive loss of $18.1 million primarily as a result of valuation adjustments related to the Company's pension asset and benefit obligation. A 114 bp decline in the discount rate used to value the pension benefit obligation coupled with the actual return on plan assets contributed to the valuation adjustments. First Financial's pension plan remains significantly over-funded and as a result recognized pension income of $0.3 million during the fourth quarter. Additionally, there was no contribution to tangible shareholders' equity from third quarter 2011 earnings as a result of the variable dividend / 100% payout ratio paid during the quarter. As of December 31, 2011, tangible book value per common share was $10.41 compared to $11.15 as of September 30, 2011 and $11.02 as of December 31, 2010. Regulatory capital ratios as of December 31, 2011 are considered preliminary pending the filing of the Company's regulatory reports.
SECTION II - SUPPLEMENTAL INFORMATION ON COVERED ASSETS AND ACQUISITION-RELATED ITEMS
To assist in analyzing the effect of the Company's 2009 FDIC assisted transactions and the Liberty and Flagstar branch transaction on the financial results, supplemental information that segregates the estimated impact on pre-tax earnings of certain acquisition-related items and provides additional detail on the covered loan portfolio follows.
SUMMARY OF SIGNIFICANT ACQUISITION-RELATED ITEMS
The following table illustrates the estimated effect of certain acquisition-related items on the results of operations for the three months ended December 31, 2011, September 30, 2011 and December 31, 2010 as well as for the twelve months ended December 31, 2011 and 2010.
Table VII
For the Twelve Months
For the Three Months Ended Ended
-------------------------- ----------------------
September
December 31, 30, December 31, December 31, December 31,
(Dollars in thousands) 2011 2011 2010 2011 2010
---------------------- ---- ---- ---- ---- ----
Income effect:
Accelerated discount on
covered loans (1, 2) $4,775 $5,207 $6,113 $20,521 $29,067
Acquired-non-strategic
net interest income 8,954 8,645 9,937 35,322 41,584
FDIC loss sharing income
(1) 7,433 8,377 11,306 60,888 51,844
Service charges on deposit accounts
related to
acquired-non-strategic
operations 53 59 196 372 724
Other (loss) income related
to acquired-non-
strategic operations 11 39 331 (1,247) 403
Income related to the accelerated
discount on covered
loans and acquired-non-
strategic operations 21,226 22,327 27,883 115,856 123,622
------ ------ ------ ------- -------
Expense effect:
Provision for loan and
lease losses -covered 6,910 7,260 13,997 64,081 63,144
Acquired-non-strategic operating
expenses: (3)
Salaries and employee
benefits - - 820 1,996 984
Occupancy (27) (367) 161 1,823 2,209
Other - (40) 3,071 2,331 4,896
Total acquired-non-
strategic operating
expenses (27) (407) 4,052 6,150 8,089
--- ---- ----- ----- -----
FDIC loss share support (3) 1,333 1,382 1,160 4,867 3,578
Loss share and covered
asset expense (3) 2,521 3,755 616 12,823 616
Acquisition-related costs: (3)
Integration-related costs 618 488 9 1,228 1,626
Professional services fees 113 127 396 295 4,463
Other 436 1,260 7 1,711 636
Total acquisition-related
costs 1,167 1,875 412 3,234 6,725
----- ----- --- ----- -----
Transition-related items: (3)
Salaries and benefits - 14 176 261 7,591
Occupancy - - 172 - 610
Other - (125) 336 (15) 913
Total transition-related
items - (111) 684 246 9,114
--- ---- --- --- -----
Total expense effect 11,904 13,754 20,921 91,401 91,266
------ ------ ------ ------ ------
Total estimated effect on
pre-tax earnings $9,322 $8,573 $6,962 $24,455 $32,356
====== ====== ====== ======= =======
(1) Included in noninterest income
(2) Net of the corresponding valuation adjustment on the FDIC indemnification asset
(3) Included in noninterest expense
ACCELERATED DISCOUNT ON LOAN PREPAYMENTS AND DISPOSITIONS
During the fourth quarter 2011, First Financial recognized approximately $4.8 million in accelerated discount from acquired loans. Accelerated discount is recognized when acquired loans, which are recorded on the Company's balance sheet at an amount less than the unpaid principal balance, prepay at an amount greater than their recorded book value. Prepayments can occur through either customer driven payments before the maturity date or loan sales. The amount of discount attributable to the credit loss component of each loan varies and the recognized amount is offset by a related reduction in the FDIC indemnification asset. Accelerated discount recognized during the quarter resulted primarily from loan prepayments.
OPERATING EXPENSES AND OTHER ACQUISITION-RELATED COSTS
Acquired-non-strategic operating expenses have declined significantly as costs associated with the exited markets of Michigan and Louisville, KY are substantially complete and professional services and other resolution expenses related to non-strategic acquired subsidiaries have dropped over the past two quarters. Acquisition-related costs incurred during the fourth quarter 2011 consisted primarily of the previously mentioned $1.0 million of expenses incurred related to the Flagstar acquisition. Acquisition-related costs recognized in the third quarter 2011 consisted primarily of $1.8 million of costs incurred related to the Liberty branch acquisition. Expenses related to transition-related items and other acquisition-related costs, excluding the impact of the Liberty and Flagstar acquisitions, continued to decline as planned.
NET INTEREST MARGIN IMPACT
Net interest margin is affected by certain activity related to the acquired loan portfolio. The majority of these loans are accounted for under ASC Topic 310-30 and, as such, the Company is required to periodically update its forecast of expected cash flows from these loans. Impairment, as a result of a decrease in expected cash flows, is recognized as provision expense in the period it is measured and has no impact on net interest margin. Improvements in expected cash flows, in excess of any prior impairment, are recognized on a prospective basis through an upward adjustment to the yield earned on the portfolio. Impairment and improvement are both partially offset by the impact of changes in the value of the FDIC indemnification asset. Impairment is partially offset by an increase to the FDIC indemnification asset as a result of FDIC loss sharing income and has no impact on net interest margin. Improvement, which is reflected as a higher yield, is partially offset by a lower yield earned on the FDIC indemnification asset until the next periodic valuation of the loans and the indemnification asset. The weighted average yield of the acquired loan portfolio may also be subject to change as loans with higher yields pay down more quickly or slowly than loans with lower yields.
The following table shows the estimated yield earned by the Company on its covered and uncovered loan portfolios and the FDIC indemnification asset for the three months ended December 31, 2011.
For the Three Months
Table VIII Ended
December 31, 2011
-----------------
Average
Balance Yield
------- -----
Loans, excluding covered loans (1) $2,983,354 5.10%
Covered loan portfolio accounted for under
ASC Topic 310-30 (2) 1,021,654 10.94%
Covered loan portfolio accounted for under
FAS 91 (3) 92,222 13.55%
FDIC indemnification asset (2) 173,900 -4.86%
Total $4,271,130 6.27%
==========
(1) Includes loans with loss share coverage removed
(2) Future yield adjustments subject to change based on required,
periodic valuation procedures
(3) Includes loans with revolving privileges which are scoped out
of ASC Topic 310-30 and certain loans
which the Company elected to treat under the cost recovery method of
accounting
As part of its on-going valuation procedures, the Company experienced a $2.4 million net improvement in the cash flow expectations related to certain loan pools during the fourth quarter 2011. During the quarter, the average yield earned on covered loans accounted for under ASC Topic 310-30 was 10.94%. On a prospective basis and until its next periodic valuation, the Company expects the yield on covered loans to be 11.52%.
This projected improvement in cash flow expectations on loans is partially offset by a related decline in cash flow expectations on the FDIC indemnification asset which is recognized through its yield. The average yield earned on the indemnification asset during the fourth quarter 2011 was -4.86%. On a prospective basis and until its next periodic valuation, the Company expects the yield on the indemnification asset to be -5.10%.
COVERED ASSETS & LOSS SHARE AGREEMENTS
As of December 31, 2011, 26.2% of the Company's total loans were covered loans. As required under the loss-share arrangements, First Financial must file monthly certifications with the FDIC on single-family residential loans and quarterly certifications on all other loans. To date, all certifications have been filed in a timely manner and without significant issues.
When losses are incurred on covered assets that exceed expectations, the Company recognizes the gross credit losses in excess of the valuation mark as either provision expense if related to loans or noninterest expense if related to OREO. Reimbursements expected from the FDIC under loss share agreements related to these credit losses are recorded as noninterest income. As such, the net impact on earnings is the difference between the gross credit losses and FDIC reimbursements, representing the Company's proportionate share of the credit losses realized on covered assets.
COVERED LOAN PORTFOLIO
The following table presents estimated activity in the covered loan portfolio by loan type during the fourth quarter 2011.
Table IX
Covered Loan Activity - Fourth Quarter 2011
-------------------------------------------
Reduction in Recorded Investment Due to:
----------------------------------------
September 30, Sales Prepayments Contractual Net Loans With December 31,
------------- ----- ----------- ----------- --- ---------- ------------
Charge-Offs Coverage
2011 Activity (1) (2) Removed 2011
---- ------------ ------------ --------- ----
(Dollars in thousands)
----------------------
Commercial $223,882 $1,144 $14,335 $7,782 $4,729 $- $195,892
Real
estate
-
construction 25,893 - 3,960 5,349 (536) - 17,120
Real
estate
-
commercial 687,392 - 31,705 4,979 7,295 6,369 637,044
Real
estate
-
residential 127,753 - 5,219 1,319 98 - 121,117
Installment 14,178 - 550 208 223 21 13,176
Home
equity 67,897 - 2,630 (89) 378 - 64,978
Other
covered
loans 4,071 - - 154 - - 3,917
Total
covered
loans $1,151,066 $1,144 $58,399 $19,702 $12,187 $6,390 $1,053,244
========== ====== ======= ======= ======= ====== ==========
(1) Includes partial paydowns, accretion of the valuation discount and advances on revolving loans
(2) Indemnified at 80% from the FDIC
During the fourth quarter 2011, the total balance of covered loans decreased $97.8 million, or 8.5%, as compared to the previous quarter. Loans with coverage removed represent loans to primarily high quality borrowers involving a change in loan terms which caused the respective loans to no longer qualify for reimbursement from the FDIC in the event of credit losses.
ALLOWANCE FOR LOAN AND LEASE LOSSES - COVERED
Under the applicable accounting guidance, the allowance for loan losses related to covered loans is a result of impairment identified in on-going valuation procedures and is generally recognized in the current period as provision expense. However, if improvement is noted in a loan pool that had previously experienced impairment, the amount of improvement is recognized as a reduction to the applicable period's provision expense. Additional improvement beyond previously recorded impairment is reflected as a yield adjustment on a prospective basis. The timing inherent in this accounting treatment may result in earnings volatility in future periods.
The following table presents activity in the allowance for loan losses related to covered loans for the three months ended December 31, September 30, June 30 and March 31, 2011 as well as for the twelve month period ended December 31, 2011.
Table X
As of or for the
As of or for the Three Months Ended Twelve Months
-----------------------------------
September Ended December
December 31, 30, June 30, March 31, 31,
(Dollars in
thousands) 2011 2011 2011 2011 2011
----------- ---- ---- ---- ---- ----
Balance at beginning
of period $48,112 $51,044 $31,555 $16,493 $16,493
Provision for loan
and lease losses -
covered 6,910 7,260 23,895 26,016 64,081
Total gross charge-
offs (13,513) (10,609) (7,456) (14,026) (45,604)
Total recoveries 1,326 417 3,050 3,072 7,865
----- --- ----- ----- -----
Total net charge-
offs (12,187) (10,192) (4,406) (10,954) (37,739)
Ending allowance for
loan and lease
losses -covered $42,835 $48,112 $51,044 $31,555 $42,835
======= ======= ======= ======= =======
The Company has established an allowance for loan losses associated with covered loans based on estimated valuation procedures performed each quarter. During the fourth quarter 2011, the Company recognized a provision expense of $6.9 million, representing a decline of $0.4 million, or 4.8%, compared to the linked quarter. The decrease reflects a continued stabilizing credit outlook related to loan pools with previously recognized impairment. The allowance for loan losses related to covered loans declined $5.3 million, or 11.0%, compared to the third quarter 2011, also reflecting the stabilized credit outlook in conjunction with the decline in the covered loan portfolio. As a percentage of total covered loans, the allowance for loan losses totaled 4.07% as of December 31, 2011 compared to 4.18% as of September 30, 2011.
In addition to the provision expense, the Company incurred loss share and covered asset expenses of $2.5 million, including $0.8 million of losses related to covered OREO and $1.7 million of other credit expenses related to covered assets. The receivable due from the FDIC under loss share agreements of $7.4 million related to total credit costs incurred was recognized as FDIC loss share income and a corresponding increase to the FDIC indemnification asset.
SUMMARY OF ACQUISITIONS
During the third quarter 2009, through FDIC-assisted transactions, First Financial assumed the banking operations of Peoples Community Bank ("Peoples"), Irwin Union Bank and Trust Company and Irwin Union Bank, F.S.B. (collectively, "Irwin"). In connection with the FDIC-assisted transactions, the Company has loss sharing arrangements with the FDIC. Under the terms of these agreements, the FDIC will reimburse the Company for losses with respect to certain loans ("covered loans") and other real estate owned ("OREO") (collectively, "covered assets").
During the third quarter 2011, the Company completed its acquisition of the Ohio-based retail banking branches of Liberty Savings Bank, FSB. This transaction included 16 branch locations, 12 of which are located in the Dayton, OH area and significantly enhanced the Company's presence in this key strategic market. At closing, First Financial assumed $341.9 million of deposits and acquired $126.5 million of in-market performing loans. All elements of the business acquired as part of this transaction are considered by the Company to be acquired-strategic (see definition below).
During the fourth quarter 2011, First Financial completed its acquisition of the Indiana-based retail banking branches of Flagstar Bank, FSB. This transaction included 22 branch locations, 18 of which are located in the Indianapolis, IN area and substantially increased the Company's presence in the strategic metropolitan market. At closing, First Financial assumed $464.7 million of deposits. All elements of the business acquired as part of this transaction are considered by the Company to be acquired-strategic (see definition below).
As a result of the acquisitions, the Company's business and operating markets expanded significantly. To assist readers in understanding the financial and strategic impact of the acquisitions, the combined operations of First Financial's legacy and acquired businesses will be discussed in three categories: "Legacy-Strategic", "Acquired-Strategic" and "Acquired-Non-Strategic". Definitions of the business categories and other financial items related to the acquisitions can be found below in "Glossary of Terms". Available on the Company's website at www.bankatfirst.com is a presentation providing supplemental information regarding its quarterly results.
Glossary of Terms
To assist readers in understanding the Company's financial results and the effect of the acquisitions on reported amounts, the following terms are used throughout this release to refer to specific acquisition-related items. The first three define the business components referred to above and the remaining items define specific covered loan terminology.
Legacy-strategic - Elements of the business that existed prior to the acquisitions and will continue to be supported.
Acquired-strategic - Elements of the business that the Company intends to retain and will continue to support and build. Legacy-strategic and acquired-strategic are collectively referred to as "strategic."
Acquired-non-strategic - Elements of the business that the Company intends to exit but will continue to support to obtain maximum economic value. No growth or replacement is expected.
Accelerated discount on covered loans - The acceleration of the unrealized valuation discount. This item will be ongoing but diminishing as covered loan balances decline over time.
UPB - Unpaid principal balance
Carrying value - The unpaid principal balance of a covered loan less any valuation discount.
Unless otherwise noted, all amounts discussed in this earnings release are pre-tax except net income and per-share data which are presented after-tax. Percentage changes are not annualized unless specifically noted. In some instances, financial data may not add up due to rounding.
Teleconference / Webcast Information
First Financial's senior management will host a conference call to discuss the Company's financial and operating results on Thursday, January 26, 2012 at 9:00 a.m. Eastern Time. Members of the public who would like to listen to the conference call should dial (877) 317-6789 (U.S. toll free), (866) 605-3852 (Canada toll free) or +1 (412) 317-6789 (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 10, 2012 at (877) 344-7529 (U.S. toll free) and +1 (412) 317-0088 (International); conference number 10009042. The webcast will be archived on the Investor Relations section of the Company's website through January 26, 2013.
Press Release and Additional Information on Website
This press release as well as supplemental information 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 Statements
Certain statements contained in this news 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;
-- the effects of the potential delay or failure of the U.S. federal
government to pay its debts as they become due or make payments in the
ordinary course;
-- 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, such as the U.S. Treasury's TARP and the FDIC's Temporary
Liquidity Guarantee Program, 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);
-- inflation and possible changes in interest rates;
-- our ability to keep up with technological changes;
-- 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 and debt 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 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, 2010, 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, 2011, the Company had $6.7 billion in assets, $4.0 billion in loans, $5.6 billion in deposits and $712 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, 2011. The Company's strategic operating markets are located in Ohio, Indiana and Kentucky where it operates 136 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,
2011 2011 2011 2011 2010 2011 2010
---- ---- ---- ---- ---- ---- ----
RESULTS OF OPERATIONS
Net income $17,941 $15,618 $15,973 $17,207 $14,300 $66,739 $59,251
Net income available
to common
shareholders $17,941 $15,618 $15,973 $17,207 $14,300 $66,739 $57,386
Net earnings per
common share -basic $0.31 $0.27 $0.28 $0.30 $0.25 $1.16 $1.01
Net earnings per
common share -
diluted $0.31 $0.27 $0.27 $0.29 $0.24 $1.14 $0.99
Dividends declared
per common share $0.27 $0.27 $0.12 $0.12 $0.10 $0.78 $0.40
KEY FINANCIAL RATIOS
Return on average
assets 1.09% 1.01% 1.03% 1.11% 0.90% 1.06% 0.91%
Return on average
shareholders' equity 9.89% 8.54% 9.05% 10.04% 8.14% 9.37% 8.68%
Return on average
common shareholders'
equity 9.89% 8.54% 9.05% 10.04% 8.14% 9.37% 8.55%
Return on average
tangible common
shareholders' equity 11.59% 9.56% 9.84% 10.94% 8.87% 11.01% 9.35%
Net interest margin 4.32% 4.55% 4.61% 4.73% 4.65% 4.55% 4.66%
Net interest margin
(fully tax
equivalent) (1) 4.34% 4.57% 4.62% 4.75% 4.67% 4.57% 4.68%
Ending equity as a
percent of ending
assets 10.68% 11.47% 11.95% 11.21% 11.16% 10.68% 11.16%
Ending tangible
common equity as a
percent of:
Ending tangible
assets 9.23% 10.38% 11.11% 10.40% 10.33% 9.23% 10.33%
Risk-weighted assets 16.63% 18.47% 19.65% 19.28% 17.36% 16.63% 17.36%
Average equity as a
percent of average
assets 11.05% 11.83% 11.38% 11.09% 11.12% 11.33% 10.53%
Average common equity
as a percent of
average assets 11.05% 11.83% 11.38% 11.09% 11.12% 11.33% 10.35%
Average tangible
common equity as a
percent of
average tangible
assets 9.58% 10.70% 10.56% 10.28% 10.29% 9.81% 9.55%
Book value per common
share $12.22 $12.48 $12.39 $12.15 $12.01 $12.22 $12.01
Tangible book value
per common share $10.41 $11.15 $11.42 $11.17 $11.02 $10.41 $11.02
Tier 1 Ratio (2) 17.47% 18.81% 20.14% 20.49% 18.45% 17.47% 18.45%
Total Capital Ratio
(2) 18.74% 20.08% 21.42% 21.76% 19.72% 18.74% 19.72%
Leverage Ratio (2) 9.87% 10.87% 11.01% 11.09% 10.89% 9.87% 10.89%
AVERAGE BALANCE SHEET
ITEMS
Loans (3) $2,983,354 $2,800,466 $2,782,947 $2,821,450 $2,804,832 $2,847,370 $2,816,541
Covered loans and
FDIC indemnification
asset 1,287,776 1,380,128 1,481,353 1,628,645 1,783,737 1,443,365 1,968,896
Investment securities 1,257,574 1,199,473 1,093,870 1,045,292 798,135 1,149,772 662,344
Interest-bearing
deposits with other
banks 485,432 306,969 375,434 276,837 405,920 361,591 459,618
Total earning assets $6,014,136 $5,687,036 $5,733,604 $5,772,224 $5,792,624 $5,802,098 $5,907,399
Total assets $6,515,756 $6,136,815 $6,219,754 $6,266,408 $6,270,480 $6,284,961 $6,485,632
Noninterest-bearing
deposits $860,863 $735,621 $734,674 $733,242 $741,343 $766,366 $744,159
Interest-bearing
deposits 4,630,412 4,366,827 4,402,103 4,431,524 4,438,113 4,458,012 4,500,188
--------- --------- --------- --------- --------- --------- ---------
Total deposits $5,491,275 $5,102,448 $5,136,777 $5,164,766 $5,179,456 $5,224,378 $5,244,347
Borrowings $174,939 $195,140 $218,196 $230,087 $213,107 $204,414 $367,358
Shareholders' equity $719,964 $725,809 $707,750 $695,062 $697,016 $712,252 $682,987
CREDIT QUALITY RATIOS
(excluding covered
assets)
Allowance to ending
loans 1.77% 1.86% 1.92% 1.93% 2.03% 1.77% 2.03%
Allowance to
nonaccrual loans 96.83% 92.20% 94.93% 86.46% 91.87% 96.83% 91.87%
Allowance to
nonperforming loans 68.84% 71.35% 72.51% 66.57% 71.62% 68.84% 71.62%
Nonperforming loans
to total loans 2.57% 2.60% 2.65% 2.90% 2.84% 2.57% 2.84%
Nonperforming assets
to ending loans,
plus OREO 2.94% 3.00% 3.22% 3.42% 3.45% 2.94% 3.45%
Nonperforming assets
to total assets 1.31% 1.40% 1.50% 1.51% 1.57% 1.31% 1.57%
Net charge-offs to
average loans
(annualized) 0.95% 0.96% 0.83% 0.61% 1.39% 0.84% 1.27%
(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, 2011 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,
-------- --------
2011 2010 % Change 2011 2010 % Change
---- ---- -------- ---- ---- --------
Interest income
Loans, including fees $69,658 $75,836 (8.1%) $285,689 $306,075 (6.7%)
Investment securities
Taxable 6,945 5,522 25.8% 28,239 21,748 29.8%
Tax-exempt 201 214 (6.1%) 767 934 (17.9%)
--- --- ------ --- --- -------
Total investment securities
interest 7,146 5,736 24.6% 29,006 22,682 27.9%
Other earning assets (1,819) 749 (342.9%) (5,878) 14,745 (139.9%)
------ --- -------- ------ ------ --------
Total interest income 74,985 82,321 (8.9%) 308,817 343,502 (10.1%)
Interest expense
Deposits 8,791 12,923 (32.0%) 40,781 58,336 (30.1%)
Short-term borrowings 25 33 (24.2%) 163 94 73.4%
Long-term borrowings 693 1,194 (42.0%) 3,586 8,341 (57.0%)
Subordinated debentures and
capital securities 0 265 (100.0%) 391 1,221 (68.0%)
--- --- -------- --- ----- -------
Total interest expense 9,509 14,415 (34.0%) 44,921 67,992 (33.9%)
----- ------ ------- ------ ------ -------
Net interest income 65,476 67,906 (3.6%) 263,896 275,510 (4.2%)
Provision for loan and lease
losses -uncovered 5,164 9,741 (47.0%) 19,210 33,564 (42.8%)
Provision for loan and lease
losses -covered 6,910 13,997 (50.6%) 64,081 63,144 1.5%
----- ------ ------- ------ ------ ---
Net interest income after
provision for loan and lease
losses 53,402 44,168 20.9% 180,605 178,802 1.0%
Noninterest income
Service charges on deposit
accounts 4,920 5,090 (3.3%) 19,206 22,188 (13.4%)
Trust and wealth management
fees 3,531 3,283 7.6% 14,340 13,862 3.4%
Bankcard income 2,490 2,255 10.4% 9,291 8,518 9.1%
Net gains from sales of loans 1,172 1,241 (5.6%) 4,258 4,632 (8.1%)
FDIC loss sharing income 7,433 11,306 (34.3%) 60,888 51,844 17.4%
Accelerated discount on
covered loans 4,775 6,113 (21.9%) 20,521 29,067 (29.4%)
Gain on sale of investment
securities 2,541 0 N/M 2,541 0 N/M
(Loss) Income on preferred
securities 0 0 N/M 0 (30) (100.0%)
Other 2,778 5,246 (47.0%) 11,486 16,750 (31.4%)
----- ----- ------- ------ ------ -------
Total noninterest income 29,640 34,534 (14.2%) 142,531 146,831 (2.9%)
Noninterest expenses
Salaries and employee benefits 26,447 28,819 (8.2%) 106,914 117,363 (8.9%)
Net occupancy 5,893 4,430 33.0% 21,410 22,555 (5.1%)
Furniture and equipment 2,425 3,022 (19.8%) 9,945 10,299 (3.4%)
Data processing 1,559 1,593 (2.1%) 5,716 5,152 10.9%
Marketing 1,567 1,453 7.8% 5,794 5,357 8.2%
Communication 864 892 (3.1%) 3,203 3,908 (18.0%)
Professional services 2,252 2,863 (21.3%) 9,636 9,169 5.1%
Debt extinguishment 0 0 N/M 0 8,029 (100.0%)
State intangible tax 436 1,362 (68.0%) 3,583 4,843 (26.0%)
FDIC assessments 1,192 2,272 (47.5%) 5,676 8,312 (31.7%)
Other 12,033 9,584 25.6% 46,220 38,693 19.5%
Total noninterest expenses 54,668 56,290 (2.9%) 218,097 233,680 (6.7%)
Income before income taxes 28,374 22,412 26.6% 105,039 91,953 14.2%
Income tax expense 10,433 8,112 28.6% 38,300 32,702 17.1%
------ ----- ---- ------ ------ ----
Net income 17,941 14,300 25.5% 66,739 59,251 12.6%
Dividends on preferred stock 0 0 N/M 0 1,865 (100.0%)
--- --- --- --- ----- --------
Income available to common
shareholders $17,941 $14,300 25.5% $66,739 $57,386 16.3%
======= ======= ==== ======= ======= ====
ADDITIONAL DATA
Net earnings per common share
-basic $0.31 $0.25 $1.16 $1.01
Net earnings per common share
-diluted $0.31 $0.24 $1.14 $0.99
Dividends declared per common
share $0.27 $0.10 $0.78 $0.40
Return on average assets 1.09% 0.90% 1.06% 0.91%
Return on average
shareholders' equity 9.89% 8.14% 9.37% 8.68%
Interest income $74,985 $82,321 (8.9%) $308,817 $343,502 (10.1%)
Tax equivalent adjustment 265 220 20.5% 979 866 13.0%
--- --- ---- --- --- ----
Interest income -tax
equivalent 75,250 82,541 (8.8%) 309,796 344,368 (10.0%)
Interest expense 9,509 14,415 (34.0%) 44,921 67,992 (33.9%)
----- ------ ------- ------ ------ -------
Net interest income -tax
equivalent $65,741 $68,126 (3.5%) $264,875 $276,376 (4.2%)
======= ======= ====== ======== ======== ======
Net interest margin 4.32% 4.65% 4.55% 4.66%
Net interest margin (fully tax
equivalent) (1) 4.34% 4.67% 4.57% 4.68%
Full-time equivalent
employees (2) 1,508 1,529
(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.
(2) Does not include associates from acquisitions that are
currently in a temporary hire status.
N/M = Not meaningful.
FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share)
(Unaudited)
2011
----
%
Fourth Third Second First Change
Linked
Quarter Quarter Quarter Quarter YTD Qtr.
------- ------- ------- ------- --- -------
Interest income
Loans, including fees $69,658 $70,086 $71,929 $74,016 $285,689 (0.6%)
Investment securities
Taxable 6,945 7,411 7,080 6,803 28,239 (6.3%)
Tax-exempt 201 176 192 198 767 14.2%
--- --- --- --- --- ----
Total investment securities
interest 7,146 7,587 7,272 7,001 29,006 (5.8%)
Other earning assets (1,819) (1,721) (1,384) (954) (5,878) 5.7%
------ ------ ------ ---- ------ ---
Total interest income 74,985 75,952 77,817 80,063 308,817 (1.3%)
Interest expense
Deposits 8,791 9,823 10,767 11,400 40,781 (10.5%)
Short-term borrowings 25 44 49 45 163 (43.2%)
Long-term borrowings 693 867 937 1,089 3,586 (20.1%)
Subordinated debentures and
capital securities 0 0 197 194 391 N/M
--- --- --- --- --- ---
Total interest expense 9,509 10,734 11,950 12,728 44,921 (11.4%)
----- ------ ------ ------ ------ -------
Net interest income 65,476 65,218 65,867 67,335 263,896 0.4%
Provision for loan and lease
losses -uncovered 5,164 7,643 5,756 647 19,210 (32.4%)
Provision for loan and lease
losses -covered 6,910 7,260 23,895 26,016 64,081 (4.8%)
----- ----- ------ ------ ------ ------
Net interest income after
provision for loan and lease
losses 53,402 50,315 36,216 40,672 180,605 6.1%
Noninterest income
Service charges on deposit
accounts 4,920 4,793 4,883 4,610 19,206 2.6%
Trust and wealth management
fees 3,531 3,377 3,507 3,925 14,340 4.6%
Bankcard income 2,490 2,318 2,328 2,155 9,291 7.4%
Net gains from sales of loans 1,172 1,243 854 989 4,258 (5.7%)
FDIC loss sharing income 7,433 8,377 21,643 23,435 60,888 (11.3%)
Accelerated discount on
covered loans 4,775 5,207 4,756 5,783 20,521 (8.3%)
Gain on sale of investment
securities 2,541 0 0 0 2,541 N/M
Other 2,778 2,800 3,147 2,761 11,486 (0.8%)
----- ----- ----- ----- ------ ------
Total noninterest income 29,640 28,115 41,118 43,658 142,531 5.4%
Noninterest expenses
Salaries and employee
benefits 26,447 27,774 25,123 27,570 106,914 (4.8%)
Net occupancy 5,893 4,164 4,493 6,860 21,410 41.5%
Furniture and equipment 2,425 2,386 2,581 2,553 9,945 1.6%
Data processing 1,559 1,466 1,453 1,238 5,716 6.3%
Marketing 1,567 1,584 1,402 1,241 5,794 (1.1%)
Communication 864 772 753 814 3,203 11.9%
Professional services 2,252 2,062 3,095 2,227 9,636 9.2%
State intangible tax 436 546 1,236 1,365 3,583 (20.1%)
FDIC assessments 1,192 1,211 1,152 2,121 5,676 (1.6%)
Other 12,033 11,177 11,209 11,801 46,220 7.7%
Total noninterest expenses 54,668 53,142 52,497 57,790 218,097 2.9%
Income before income taxes 28,374 25,288 24,837 26,540 105,039 12.2%
Income tax expense 10,433 9,670 8,864 9,333 38,300 7.9%
------ ----- ----- ----- ------ ---
Net income $17,941 $15,618 $15,973 $17,207 $66,739 14.9%
======= ======= ======= ======= ======= ====
ADDITIONAL DATA
Net earnings per common share
-basic $0.31 $0.27 $0.28 $0.30 $1.16
Net earnings per common share
-diluted $0.31 $0.27 $0.27 $0.29 $1.14
Dividends declared per common
share $0.27 $0.27 $0.12 $0.12 $0.78
Return on average assets 1.09% 1.01% 1.03% 1.11% 1.06%
Return on average
shareholders' equity 9.89% 8.54% 9.05% 10.04% 9.37%
Interest income $74,985 $75,952 $77,817 $80,063 $308,817 (1.3%)
Tax equivalent adjustment 265 236 240 238 979 12.3%
--- --- --- --- --- ----
Interest income -tax
equivalent 75,250 76,188 78,057 80,301 309,796 (1.2%)
Interest expense 9,509 10,734 11,950 12,728 44,921 (11.4%)
----- ------ ------ ------ ------ -------
Net interest income -tax
equivalent $65,741 $65,454 $66,107 $67,573 $264,875 0.4%
======= ======= ======= ======= ======== ===
Net interest margin 4.32% 4.55% 4.61% 4.73% 4.55%
Net interest margin (fully
tax equivalent) (1) 4.34% 4.57% 4.62% 4.75% 4.57%
Full-time equivalent
employees (2) 1,508 1,377 1,374 1,483
(1) The tax equivalent adjustment to net interest income recognizes the income tax savings when
comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that
it is a standard practice in the banking industry to present net interest income on a fully tax
equivalent basis. Therefore, management believes, these measures provided useful information
to investors by allowing them to make peer comparisons. Management also uses these measures to
make peer comparisons.
(2) Does not include associates from acquisitions that are currently in a temporary hire
status.
N/M = Not meaningful.
FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share)
(Unaudited)
2010
----
Fourth Third Second First Full
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
Interest income
Loans, including fees $75,836 $75,957 $74,944 $79,338 $306,075
Investment securities
Taxable 5,522 5,386 5,444 5,396 21,748
Tax-exempt 214 240 245 235 934
--- --- --- --- ---
Total investment securities
interest 5,736 5,626 5,689 5,631 22,682
Other earning assets 749 3,101 5,305 5,590 14,745
--- ----- ----- ----- ------
Total interest income 82,321 84,684 85,938 90,559 343,502
Interest expense
Deposits 12,923 14,457 15,308 15,648 58,336
Short-term borrowings 33 25 17 19 94
Long-term borrowings 1,194 2,034 2,556 2,557 8,341
Subordinated debentures and
capital securities 265 322 319 315 1,221
--- --- --- --- -----
Total interest expense 14,415 16,838 18,200 18,539 67,992
------ ------ ------ ------ ------
Net interest income 67,906 67,846 67,738 72,020 275,510
Provision for loan and lease
losses -uncovered 9,741 6,287 6,158 11,378 33,564
Provision for loan and lease
losses -covered 13,997 20,725 18,962 9,460 63,144
------ ------ ------ ----- ------
Net interest income after
provision for loan and
lease losses 44,168 40,834 42,618 51,182 178,802
Noninterest income
Service charges on deposit
accounts 5,090 5,632 5,855 5,611 22,188
Trust and wealth management
fees 3,283 3,366 3,668 3,545 13,862
Bankcard income 2,255 2,193 2,102 1,968 8,518
Net gains from sales of
loans 1,241 2,749 473 169 4,632
FDIC loss sharing income 11,306 17,800 15,170 7,568 51,844
Accelerated discount on
covered loans 6,113 9,448 7,408 6,098 29,067
(Loss) income on preferred
securities 0 0 0 (30) (30)
Other 5,246 3,707 5,791 2,006 16,750
----- ----- ----- ----- ------
Total noninterest income 34,534 44,895 40,467 26,935 146,831
Noninterest expenses
Salaries and employee
benefits 28,819 28,790 29,513 30,241 117,363
Net occupancy 4,430 4,663 5,340 8,122 22,555
Furniture and equipment 3,022 2,490 2,514 2,273 10,299
Data processing 1,593 1,191 1,136 1,232 5,152
Marketing 1,453 1,230 1,600 1,074 5,357
Communication 892 986 822 1,208 3,908
Professional services 2,863 2,117 2,446 1,743 9,169
Debt extinguishment 0 8,029 0 0 8,029
State intangible tax 1,362 724 1,426 1,331 4,843
FDIC assessments 2,272 2,123 1,907 2,010 8,312
Other 9,584 8,967 9,115 11,027 38,693
Total noninterest expenses 56,290 61,310 55,819 60,261 233,680
Income before income taxes 22,412 24,419 27,266 17,856 91,953
Income tax expense 8,112 8,840 9,492 6,258 32,702
----- ----- ----- ----- ------
Net income 14,300 15,579 17,774 11,598 59,251
Dividends on preferred stock 0 0 0 1,865 1,865
--- --- --- ----- -----
Net income available to
common shareholders $14,300 $15,579 $17,774 $9,733 $57,386
======= ======= ======= ====== =======
ADDITIONAL DATA
Net earnings per common
share -basic $0.25 $0.27 $0.31 $0.18 $1.01
Net earnings per common
share -diluted $0.24 $0.27 $0.30 $0.17 $0.99
Dividends declared per
common share $0.10 $0.10 $0.10 $0.10 $0.40
Return on average assets 0.90% 0.96% 1.08% 0.71% 0.91%
Return on average
shareholders' equity 8.14% 9.03% 10.62% 6.92% 8.68%
Interest income $82,321 $84,684 $85,938 $90,559 $343,502
Tax equivalent adjustment 220 222 212 212 866
--- --- --- --- ---
Interest income -tax
equivalent 82,541 84,906 86,150 90,771 344,368
Interest expense 14,415 16,838 18,200 18,539 67,992
------ ------ ------ ------ ------
Net interest income -tax
equivalent $68,126 $68,068 $67,950 $72,232 $276,376
======= ======= ======= ======= ========
Net interest margin 4.65% 4.59% 4.53% 4.89% 4.66%
Net interest margin (fully
tax equivalent) (1) 4.67% 4.60% 4.54% 4.91% 4.68%
Full-time equivalent
employees (2) 1,529 1,535 1,511 1,466
(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.
(2) Does not include associates from acquisitions
that are currently in a temporary hire status.
N/M = Not meaningful.
FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, % Change % Change
Linked Comparable
2011 2011 2011 2011 2010 Qtr. Qtr.
---- ---- ---- ---- ---- ------- ----------
ASSETS
Cash and due from
banks $149,653 $108,253 $104,150 $96,709 $105,981 38.2% 41.2%
Interest-bearing
deposits with other
banks 375,398 369,130 147,108 387,923 176,952 1.7% 112.1%
Investment securities
available-for-sale 1,441,846 1,120,179 1,134,114 1,024,684 919,110 28.7% 56.9%
Investment securities
held-to-maturity 2,664 2,724 3,001 16,780 17,406 (2.2%) (84.7%)
Other investments 71,492 71,492 71,492 78,689 78,689 0.0% (9.1%)
Loans held for sale 24,834 14,259 8,824 6,813 29,292 74.2% (15.2%)
Loans
Commercial 856,981 822,552 798,552 794,821 800,253 4.2% 7.1%
Real estate -
construction 114,974 136,651 142,682 145,355 163,543 (15.9%) (29.7%)
Real estate -
commercial 1,233,067 1,202,035 1,144,368 1,131,306 1,139,931 2.6% 8.2%
Real estate -
residential 287,980 300,165 256,788 268,746 269,173 (4.1%) 7.0%
Installment 67,543 70,034 63,799 66,028 69,711 (3.6%) (3.1%)
Home equity 358,960 362,919 344,457 339,590 341,310 (1.1%) 5.2%
Credit card 31,631 30,435 28,618 28,104 29,563 3.9% 7.0%
Lease financing 17,311 12,870 9,890 7,147 2,609 34.5% 563.5%
---- -----
Total loans,
excluding covered
loans 2,968,447 2,937,661 2,789,154 2,781,097 2,816,093 1.0% 5.4%
Less
Allowance for loan
and lease losses 52,576 54,537 53,671 53,645 57,235 (3.6%) (8.1%)
------ ------ ------ ------ ------ ------ ------
Net loans -uncovered 2,915,871 2,883,124 2,735,483 2,727,452 2,758,858 1.1% 5.7%
Covered loans 1,053,244 1,151,066 1,242,730 1,336,015 1,481,493 (8.5%) (28.9%)
Less
Allowance for loan
and lease losses 42,835 48,112 51,044 31,555 16,493 (11.0%) 159.7%
------ ------ ------ ------ ------ -------
Net loans -covered 1,010,409 1,102,954 1,191,686 1,304,460 1,465,000 (8.4%) (31.0%)
--------- --------- --------- --------- --------- ------ -------
Net loans 3,926,280 3,986,078 3,927,169 4,031,912 4,223,858 (1.5%) (7.0%)
Premises and
equipment 138,096 120,325 114,797 115,873 118,477 14.8% 16.6%
Goodwill 95,050 68,922 51,820 51,820 51,820 37.9% 83.4%
Other intangibles 10,844 8,436 4,847 5,227 5,604 28.5% 93.5%
FDIC indemnification
asset 173,009 177,814 193,113 207,359 222,648 (2.7%) (22.3%)
Accrued interest and
other assets 262,345 290,117 281,172 290,692 300,388 (9.6%) (12.7%)
------- ------- ------- ------- ------- ------ -------
Total Assets $6,671,511 $6,337,729 $6,041,607 $6,314,481 $6,250,225 5.3% 6.7%
========== ========== ========== ========== ========== === ===
LIABILITIES
Deposits
Interest-bearing
demand $1,317,339 $1,288,721 $1,021,519 $1,136,219 $1,111,877 2.2% 18.5%
Savings 1,724,659 1,537,420 1,643,110 1,628,952 1,534,045 12.2% 12.4%
Time 1,654,662 1,658,031 1,581,603 1,702,294 1,794,843 (0.2%) (7.8%)
--------- --------- --------- --------- --------- ------ ------
Total interest-
bearing deposits 4,696,660 4,484,172 4,246,232 4,467,465 4,440,765 4.7% 5.8%
Noninterest-bearing 946,180 814,928 728,178 749,785 705,484 16.1% 34.1%
------- ------- ------- ------- ------- ---- ----
Total deposits 5,642,840 5,299,100 4,974,410 5,217,250 5,146,249 6.5% 9.6%
Federal funds
purchased and
securities sold
under agreements to
repurchase 99,431 95,451 105,291 87,973 59,842 4.2% 66.2%
Long-term debt 76,544 76,875 102,255 102,976 128,880 (0.4%) (40.6%)
Other long-term debt 0 0 0 20,620 20,620 N/M (100.0%)
--- --- --- ------ ------ --- --------
Total borrowed funds 175,975 172,326 207,546 211,569 209,342 2.1% (15.9%)
Accrued interest and
other liabilities 140,475 139,171 137,889 177,698 197,240 0.9% (28.8%)
--- -------
Total Liabilities 5,959,290 5,610,597 5,319,845 5,606,517 5,552,831 6.2% 7.3%
SHAREHOLDERS' EQUITY
Common stock 579,871 578,974 577,856 576,992 580,097 0.2% (0.0%)
Retained earnings 331,351 329,243 329,455 320,515 310,271 0.6% 6.8%
Accumulated other
comprehensive loss (21,490) (3,388) (7,902) (12,332) (12,044) 534.3% 78.4%
Treasury stock, at
cost (177,511) (177,697) (177,647) (177,211) (180,930) (0.1%) (1.9%)
-------- -------- -------- -------- -------- ------ ------
Total Shareholders'
Equity 712,221 727,132 721,762 707,964 697,394 (2.1%) 2.1%
------- ------- ------- ------- ------- ------ ---
Total Liabilities and
Shareholders' Equity $6,671,511 $6,337,729 $6,041,607 $6,314,481 $6,250,225 5.3% 6.7%
========== ========== ========== ========== ========== === ===
N/M = Not meaningful.
FIRST FINANCIAL BANCORP.
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
Quarterly Averages Year-to-Date Averages
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Dec. 31,
2011 2011 2011 2011 2010 2011 2010
---- ---- ---- ---- ---- ---- ----
ASSETS
Cash and due from banks $121,603 $110,336 $118,829 $111,953 $122,167 $115,692 $228,539
Interest-bearing
deposits with other
banks 485,432 306,969 375,434 276,837 405,920 361,591 459,618
Investment securities 1,257,574 1,199,473 1,093,870 1,045,292 798,135 1,149,772 662,344
Loans held for sale 21,067 9,497 8,530 16,121 21,141 13,805 11,550
Loans
Commercial 851,006 794,447 797,158 802,944 739,082 811,474 751,459
Real estate -
construction 135,825 141,791 139,255 158,403 172,585 143,751 198,395
Real estate -
commercial 1,206,678 1,145,195 1,132,662 1,135,630 1,155,896 1,155,209 1,120,646
Real estate -
residential 293,158 258,377 260,920 265,527 276,166 269,541 295,677
Installment 68,945 63,672 65,568 67,700 71,623 66,467 74,994
Home equity 360,389 346,486 341,876 340,285 339,192 347,312 335,219
Credit card 30,759 29,505 28,486 28,321 28,962 29,275 28,529
Lease financing 15,527 11,496 8,492 6,519 185 10,536 72
Total loans, excluding
covered loans 2,962,287 2,790,969 2,774,417 2,805,329 2,783,691 2,833,565 2,804,991
Less
Allowance for loan and
lease losses 55,157 55,146 55,132 59,756 60,433 56,282 60,409
------ ------ ------ ------ ------ ------ ------
Net loans -uncovered 2,907,130 2,735,823 2,719,285 2,745,573 2,723,258 2,777,283 2,744,582
Covered loans 1,113,876 1,196,327 1,295,228 1,420,197 1,551,003 1,255,403 1,715,984
Less
Allowance for loan and
lease losses 51,330 51,955 39,070 23,399 16,104 41,544 4,285
------ ------ ------ ------ ------ ------ -----
Net loans -covered 1,062,546 1,144,372 1,256,158 1,396,798 1,534,899 1,213,859 1,711,699
Net loans 3,969,676 3,880,195 3,975,443 4,142,371 4,258,157 3,991,142 4,456,281
Premises and equipment 128,168 116,070 115,279 119,006 117,659 119,646 114,371
Goodwill 77,158 52,004 51,820 51,820 51,820 58,253 51,820
Other intangibles 9,094 4,697 5,031 5,421 5,841 6,067 6,621
FDIC indemnification
asset 173,900 183,801 186,125 208,448 232,734 187,962 252,912
Accrued interest and
other assets 272,084 273,773 289,393 289,139 256,906 281,031 241,576
------- ------- ------- ------- ------- ------- -------
Total Assets $6,515,756 $6,136,815 $6,219,754 $6,266,408 $6,270,480 $6,284,961 $6,485,632
========== ========== ========== ========== ========== ========== ==========
LIABILITIES
Deposits
Interest-bearing
demand $1,388,903 $1,153,178 $1,130,503 $1,088,791 $1,086,685 $1,191,064 $1,076,403
Savings 1,617,588 1,659,152 1,636,821 1,585,065 1,490,132 1,624,840 1,391,066
Time 1,623,921 1,554,497 1,634,779 1,757,668 1,861,296 1,642,108 2,032,719
--------- --------- --------- --------- --------- --------- ---------
Total interest-bearing
deposits 4,630,412 4,366,827 4,402,103 4,431,524 4,438,113 4,458,012 4,500,188
Noninterest-bearing 860,863 735,621 734,674 733,242 741,343 766,366 744,159
------- ------- ------- ------- ------- ------- -------
Total deposits 5,491,275 5,102,448 5,136,777 5,164,766 5,179,456 5,224,378 5,244,347
Federal funds purchased
and securities sold
under agreements to
repurchase 98,268 100,990 95,297 89,535 63,489 96,060 47,536
Long-term debt 76,671 94,150 102,506 119,932 128,998 98,185 299,202
Other long-term debt 0 0 20,393 20,620 20,620 10,169 20,620
--- --- ------ ------ ------ ------ ------
Total borrowed funds 174,939 195,140 218,196 230,087 213,107 204,414 367,358
Accrued interest and
other liabilities 129,578 113,418 157,031 176,493 180,901 143,917 190,940
Total Liabilities 5,795,792 5,411,006 5,512,004 5,571,346 5,573,464 5,572,709 5,802,645
SHAREHOLDERS' EQUITY
Preferred stock 0 0 0 0 0 0 11,717
Common stock 579,321 578,380 577,417 579,790 579,701 578,725 572,161
Retained earnings 323,624 331,107 318,466 308,841 306,923 320,579 290,510
Accumulated other
comprehensive loss (5,396) (6,013) (10,488) (13,251) (8,584) (8,758) (8,694)
Treasury stock, at cost (177,585) (177,665) (177,645) (180,318) (181,024) (178,294) (182,707)
-------- -------- -------- -------- -------- -------- --------
Total Shareholders'
Equity 719,964 725,809 707,750 695,062 697,016 712,252 682,987
------- ------- ------- ------- ------- ------- -------
Total Liabilities and
Shareholders' Equity $6,515,756 $6,136,815 $6,219,754 $6,266,408 $6,270,480 $6,284,961 $6,485,632
========== ========== ========== ========== ========== ========== ==========
FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS
(Dollars in thousands)
(Unaudited)
Quarterly Averages Year-to-Date Averages
------------------ ---------------------
Dec. 31, 2011 Sep. 30, 2011 Dec. 31, 2010 Dec. 31, 2011 Dec. 31, 2010
Balance Yield Balance Yield Balance Yield Balance Yield Balance Yield
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Earning assets
Investment securities $1,257,574 2.25% $1,199,473 2.51% $798,135 2.85% $1,149,772 2.52% $662,344 3.42%
Interest-bearing deposits with
other banks 485,432 0.25% 306,969 0.27% 405,920 0.36% 361,591 0.31% 459,618 0.34%
Gross loans (2) 4,271,130 6.27% 4,180,594 6.47% 4,588,569 6.59% 4,290,735 6.49% 4,785,437 6.67%
---- ---- ---- ---- ----
Total earning assets 6,014,136 4.95% 5,687,036 5.30% 5,792,624 5.64% 5,802,098 5.32% 5,907,399 5.81%
Nonearning assets
Allowance for loan and lease losses (106,487) (107,101) (76,537) (97,826) (64,694)
Cash and due from banks 121,603 110,336 122,167 115,692 228,539
Accrued interest and other assets 486,504 446,544 432,226 464,997 414,388
------- ------- ------- ------- -------
Total assets $6,515,756 $6,136,815 $6,270,480 $6,284,961 $6,485,632
========== ========== ========== ========== ==========
Interest-bearing liabilities
Total interest-bearing deposits $4,630,412 0.75% $4,366,827 0.89% $4,438,113 1.16% $4,458,012 0.91% $4,500,188 1.30%
Borrowed funds
Short-term borrowings 98,268 0.10% 100,990 0.17% 63,489 0.21% 96,060 0.17% 47,536 0.20%
Long-term debt 76,671 3.59% 94,150 3.65% 128,998 3.67% 98,185 3.65% 299,202 2.79%
Other long-term debt 0 N/M 0 N/M 20,620 5.10% 10,169 3.85% 20,620 5.92%
--- --- ------ ---- ------ ---- ------ ----
Total borrowed funds 174,939 1.63% 195,140 1.85% 213,107 2.78% 204,414 2.03% 367,358 2.63%
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
Total interest-bearing liabilities 4,805,351 0.79% 4,561,967 0.93% 4,651,220 1.23% 4,662,426 0.96% 4,867,546 1.40%
Noninterest-bearing liabilities
Noninterest-bearing demand
deposits 860,863 735,621 741,343 766,366 744,159
Other liabilities 129,578 113,418 180,901 143,917 190,940
Shareholders' equity 719,964 725,809 697,016 712,252 682,987
Total liabilities & shareholders'
equity $6,515,756 $6,136,815 $6,270,480 $6,284,961 $6,485,632
========== ========== ========== ========== ==========
Net interest income (1) $65,476 $65,218 $67,906 $263,896 $275,510
======= ======= ======= ======== ========
Net interest spread (1) 4.16% 4.37% 4.41% 4.36% 4.41%
==== ==== ==== ==== ====
Net interest margin (1) 4.32% 4.55% 4.65% 4.55% 4.66%
==== ==== ==== ==== ====
(1) Not tax equivalent.
(2) Loans held for sale, nonaccrual loans, covered loans, and indemnification asset are included in gross loans.
FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS
(Dollars in thousands)
(Unaudited)
Comparable Qtr. Income
Linked Qtr. Income Variance Variance Year-to-Date Income Variance
--------------------------- ---------------------- ----------------------------
Rate Volume Total Rate Volume Total Rate Volume Total
---- ------ ----- ---- ------ ----- ---- ------ -----
Earning assets
Investment securities $(771) $330 $(441) $(1,201) $2,611 $1,410 $(5,973) $12,297 $6,324
Interest-bearing deposits with
other banks (11) 115 104 (111) 51 (60) (132) (306) (438)
Gross loans (2) (2,061) 1,431 (630) (3,667) (5,019) (8,686) (8,440) (32,131) (40,571)
---- ------ ------ ------ ------ ------- -------
Total earning assets (2,843) 1,876 (967) (4,979) (2,357) (7,336) (14,545) (20,140) (34,685)
Interest-bearing liabilities
Total interest-bearing deposits $(1,532) $500 $(1,032) $(4,497) $365 $(4,132) $(17,169) $(386) $(17,555)
Borrowed funds
Short-term borrowings (18) (1) (19) (17) 9 (8) (13) 82 69
Long-term debt (16) (158) (174) (28) (473) (501) 2,587 (7,342) (4,755)
Other long-term debt 0 0 0 0 (265) (265) (428) (402) (830)
--- --- --- ---- ---- ---- ----
Total borrowed funds (34) (159) (193) (45) (729) (774) 2,146 (7,662) (5,516)
--- ---- ---- --- ---- ---- ----- ------ ------
Total interest-bearing
liabilities (1,566) 341 (1,225) (4,542) (364) (4,906) (15,023) (8,048) (23,071)
Net interest income (1) $(1,277) $1,535 $258 $(437) $(1,993) $(2,430) $478 $(12,092) $(11,614)
======= ====== ==== ===== ======= ======= ==== ======== ========
(1) Not tax equivalent.
(2) Loans held for sale, nonaccrual loans, covered loans, and indemnification asset are included in gross loans.
FIRST FINANCIAL BANCORP.
CREDIT QUALITY
(excluding covered assets)
(Dollars in thousands)
(Unaudited)
Full Full
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Year Year
2011 2011 2011 2011 2010 2011 2010
---- ---- ---- ---- ---- ---- ----
ALLOWANCE FOR LOAN AND LEASE LOSS
ACTIVITY
Balance at beginning of
period $54,537 $53,671 $53,645 $57,235 $57,249 $57,235 $59,311
Provision for uncovered
loan and lease losses 5,164 7,643 5,756 647 9,741 19,210 33,564
Gross charge-offs
Commercial 1,742 879 383 432 5,131 3,436 13,324
Real estate -construction 2,105 1,771 1,213 1,190 500 6,279 8,619
Real estate -commercial 2,505 2,997 2,791 2,089 1,887 10,382 8,191
Real estate -residential 473 564 406 108 196 1,551 1,693
Installment 115 162 177 72 231 526 1,154
Home equity 488 510 923 262 1,846 2,183 3,499
Other 363 291 339 448 494 1,441 1,871
Total gross charge-offs 7,791 7,174 6,232 4,601 10,285 25,798 38,351
Recoveries
Commercial 348 92 222 100 57 762 620
Real estate -construction 5 0 27 0 0 32 24
Real estate -commercial 68 168 38 35 243 309 1,082
Real estate -residential 3 4 29 9 6 45 24
Installment 96 87 82 98 116 363 519
Home equity 71 9 12 25 74 117 192
Other 75 37 92 97 34 301 250
Total recoveries 666 397 502 364 530 1,929 2,711
Total net charge-offs 7,125 6,777 5,730 4,237 9,755 23,869 35,640
----- ----- ----- ----- ----- ------ ------
Ending allowance for
uncovered loan and lease
losses $52,576 $54,537 $53,671 $53,645 $57,235 $52,576 $57,235
======= ======= ======= ======= ======= ======= =======
NET CHARGE-OFFS TO AVERAGE LOANS AND
LEASES (ANNUALIZED)
Commercial 0.65% 0.39% 0.08% 0.17% 2.72% 0.33% 1.69%
Real estate -construction 6.13% 4.96% 3.42% 3.05% 1.15% 4.35% 4.33%
Real estate - commercial 0.80% 0.98% 0.97% 0.73% 0.56% 0.87% 0.63%
Real estate -residential 0.64% 0.86% 0.58% 0.15% 0.27% 0.56% 0.56%
Installment 0.11% 0.47% 0.58% (0.16%) 0.64% 0.25% 0.85%
Home equity 0.46% 0.57% 1.07% 0.28% 2.07% 0.59% 0.99%
Other 2.47% 2.46% 2.68% 4.09% 6.26% 2.86% 5.67%
Total net charge-offs 0.95% 0.96% 0.83% 0.61% 1.39% 0.84% 1.27%
==== ==== ==== ==== ==== ==== ====
COMPONENTS OF NONPERFORMING LOANS, NONPERFORMING ASSETS,
AND UNDERPERFORMING ASSETS
Nonaccrual loans
Commercial $7,809 $10,792 $9,811 $9,918 $13,729 $7,809 $13,729
Real estate -construction 10,005 13,844 13,237 14,199 12,921 10,005 12,921
Real estate -commercial 28,349 26,408 26,213 30,846 28,342 28,349 28,342
Real estate -residential 5,692 5,507 4,564 4,419 4,607 5,692 4,607
Installment 371 322 335 262 150 371 150
Home equity 2,073 2,277 2,376 2,404 2,553 2,073 2,553
----- ----- ----- ----- ----- ----- -----
Total nonaccrual loans 54,299 59,150 56,536 62,048 62,302 54,299 62,302
Restructured loans
Accruing 4,009 4,712 3,039 3,923 3,508 4,009 3,508
Nonaccrual 18,071 12,571 14,443 14,609 14,105 18,071 14,105
------ ------ ------ ------ ------ ------ ------
Total restructured loans 22,080 17,283 17,482 18,532 17,613 22,080 17,613
Total nonperforming loans 76,379 76,433 74,018 80,580 79,915 76,379 79,915
Other real estate owned
(OREO) 11,317 12,003 16,313 14,953 17,907 11,317 17,907
------ ------ ------ ------ ------ ------ ------
Total nonperforming assets 87,696 88,436 90,331 95,533 97,822 87,696 97,822
Accruing loans past due 90
days or more 191 235 149 241 370 191 370
--- --- --- --- --- ---
Total underperforming
assets $87,887 $88,671 $90,480 $95,774 $98,192 $87,887 $98,192
======= ======= ======= ======= ======= ======= =======
Total classified assets $162,372 $172,581 $184,786 $185,738 $202,140 $162,372 $202,140
======== ======== ======== ======== ======== ======== ========
CREDIT QUALITY RATIOS (excluding
covered assets)
Allowance for loan and lease losses
to
Nonaccrual loans (1) 96.83% 92.20% 94.93% 86.46% 91.87% 96.83% 91.87%
Nonperforming loans 68.84% 71.35% 72.51% 66.57% 71.62% 68.84% 71.62%
Total ending loans 1.77% 1.86% 1.92% 1.93% 2.03% 1.77% 2.03%
Nonperforming loans to
total loans 2.57% 2.60% 2.65% 2.90% 2.84% 2.57% 2.84%
Nonperforming assets to
Ending loans, plus OREO 2.94% 3.00% 3.22% 3.42% 3.45% 2.94% 3.45%
Total assets 1.31% 1.40% 1.50% 1.51% 1.57% 1.31% 1.57%
(1) Excludes nonaccrual restructured loans
FIRST FINANCIAL BANCORP.
CAPITAL ADEQUACY
(Dollars in thousands, except per share)
(Unaudited)
Twelve months ended,
Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31,
2011 2011 2011 2011 2010 2011 2010
---- ---- ---- ---- ---- ---- ----
PER COMMON SHARE
Market Price
High $17.06 $17.12 $17.20 $18.91 $19.41 $18.91 $21.32
Low $13.40 $13.34 $15.04 $15.65 $16.21 $13.34 $13.89
Close $16.64 $13.80 $16.69 $16.69 $18.48 $16.64 $18.48
Average common
shares
outstanding -
basic 57,744,662 57,735,811 57,694,792 57,591,568 57,573,544 57,691,979 56,969,491
Average common
shares
outstanding -
diluted 58,672,575 58,654,099 58,734,662 58,709,037 58,688,415 58,693,205 57,993,078
Ending common
shares
outstanding 58,267,054 58,256,136 58,259,440 58,286,890 58,064,977 58,267,054 58,064,977
REGULATORY CAPITAL Preliminary
Tier 1 Capital $636,836 $661,838 $681,492 $691,559 $680,145 $636,836 $680,145
Tier 1 Ratio 17.47% 18.81% 20.14% 20.49% 18.45% 17.47% 18.45%
Total Capital $683,255 $706,570 $724,763 $734,724 $727,252 $683,255 $727,252
Total Capital
Ratio 18.74% 20.08% 21.42% 21.76% 19.72% 18.74% 19.72%
Total Capital in
excess of minimum
requirement $391,623 $425,128 $454,034 $464,660 $432,274 $391,623 $432,274
Total Risk-
Weighted Assets $3,645,403 $3,518,026 $3,384,115 $3,375,800 $3,687,224 $3,645,403 $3,687,224
Leverage Ratio 9.87% 10.87% 11.01% 11.09% 10.89% 9.87% 10.89%
OTHER CAPITAL
RATIOS
Ending
shareholders'
equity to ending
assets 10.68% 11.47% 11.95% 11.21% 11.16% 10.68% 11.16%
Ending tangible
shareholders'
equity to ending
tangible assets 9.23% 10.38% 11.11% 10.40% 10.33% 9.23% 10.33%
Average
shareholders'
equity to average
assets 11.05% 11.83% 11.38% 11.09% 11.12% 11.33% 10.53%
Average common
shareholders'
equity to average
assets 11.05% 11.83% 11.38% 11.09% 11.12% 11.33% 10.35%
Average tangible
shareholders'
equity to average
tangible assets 9.58% 10.70% 10.56% 10.28% 10.29% 9.81% 9.73%
Average tangible
common
shareholders'
equity to average
tangible assets 9.58% 10.70% 10.56% 10.28% 10.29% 9.81% 9.55%
SOURCE First Financial Bancorp
