First Financial Bancorp Reports Third Quarter 2010 Financial Results
80th Consecutive Quarter of Profitability
Cincinnati, Ohio – November 2, 2010 – First Financial Bancorp (Nasdaq: FFBC) (“First Financial” or the “Company”) announced today financial and operational results for the third quarter 2010 and for the nine month period ended September 30, 2010.
Third quarter 2010 net income and net income available to common shareholders were $15.6 million and earnings per diluted common share were $0.27. This compares with second quarter 2010 net income and net income available to common shareholders of $17.8 million and earnings per diluted common share of $0.30 and third quarter 2009 net income of $200.4 million, net income available to common shareholders of $199.4 million and earnings per diluted common share of $3.87.
Among other items impacting net income during the third quarter 2010 were prepayment penalties totaling $8.0 million on a pre-tax basis, or $0.09 per fully diluted share after taxes, related to the early redemption of $232 million of Federal Home Loan Bank (“FHLB”) advances. Included in the third quarter 2009 amounts was a pre-tax bargain purchase gain of $342.5 million recognized in connection with the Company’s FDIC-assisted transactions (see further discussion below).
For the nine month period ended September 30, 2010, net income was $45.0 million, net income available to common shareholders was $43.1 million and earnings per diluted common share were $0.75 as compared to net income of $207.5 million, net income available to common shareholders of $205.0 million and earnings per diluted common share of $4.71 for the nine month period ended September 30, 2009.
| | § | Continued strong quarterly performance |
| | – | Return on average assets of 0.96% |
| – | Return on average shareholders’ equity of 9.03% |
| – | Return on risk-weighted assets of 1.72% |
| | § | Earnings continue to add to already robust capital ratios |
| | – | Tangible common equity to tangible assets of 10.38% |
| | – | Annualized quarterly tangible common equity growth of 6.3% |
| | – | Tier 1 capital ratio of 18.64% |
| | – | Total risk-based capital of 19.91% |
| | § | Net interest margin remains strong at 4.59% |
| | – | Improved cash flow expectations on acquired loans increased yield on portfolio |
| | – | Enhanced by continued runoff of retail and brokered certificates of deposit and prepayment of FHLB advances |
| | § | Continued stable credit performance |
| | – | Total nonperforming assets of $97.8 million compared to $96.2 million for the linked quarter |
| | – | Net loan charge-offs related to uncovered loans increased to $6.8 million from $5.0 million for the linked quarter, but down 28% compared to September 30, 2009 |
| | – | Provision for uncovered loan losses of $6.3 million, representing a year-over-year decline of 76% |
| | § | Balance sheet risk remains low |
| | – | FDIC loss share coverage on 37% of loan portfolio |
| | – | 100% risk-weighted assets represent only 46% of balance sheet |
| | – | Prepayment of FHLB advances results in an even greater core-funded balance sheet; 93% of balance sheet is supported by deposits and common shareholders’ equity |
Claude Davis, President and Chief Executive Officer, commented, “We experienced another solid quarter, focusing on the execution of our client-focused, community bank business model. As in prior quarters, loan demand remains slow and paydowns continue to outpace new originations. We did, however, put some of our liquidity to use through the repayment of over $230 million of Federal Home Loan Bank advances assumed as part of our acquisitions and continued to experience the planned runoff of time and brokered deposit balances, both of which positively impacted our net interest margin. Additionally, we experienced an improvement in the performance of certain pools of acquired loans which should further enhance our net interest margin in future periods.
“As part of our strategic plan, we remained focused on expense control in order to ultimately achieve our target efficiency ratio. While we are always evaluating opportunities to grow our business, we also continue to examine our level of resources to ensure that they are aligned with both current and prospective business needs.
“Our capital position, which consists primarily of common equity and is among the leaders in our industry, remains strong and continues to grow as a result of our earnings power. This strong capital level provides the opportunity to take advantage of strategic opportunities that meet our internal risk and performance criteria when they arise. While we are committed to redeploying our capital in a manner that enhances long term shareholder value, we expect our capital ratios to remain well in excess of “well-capitalized” minimum requirements due to uncertainty regarding potential changes to regulatory capital guidelines.
“In addition to our focus on our traditional commercial and retail businesses, we also continued to build our residential mortgage and franchise lending business units. While we prudently scaled back our efforts in the mortgage sector as part of our strategic reorganization plan beginning in 2005, fundamentals have improved and we have been selectively hiring seasoned originators that are beginning to build a solid pipeline. Our franchise finance unit, which we acquired as part of the Irwin transaction, remains a profitable, niche business for us and our experienced team continues to leverage its expertise in this area by originating risk appropriate credits, helping to diversify our overall loan portfolio.
“Another strategic initiative we have under way is expansion in our small business banking unit. We have selected 45 of our banking centers to additionally serve as small business centers where a combination of seasoned business bankers and newly trained associates will launch a major sales effort during the fourth quarter to build out this line of business. We have already experienced an increase in our SBA lending pipeline and expect this initiative to provide additional growth related to our commitment to small business.”
DETAILS OF RESULTS
When compared to the third quarter 2009 and the nine month period ended September 30, 2009, the results of the comparable periods in 2010 were impacted by a number of acquisition-related items. 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”).
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”. Additional disclosures have been added in a separate section of the earnings release that segregate the effect acquisition-related items have on certain reported income statement and balance sheet amounts, “Section II – Supplemental Information on Covered Assets and Acquisition-Related Items”. Definitions of the business categories and other financial items related to the acquisitions can be found below in “Glossary of Terms”.
In an effort to simplify and clarify the financial performance of First Financial, a number of significant items are noted separately throughout this release and will address the nature, timing and expected recurrence of each item. 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 loan prepayments and dispositions – 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 mark 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.
ACQUISITIONS
Subsequent Events
The Irwin and Peoples acquisitions were considered business combinations and accounted for under FASB Codification Topic 805: Business Combinations, FASB Codification Topic 820: Fair Value Measurements, FASB Codification Topic 310-30: Loans and Debt Securities Acquired with Deteriorated Credit Quality and FASB Codification Topic 310-20: Receivables – Nonrefundable Fees and Costs. All acquired assets and liabilities, including identifiable intangible assets, were recorded at their estimated fair values as of the date of acquisition.
Certain reclassifications of prior periods’ amounts may also be made to conform to the current period’s presentation and would have no effect on previously reported net income amounts.
Purchase Accounting Adjustments
As a result of additional information arising subsequent to the acquisition dates, during the third quarter 2010 the Company recorded adjustments to the initial purchase entries. These items represent the final valuation adjustments allowable under the applicable accounting guidance.
The following table highlights adjustments that impacted the originally reported gain on acquisitions and provides a reconciliation of net income available to common shareholders and diluted earnings per common share as originally reported for the three months ended September 30, 2009 to an “as adjusted” basis reflecting certain adjustments recorded in connection with the gain on acquisitions and other items.
| Table I | | For the Three Months Ended September 30, 2009 | |
| | | | | | | | | Net | | | | |
| | | | | | | | | Income | | | Diluted | |
| | | Pre-Tax | | | Income | | | Available to | | | Earnings | |
| (Dollars in thousands, except per share amounts) | | Impact | | | Taxes | | | Common | | | Per Share | |
| | | | | | | | | | | | | |
| Net income, as originally reported | | $ | - | | | $ | - | | | $ | 225,187 | | | $ | 4.38 | |
| | | | | | | | | | | | | | | | | |
| Gain on acquisitions, as originally reported | | | 383,330 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Valuation - indemnification asset related to Irwin | | | (23,784 | ) | | | 8,981 | | | | (14,803 | ) | | | (0.29 | ) |
| Valuation - loans acquired from Irwin | | | (1,496 | ) | | | 565 | | | | (931 | ) | | | (0.02 | ) |
| Other asset valuations | | | (15,556 | ) | | | 5,874 | | | | (9,682 | ) | | | (0.19 | ) |
| Tax rate adjustment | | | | | | | (2,436 | ) | | | (2,436 | ) | | | (0.05 | ) |
| Total adjustments to gain on acquisitions | | | (40,836 | ) | | | 12,985 | | | | (27,852 | ) | | | (0.54 | ) |
| | | | | | | | | | | | | | | | | |
| Gain on acquisitions, as adjusted | | $ | 342,494 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other adjustments: 1 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Interest income related to loans | | | 1,898 | | | | (664 | ) | | | 1,234 | | | | 0.02 | |
| Interest income related to other earning assets | | | 1,311 | | | | (459 | ) | | | 852 | | | | 0.02 | |
| Other noninterest income and expense, net | | | (98 | ) | | | 34 | | | | (64 | ) | | | (0.00 | ) |
| | | | | | | | | | | | | | | | | |
| Net income, as adjusted | | | | | | | | | | $ | 199,357 | | | $ | 3.87 | |
1 Recorded during fourth quarter 2009
As a result of its valuation assumptions regarding the timing of expected problem asset resolution and FDIC reimbursement for losses related to loans acquired from Irwin, First Financial determined that the FDIC indemnification asset related to these loans required an adjustment decreasing the originally reported balance by $23.8 million. This change in value represents only the timing of expected cash flows, not the amount of expected cash flows. The FDIC indemnification asset represents the expected payments from the FDIC over the course of the loss sharing agreements, on a discounted basis. The FDIC continues to pay claims in a timely fashion.
The fair value of loans acquired from Irwin was adjusted to reflect the impact of reclassifications of the initial loan category assignments.
The fair value adjustment for other assets is primarily related to the establishment of valuation allowances for certain assets of and investments in Irwin subsidiaries as well as for other community reinvestment related assets.
The following table provides a reconciliation of total shareholders’ equity, goodwill and tangible book value per share as of September 30, 2009 to “as adjusted” based on prior period adjustments as well as the change in net income resulting from the adjustments to the gain on acquisitions discussed above.
| Table II | | As of September 30, 2009 | |
| | | | | | | | | Impact on | |
| | | | | | | | | Tangible | |
| | | | | | | | | Book Value | |
| (Dollars in thousands, except per share amounts) | | | | | | | | Per Share | |
| | | | | | | | | | |
| Shareholders' equity, as originally reported | | | | | $ | 671,247 | | | | |
| | | | | | | | | | | |
| Tangible book value per share, as originally reported | | | | | | | | | $ | 10.48 | |
| | | | | | | | | | | | |
| Goodwill, as originally reported | | $ | 46,931 | | | | | | | | | |
| | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Branch acquisition | | | 5,540 | | | | | | | | | |
| Valuation - Peoples | | | (651 | ) | | | | | | | | |
| Total adjustments to goodwill | | | 4,889 | | | | | | | | (0.10 | ) |
| | | | | | | | | | | | | |
| Goodwill, as adjusted | | $ | 51,820 | | | | | | | | | |
| | | | | | | | | | | | | |
| Prior period adjustment to other intangible assets | | | 989 | | | | | | | | (0.02 | ) |
| | | | | | | | | | | | | |
| Change in net income due to adjustments to gain on acqusitions | | | | (25,830 | ) | | | (0.50 | ) |
| | | | | | | | | | | | | |
| Shareholders' equity, as adjusted | | | | | | $ | 645,417 | | | | | |
| Tangible book value per share, as adjusted | | | | | | | | | | $ | 9.86 | |
Reclassification / Financial Statement Presentation Changes
As a result of recent SEC comments regarding the financial statement presentation for losses on covered loans and receivables from the FDIC related to loss sharing agreements, the Company reclassified certain items on the income statement during the second and first quarters 2010 to gross up reported activity that was previously presented on a net basis. These adjustments did not impact previously reported net income amounts.
The following table highlights the presentation changes affecting the income statement for the three months ended June 30 and March 31, 2010 to conform to these comments.
| Table III | | For the Three Months Ended | |
| | | | | | | | | | | | | |
| (Dollars in thousands) | | June 30, 2010 | | | March 31, 2010 | |
| | | | | | | | | | | | | |
| Provision for loan and lease losses - covered, as reported | | $ | 254 | | | | | | $ | - | | | | |
| Provision for loan and lease losses - covered, as adjusted | | | 18,962 | | | | | | | 9,460 | | | | |
| Increase to reflect gross credit losses related to covered loans | | | | 18,708 | | | | | | | | 9,460 | |
| | | | | | | | | | | | | | | | | |
| Total noninterest income - as reported | | | 25,296 | | | | | | | | 19,368 | | | | | |
| Total noninterest income - as adjusted | | | 40,467 | | | | | | | | 26,935 | | | | | |
Increase to reflect FDIC loss sharing income1 | | | | | | | 15,171 | | | | | | | | 7,567 | |
| | | | | | | | | | | | | | | | | |
Net effect of gross up of credit losses and FDIC loss sharing income 2 | | | | | | | 3,537 | | | | | | | | 1,893 | |
| | | | | | | | | | | | | | | | | |
| Total noninterest expense - as reported | | | 59,356 | | | | | | | | 62,154 | | | | | |
| Total noninterest expense - as adjusted | | | 55,819 | | | | | | | | 60,261 | | | | | |
| Decrease to reclass proportionate share of losses in excess | | | | | | | | | | | | | | | | |
of valuation discount 2 | | | | | | | (3,537 | ) | | | | | | | (1,893 | ) |
| | | | | | | | | | | | | | | | | |
| Effect on reported net income | | | | | | $ | - | | | | | | | $ | - | |
1 Includes immaterial amount reclassified to noninterest income
2 Represents the Company's proportionate share of total recognized, unanticipated losses on covered loans; reported previously as other noninterest expense
SECTION I – RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income on a fully tax-equivalent basis for the third quarter 2010 was $68.1 million as compared to $68.0 million for the second quarter 2010 and $41.0 million as compared to the year-over-year period. Despite a lower level of average interest earning assets relative to the linked quarter, net interest income remained essentially the same due to an increase in interest income related to loans and a decrease in interest expense as a result of lower time and brokered deposit balances and the prepayment of FHLB advances. In addition to higher levels of average interest-earning assets and interest-bearing liabilities resulting from the 2009 acquisitions, the year-over-year increase of $27.1 million was also impacted by the significant increase in the net interest margin (see further discussion below).
For the nine month period ended September 30, 2010, net interest income on a fully tax-equivalent basis was $208.3 million as compared to $103.8 million for the comparable period in 2009. Similar to the quarterly year-over-year items noted above, the increase was driven by the larger balance sheet items as well as a higher net interest margin (see further discussion below).
NET INTEREST MARGIN
Net interest margin was 4.59% for the third quarter 2010 as compared to 4.53% for the second quarter 2010 and 3.90% for the third quarter 2009. The net interest margin continued to be negatively impacted by the combination of normal amortization and paydowns in both the legacy and acquired loan portfolios and reduced loan demand in the Company’s strategic markets. However, during the third quarter, First Financial used a portion of its liquidity to purchase $154 million of FNMA / FHMLC mortgage backed securities and prepay $232 million of FHLB advances, which helped to offset the net effect of muted loan activity. Net interest margin was also positively impacted by the expected runoff of retail and brokered certificates of deposit and the lower earning asset base during the quarter.
Net interest margin was also positively impacted 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. The Company recognized an improvement in the cash flow expectations related to certain loan pools, which is reflected as a yield adjustment on a prospective basis. During the third quarter 2010, this improvement positively impacted net interest margin by 15 basis points.
The following table shows the estimated yield earned by the Company on its legacy and originated loan portfolio, acquired loan portfolio and the FDIC indemnification asset for the three months ended September 30, 2010.
| Table IV | | For the Three Months Ended | |
| | | September 30, 2010 | |
| | | Average | | | | |
| | | Balance | | | Yield | |
| | | | | | | |
Legacy and originated loan portfolio 1 | | $ | 2,947,928 | | | | 5.33 | % |
| | | | | | | | | |
Acquired loan portfolio accounted for under ASC Topic 310-30 2 | | | 1,505,866 | | | | 9.75 | % |
| | | | | | | | | |
FDIC indemnification asset 2 | | | 238,720 | | | | 3.91 | % |
1 Includes acquired revolving loans not accounted for under ASC Topic 310-30; yield estimated at time of origination
2 Future yield adjustments subject to change based on required, periodic valuation procedures
As part of its on-going valuation procedures, the Company experienced an improvement in the cash flow expectations related to certain loan pools of $36.7 million during the third quarter 2010. As a result, the average yield earned on covered loans increased from 9.10% during the second quarter 2010 to 9.75% during the third quarter 2010. On a prospective basis and until its next periodic valuation, the Company expects the yield on covered loans to be 10.08%.
This projected improvement in cash flow expectations on loans is partially offset by a related $20.7 million decline in cash flow expectations on the FDIC indemnification asset. The net result of improvement and impairment (discussed in more detail in Section II) activity related to covered loans affected the average yield earned on the indemnification asset, decreasing from 6.50% during the second quarter 2010 to 3.91% during the third quarter 2010. On a prospective basis and until its next periodic valuation, the Company expects the yield on the indemnification asset to be 2.61%.
Net interest margin for the nine month period ended September 30, 2010 was 4.67% as compared to 3.71% for the nine month period ended September 30, 2009.
NONINTEREST INCOME
The following table presents noninterest income for the three months ended September 30, June 30 and March 31, 2010 highlighting the estimated impact of covered loan activity and other transition items on the Company’s reported balance.
| Table V | | | | | | | | | |
| | | For the Three Months Ended | |
| | | September 30, | | | June 30, | | | March 31, | |
| (Dollars in thousands) | | 2010 | | | 2010 | | | 2010 | |
| | | | | | | | | | |
| Total noninterest income | | $ | 44,895 | | | $ | 40,467 | | | $ | 26,935 | |
| | | | | | | | | | | | | |
| Significant components of noninterest income | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Items likely to recur: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Accelerated discount on loan prepayments and dispositions 1, 2 | | | 9,448 | | | | 7,408 | | | | 6,098 | |
| FDIC loss sharing income | | | 17,800 | | | | 15,170 | | | | 7,568 | |
| Other acquired-non-strategic income | | | 44 | | | | 475 | | | | 80 | |
| Transition-related items | | | - | | | | - | | | | 366 | |
| | | | | | | | | | | | | |
| Items expected not to recur: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Gain on sale of insurance business | | | 1,356 | | | | - | | | | - | |
| FDIC settlement and other items not expected to recur | | | (132 | ) | | | 2,930 | | | | - | |
| | | | | | | | | | | | | |
| Total excluding items noted above | | $ | 16,379 | | | $ | 14,484 | | | $ | 12,823 | |
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 the aforementioned inclusion of reimbursements due from the FDIC resulting from loss share agreements, covered loan activity positively impacted noninterest income due to loan prepayments and dispositions. This activity is discussed in more detail in Section II. Included in noninterest income for the third quarter 2010 was a $2.0 million gain resulting from the sale of approximately $23.2 million of loans originated by its franchise finance business. As discussed in more detail under Loans (Excluding Covered Loans), periodic sales of franchise loans will be recurring in order to manage risk in the business line. Loans are sold with servicing retained. Additionally, consistent with the Company’s previous exit of a similar business line, the property and casualty insurance business acquired as part of the Irwin acquisition was sold during the quarter, resulting in the recognition of a $1.4 million gain.
Excluding the items highlighted in Table I, as well as the bargain purchase gain on the acquisitions recognized during the third quarter 2009, estimated noninterest income earned in the third quarter 2010 was $16.4 million as compared to $14.5 million in the second quarter 2010 and $11.8 million in the third quarter 2009. The remaining increase in the comparable year-over-year quarter was driven primarily by higher service charges on deposit accounts resulting from an increase in transaction-based deposits, increased bankcard income, higher trust and wealth management fees and higher brokerage and insurance income as a result of the 2009 acquisitions.
For the nine month period ended September 30, 2010, noninterest income totaled $112.3 million as compared to $380.6 million for the similar year-over-year period. Excluding the items mentioned above and those highlighted in Table I, as well as gains on sales of investments and the gain on sale of the property & casualty portion of the insurance business which occurred during the first quarter 2009, noninterest income was $43.7 million for the nine month period ended September 30, 2010 as compared to $33.9 million for the nine months ended September 30, 2009.
NONINTEREST EXPENSE
The following table presents noninterest expense for the three months ended September 30, June 30 and March 31, 2010 including the estimated effect of acquired-non-strategic operations, acquisition-related costs and other transition items.
| Table VI | | | | | | | | | |
| | | For the Three Months Ended | |
| | | September 30, | | | June 30, | | | March 31, | |
| (Dollars in thousands) | | 2010 | | | 2010 | | | 2010 | |
| | | | | | | | | | |
| Total noninterest expense | | $ | 61,310 | | | $ | 55,819 | | | $ | 60,261 | |
| | | | | | | | | | | | | |
| Significant components of noninterest expense | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Items likely to recur: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Acquired-non-strategic operating expenses 1 | | | 566 | | | | 1,270 | | | | 2,201 | |
Transition-related items 1 | | | 846 | | | | 1,321 | | | | 6,263 | |
| FDIC indemnification support | | | 875 | | | | 938 | | | | 605 | |
| | | | | | | | | | | | | |
| Items expected not to recur: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Acquisition-related costs 1 | | | 1,505 | | | | 2,180 | | | | 2,629 | |
| FHLB prepayment penalty | | | 8,029 | | �� | | - | | | | - | |
| Other items not expected to recur | | | 493 | | | | 2,387 | | | | 1,019 | |
| | | | | | | | | | | | | |
| Total excluding items noted above | | $ | 48,996 | | | $ | 47,723 | | | $ | 47,544 | |
1 See Section II for additional information
Similar to the second and first quarters 2010, noninterest expense during the third quarter 2010 continued to be affected by acquisition-related costs as well as other transition-related items and costs related to the Company’s acquired-non-strategic operations. Additionally, the Company incurred a charge of $8.0 million in connection with the aforementioned prepayment of $232 million of FHLB advances. After adjusting for these items, estimated noninterest expense increased slightly, totaling $49.0 million for the third quarter 2010. Compared to the year-over-year quarter, excluding acquisition-related and other non-recurring expenses incurred during the third quarter 2009, estimated noninterest expense increased $13.6 million, primarily driven by higher salaries and employment benefits, occupancy costs, equipment expenses and marketing costs resulting from the 2009 acquisitions.
For the nine month period ended September 30, 2010, noninterest expense totaled $177.4 million compared to $109.0 million for the comparable year-over-year period. Excluding the items mentioned above and those highlighted in Table II as well as the FDIC special assessment and acquisition related expenses incurred during the second quarter 2009 and severance costs related to the first quarter 2009 sale of the property & casualty portion of the insurance business, noninterest expense was $144.3 million for the nine month period ended September 30, 2010 as compared to $106.6 million for the nine months ended September 30, 2009.
While the technology and operational integration of Irwin and Peoples is complete, it is expected that there will be additional integration- and wind-down-related costs incurred throughout 2010 and into 2011.
INCOME TAXES
For the third quarter 2010, income tax expense was $8.8 million, resulting in an effective tax rate of 36.2%, compared with income tax expense of $9.5 million and an effective tax rate of 34.8% during the second quarter 2010 and $121.8 million and an effective tax rate of 37.8% during the comparable year-over-year period.
For the nine month period ended September 30, 2010, income tax expense was $24.6 million, resulting in an effective tax rate of 35.4%, compared with income tax expense of $125.5 million and an effective tax rate of 37.7% for the nine months ended September 30, 2009.
CREDIT QUALITY – EXCLUDING COVERED ASSETS
The following table presents certain credit quality metrics related to the Company’s uncovered loan portfolio as of September 30, 2010 and for the trailing four quarters.
| Table VII | | | | | | | | | | | | | | | |
| | | As of or for the Three Months Ended | |
| | | September 30, | | | June 30, | | | March 31, | | | December 31, | | | September 30, | |
| (Dollars in thousands) | | 2010 | | | 2010 | | | 2010 | | | 2009 | | | 2009 | |
| | | | | | | | | | | | | | | | |
| Total nonaccrual loans | | $ | 66,157 | | | $ | 66,671 | | | $ | 66,869 | | | $ | 71,657 | | | $ | 60,506 | |
| Restructured loans | | $ | 13,365 | | | $ | 12,752 | | | $ | 7,584 | | | $ | 6,125 | | | $ | 3,102 | |
| Total nonperforming loans | | $ | 79,522 | | | $ | 79,423 | | | $ | 74,453 | | | $ | 77,782 | | | $ | 63,608 | |
| Total nonperforming assets | | $ | 97,827 | | | $ | 96,241 | | | $ | 92,540 | | | $ | 81,927 | | | $ | 67,909 | |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming assets as a % of: | | | | | | | | | | | | | | | | | | | | |
| Period-end loans plus OREO | | | 3.51 | % | | | 3.42 | % | | | 3.27 | % | | | 2.83 | % | | | 2.36 | % |
| Total assets | | | 1.59 | % | | | 1.46 | % | | | 1.41 | % | | | 1.23 | % | | | 0.94 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans as a % of total loans | | | 2.88 | % | | | 2.84 | % | | | 2.65 | % | | | 2.69 | % | | | 2.21 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Provision for loan and lease losses - uncovered | | $ | 6,287 | | | $ | 6,158 | | | $ | 11,378 | | | $ | 14,812 | | | $ | 26,655 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for uncovered loan & lease losses | | $ | 57,249 | | | $ | 57,811 | | | $ | 56,642 | | | $ | 59,311 | | | $ | 55,770 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan & lease losses as a % of: | | | | | | | | | | | | | | | | | | | | |
| Period-end loans | | | 2.07 | % | | | 2.07 | % | | | 2.01 | % | | | 2.05 | % | | | 1.94 | % |
| Nonaccrual loans | | | 86.5 | % | | | 86.7 | % | | | 84.7 | % | | | 82.8 | % | | | 92.2 | % |
| Nonperforming loans | | | 72.0 | % | | | 72.8 | % | | | 76.1 | % | | | 76.3 | % | | | 87.7 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Total net charge-offs | | $ | 6,849 | | | $ | 4,989 | | | $ | 14,047 | | | $ | 11,271 | | | $ | 9,534 | |
| Annualized net-charge-offs as a % of average | | | | | | | | | | | | | | | | | | | | |
| loans & leases | | | 0.97 | % | | | 0.71 | % | | | 2.00 | % | | | 1.53 | % | | | 1.31 | % |
Net Charge-offs
Third quarter 2010 net charge-offs were $6.8 million, or 0.97% of average loans and leases, compared with $5.0 million, or 0.71%, for the linked quarter and $9.5 million, or 1.31%, for the comparable year-over-year quarter. The increase compared to the linked quarter was driven by higher charge-offs in the construction, commercial real estate and, to a lesser degree, residential portfolios, offset by lower net charge-offs in the commercial portfolio.
For the nine months ended September 30, 2010, net charge-offs were $25.9 million, or 1.23% of average loans and leases. These amounts were impacted by the alleged fraudulent activity noted during the first quarter 2010 which totaled $8.8 million, representing 42 basis points of average loans and leases for the period. Excluding the alleged fraudulent activity, net charge-offs were $17.1 million, or 0.81%, as compared to $21.4 million, or 1.03%, for the nine month period ended September 30, 2009.
Nonperforming Assets
Nonperforming loans totaled $79.5 million and nonperforming assets totaled $97.8 million as of September 30, 2010 compared with $79.4 million and $96.2 million, respectively, for the linked quarter and $63.6 million and $67.9 million, respectively, for the comparable year-over-year quarter. While total nonaccrual loans remained essentially unchanged, the individual components changed as commercial nonaccrual loans increased $4.4 million and home equity nonaccrual loans increased $561,000, offset by a decrease in construction nonaccrual loans of $5.4 million driven by the higher level of net charge-offs related to this loan category.
Total classified assets increased $10.7 million during the third quarter 2010 to $212.6 million. Classified assets are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse. The increase was driven primarily by one relationship related to a multi-family, mixed use project totaling $9.3 million in the aggregate. All credits included in classified assets are monitored closely and have workout strategies in place should their status continue to deteriorate.
Other real estate owned increased $1.5 million to $18.3 million during the third quarter 2010. The net increase pertained to three development projects and one restaurant, none of which comprised a large portion of the overall increase.
While the Company is seeing isolated areas of improvement, overall weakness in both the commercial and consumer sectors continues to exist in its strategic markets and, as a result, recovery will be slow. Given the continued challenging environment, it will be critical to remain proactive in identifying and managing individual credit situations.
Delinquent Loans
Loans 30-to-89 days past due totaled $45.1 million, or 1.63% of period end loans, as of September 30, 2010. This compares to $21.8 million, or 0.78%, as of June 30, 2010 and $20.8 million, or 0.72%, as of September 30, 2009. The increase was driven primarily by the multi-family project discussed above, two residential developments totaling $8.1 million in the aggregate and a commercial real estate credit of $3.4 million.
Provision for Loan & Lease Losses
Third quarter 2010 provision expense related to uncovered loans and leases was $6.3 million as compared to $6.2 million during the linked quarter and $26.7 million during the comparable year-over-year quarter. As a percentage of net charge-offs, third quarter 2010 provision expense equaled 91.8% compared to 123.4% during the second quarter 2010 and 279.6% during the third quarter 2009.
Allowance for Loan & Lease Losses
As of the end of the third quarter 2010, the allowance for uncovered loan and lease losses was $57.2 million as compared to $57.8 million as of June 30, 2010 and $55.8 million as of September 30, 2009. As a percentage of period-end loans, the allowance for loan and lease losses remained unchanged at 2.07% as of September 30, 2010 as compared to June 30, 2010 and 1.94% as of September 30, 2009. The allowance for loan and lease losses as of September 30, 2010 reflects management’s estimate of credit risk inherent in the Company’s portfolio at that time.
LOANS (EXCLUDING COVERED LOANS)
The following table presents the loan portfolio, not including covered loans, as of September 30, 2010, June 30, 2010 and September 30, 2009.
| Table VIII | | | | | | | | | | | | | | | | | | |
| | | As of | |
| | | September 30, 2010 | | | June 30, 2010 | | | September 30, 2009 | |
| | | | | | Percent | | | | | | Percent | | | | | | Percent | |
| (Dollars in thousands) | | Balance | | | of Total | | | Balance | | | of Total | | | Balance | | | of Total | |
| | | | | | | | | | | | | | | | | | | |
| Commercial | | $ | 763,449 | | | | 27.6 | % | | $ | 749,522 | | | | 26.8 | % | | $ | 818,608 | | | | 28.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Real estate - construction | | | 178,914 | | | | 6.5 | % | | | 197,112 | | | | 7.1 | % | | | 245,535 | | | | 8.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Real estate - commercial | | | 1,095,543 | | | | 39.6 | % | | | 1,113,836 | | | | 39.9 | % | | | 1,037,121 | | | | 36.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Real estate - residential | | | 283,914 | | | | 10.3 | % | | | 296,295 | | | | 10.6 | % | | | 331,678 | | | | 11.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Installment | | | 73,138 | | | | 2.6 | % | | | 75,862 | | | | 2.7 | % | | | 86,940 | | | | 3.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Home equity | | | 341,288 | | | | 12.3 | % | | | 332,928 | | | | 11.9 | % | | | 324,340 | | | | 11.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Credit card | | | 28,825 | | | | 1.0 | % | | | 28,567 | | | | 1.0 | % | | | 27,713 | | | | 1.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Lease financing | | | 138 | | | | 0.0 | % | | | 15 | | | | 0.0 | % | | | 19 | | | | 0.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 2,765,209 | | | | 100.0 | % | | $ | 2,794,137 | | | | 100.0 | % | | $ | 2,871,954 | | | | 100.0 | % |
Loans, excluding covered loans, totaled $2.8 billion at the end of the third quarter, a decrease of $28.9 million, or 1.0%, compared to June 30, 2010 and a decrease of $106.7 million, or 3.7%, compared to September 30, 2009. As compared to the linked quarter, the composition of the loan portfolio remained essentially the same with the slight overall decrease occurring largely in the construction and commercial and residential real estate portfolios offset by modest increases in the commercial and home equity portfolios. Overall, loan demand continued to remain slow in the Company’s strategic operating markets.
During the third quarter 2010, the Company sold approximately $23.2 million of loans originated by its franchise finance business at a premium, recognizing a gain of $2.0 million. The loans sold consisted of both loans covered by FDIC loss sharing agreements and credits originated subsequent to the Irwin acquisition. The sale was conducted to lessen credit and geographic concentration risk within the franchise portfolio. As a liquid secondary market exists for these types of credits, the Company may consider additional franchise loan sales in the future as a way to mitigate the aforementioned risks.
INVESTMENTS
The following table presents a summary of the total investment portfolio at September 30, 2010.
| Table IX | | | | | | | | | | | | | | | | | | |
| | | As of September 30, 2010 | |
| | | Book | | | Percent of | | | Book | | | Cost | | | Market | | | Gain/ | |
| (Dollars in thousands) | | Value | | | Total | | | Yield | | | Basis | | | Value | | | (Loss) | |
| | | | | | | | | | | | | | | | | | | |
| U.S. Treasury notes | | $ | 14,335 | | | | 2.0 | % | | | 2.26 | | | | 99.68 | | | | 103.69 | | | $ | 576 | |
| Agencies | | | 111,590 | | | | 15.5 | % | | | 2.88 | | | | 100.00 | | | | 101.42 | | | | 1,567 | |
| CMOs (agency) | | | 190,017 | | | | 26.4 | % | | | 1.71 | | | | 99.75 | | | | 100.95 | | | | 2,256 | |
| CMOs (private) | | | 48 | | | | 0.0 | % | | | 1.03 | | | | 100.00 | | | | 100.25 | | | | 0 | |
| MBSs (agency) | | | 289,247 | | | | 40.1 | % | | | 4.56 | | | | 100.93 | | | | 106.38 | | | | 14,823 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 605,236 | | | | 84.0 | % | | | 3.30 | | | | 100.36 | | | | 103.63 | | | | 19,222 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Municipal | | | 18,761 | | | | 2.6 | % | | | 7.20 | | | | 99.19 | | | | 102.22 | | | | 567 | |
Other 1 | | | 96,528 | | | | 13.4 | % | | | 2.95 | | | | 102.18 | | | | 102.60 | | | | 398 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 115,290 | | | | 16.0 | % | | | 3.64 | | | | 101.69 | | | | 102.54 | | | | 965 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total investment portfolio | | $ | 720,526 | | | | 100.0 | % | | | 3.36 | | | | 100.57 | | | | 103.45 | | | $ | 20,187 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Net Unrealized Gain/(Loss) | | | $ | 20,187 | |
| | | | | | | Aggregate Gains | | | | 20,302 | |
| | | | | | | Aggregate Losses | | | | (115 | ) |
| | | | | | | Net Unrealized Gain/(Loss) % of Book Value | | | | 2.80 | % |
1 Other includes $87 million of regulatory stock
The increase relative to the linked quarter was due to the purchase of $154 million of FNMA / FHLMC mortgage backed securities during the quarter, net of maturities and amortizations. While loan demand remains muted, the Company continues to selectively redeploy a portion of its cash position to purchase investments as market conditions permit. Future purchases will be made utilizing the same discipline and portfolio management philosophy applied in the past, including avoidance of material credit risk and geographic concentration risk within mortgage-backed securities, while also balancing the Company’s overall asset / liability management objectives.
DEPOSITS
The following table presents a roll-forward of deposit activity during the third quarter 2010, including activity related to deposits acquired through the FDIC-assisted transactions.
| Table X | | | | | | | | | | | | |
| | | Deposit Activity - Third Quarter 2010 | |
| | | Balance as of | | | | | | Acquired- | | | Balance as of | |
| | | June 30, | | | Strategic | | | Non-Strategic | | | September 30, | |
| (Dollars in thousands) | | 2010 | | | Portfolio | | | Portfolio | | | 2010 | |
| | | | | | | | | | | | | |
| Transaction and savings accounts | | $ | 3,204,513 | | | | (36,878 | ) | | | (47,024 | ) | | $ | 3,120,611 | |
| | | | | | | | | | | | | | | | | |
| Time deposits | | | 1,795,934 | | | | (37,743 | ) | | | (16,132 | ) | | | 1,742,059 | |
| | | | | | | | | | | | | | | | | |
| Brokered deposits | | | 246,889 | | | | (984 | ) | | | (57,312 | ) | | | 188,593 | |
| | | | | | | | | | | | | | | | | |
| Total deposits | | $ | 5,247,336 | | | $ | (75,605 | ) | | $ | (120,468 | ) | | $ | 5,051,263 | |
Overall, strategic transaction and savings accounts declined $36.9 million during the third quarter. Retail and business transactional accounts continued to experience solid growth during the quarter, increasing $60.4 million. However, this was offset by a decrease of $97.2 million in public funds transactional deposits. Similar to the prior quarter, acquired-non-strategic balances continued to decline, the majority of which consisted of time and brokered deposits. During the third quarter 2010, the Company closed its remaining two western market offices acquired as part of the Irwin transaction, contributing to the decline in acquired-non-strategic transaction and savings accounts. As of September 30, 2010, brokered deposits had declined to less than 4% of total deposits.
CAPITAL MANAGEMENT
The following table presents First Financial’s preliminary regulatory and other capital ratios as of September 30, 2010, June 30, 2010 and September 30, 2009. Prior period amounts have been revised to reflect the purchase accounting adjustments discussed in Acquisitions above.
| Table XI | | | | | | | | | | | | |
| | | As of | | | | |
| | | September 30, | | | June 30, | | | September 30, | | | "Well-Capitalized" | |
| | | 2010 | | | 2010 | | | 2009 | | | Minimum | |
| | | | | | | | | | | | | |
| Leverage Ratio | | | 10.50 | % | | | 9.99 | % | | | 13.86 | % | | | 5.00 | % |
| | | | | | | | | | | | | | | | | |
| Tier 1 Capital Ratio | | | 18.64 | % | | | 18.15 | % | | | 15.46 | % | | | 6.00 | % |
| | | | | | | | | | | | | | | | | |
| Total Risk-Based Capital Ratio | | | 19.91 | % | | | 19.42 | % | | | 16.71 | % | | | 10.00 | % |
| | | | | | | | | | | | | | | | | |
| Ending tangible shareholders' equity | | | | | | | | | | | | | | | | |
| to ending tangible assets | | | 10.38 | % | | | 9.55 | % | | | 8.16 | % | | | N/A | |
| | | | | | | | | | | | | | | | | |
| Ending tangible common shareholders' | | | | | | | | | | | | | | | | |
| equity to ending tangible assets | | | 10.38 | % | | | 9.55 | % | | | 7.07 | % | | | N/A | |
Capital levels continued to improve during the third quarter 2010. As of September 30, 2010, tangible book value per common share was $10.90 as compared to $10.73 as of June 30, 2010 and $9.86 as of September 30, 2009. First Financial’s tangible common equity ratio increased to 10.38% for the third quarter 2010 as compared to 9.55% for the linked quarter and 7.07% for the comparable year-over-year quarter.
SECTION II – SUPPLEMENTAL INFORMATION ON COVERED ASSETS AND ACQUISITION-RELATED ITEMS
Due to the FDIC-assisted transactions and other acquisitions occurring during 2009, the size of First Financial’s business expanded significantly. To assist in analyzing the effect of these transactions 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 September 30, June 30, and March 31, 2010.
| Table XII | | | | | | | | | |
| | | For the Three Months Ended | |
| | | September 30, | | | June 30, | | | March 31, | |
| (Dollars in thousands) | | 2010 | | | 2010 | | | 2010 | |
| | | | | | | | | | |
| Income effect: | | | | | | | | | |
Accelerated discount on loan prepayments and dispositions: 1, 2 | | $ | 9,448 | | | $ | 7,408 | | | $ | 6,098 | |
| Acquired-non-strategic net interest income | | | 10,586 | | | | 10,207 | | | | 10,854 | |
| Service charges on deposit accounts related to | | | | | | | | | | | | |
| acquired-non-strategic operations | | | 168 | | | | 130 | | | | 230 | |
| Other income related to acquired-non-strategic operations | | | (124 | ) | | | 346 | | | | (150 | ) |
| Income related to the accelerated discount on loan prepayments | | | | | | | | | | | | |
| and dispositions and acquired-non-strategic operations | | | 20,078 | | | | 18,091 | | | | 17,032 | |
| | | | | | | | | | | | | |
| Expense effect: | | | | | | | | | | | | |
Acquired-non-strategic operating expenses: 3 | | | | | | | | | | | | |
| Salaries and employee benefits | | | 13 | | | | 29 | | | | 122 | |
| Occupancy | | | 91 | | | | 542 | | | | 1,415 | |
| Other | | | 462 | | | | 699 | | | | 664 | |
| Total acquired-non-strategic operating expenses | | | 566 | | | | 1,270 | | | | 2,201 | |
| | | | | | | | | | | | | |
FDIC indemnification support 3 | | | 875 | | | | 938 | | | | 605 | |
| | | | | | | | | | | | | |
Acquisition-related costs: 3 | | | | | | | | | | | | |
| Integration-related costs | | | (102 | ) | | | 720 | | | | 999 | |
| Professional services fees | | | 1,174 | | | | 1,436 | | | | 1,457 | |
| Other | | | 433 | | | | 24 | | | | 172 | |
| Total acquisition-related costs | | | 1,505 | | | | 2,180 | | | | 2,628 | |
| | | | | | | | | | | | | |
Transition-related items: 3 | | | | | | | | | | | | |
| Salaries and benefits | | | 796 | | | | 1,843 | | | | 4,776 | |
| Occupancy | | | 50 | | | | (522 | ) | | | 910 | |
| Other | | | - | | | | - | | | | 577 | |
| Total transition-related items | | | 846 | | | | 1,321 | | | | 6,263 | |
| | | | | | | | | | | | | |
Net effect of gross up of credit losses and FDIC reimbursement 4 | | | 2,925 | | | | 3,792 | | | | 1,892 | |
| Total expense effect | | | 6,717 | | | | 9,501 | | | | 13,589 | |
| | | | | | | | | | | | | |
| Total estimated effect on pre-tax earnings | | $ | 13,361 | | | $ | 8,590 | | | $ | 3,443 | |
1 Included in noninterest income
2 Net of the corresponding valuation adjustment on the FDIC indemnification asset
3 Included in noninterest expense
4 Represents the Company's proportionate share of total recognized, unanticipated losses on covered loans
When covered loan balances paydown early, through either a loan sale or prepayments by the borrower, and credit experience is better than originally estimated, the remaining carrying value of the valuation mark associated with the respective loan is recognized as noninterest income, net of a corresponding valuation adjustment on the FDIC indemnification asset. When losses are incurred on covered loans that exceed expectations, the Company recognizes the gross credit losses in excess of the valuation mark as provision expense. Reimbursements due from the FDIC under loss share agreements related to these credit losses are recorded as noninterest income. The impact on earnings of this offsetting activity is shown above as the net effect of the gross up of credit losses and FDIC reimbursement, representing the Company’s proportionate share of the credit losses realized on covered loans.
As previously discussed, the Company sold $23.2 million of loans originated by its franchise finance unit, a portion of which consisted of loans covered under loss share agreements. With regard to the covered loan portion, the Company recognized $362,000 of revenue related to the accelerated discount. The remaining $9.1 million of accelerated discount resulted from loan prepayments.
COVERED ASSETS & LOSS SHARE AGREEMENTS
As of September 30, 2010, 37% 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.
COVERED LOAN PORTFOLIO
The following table presents estimated activity in the covered loan portfolio by loan type during the third quarter 2010.
| Table XIII | | | | | | | | | | | | | | | | | | |
| | | Covered Loan Activity - Third Quarter 2010 | |
| | | | | | Reduction in Balance Due to: | | | | |
| | | June 30, | | | | | | Prepayments / | | | | | | | | | September 30, | |
| (Dollars in thousands) | | 2010 | | | Loan Sales | | | Renewals | | | Contractual Activity 1 | | | Charge-Offs 2 | | | 2010 | |
| | | | | | | | | | | | | | | | | | | |
| Commercial | | $ | 422,613 | | | $ | 14,248 | | | $ | 13,939 | | | $ | 6,242 | | | $ | 1,591 | | | $ | 386,593 | |
| Real estate - construction | | | 61,327 | | | | - | | | | 596 | | | | 1,995 | | | | - | | | | 58,736 | |
| Real estate - commercial | | | 957,129 | | | | - | | | | 44,658 | | | | 5,412 | | | | 8,604 | | | | 898,455 | |
| Real estate - residential | | | 244,333 | | | | - | | | | 9,444 | | | | (1,426 | ) | | | 23 | | | | 236,292 | |
| Installment | | | 24,585 | | | | - | | | | 1,546 | | | | 902 | | | | 274 | | | | 21,863 | |
| Other covered loans | | | 7,645 | | | | - | | | | - | | | | - | | | | - | | | | 7,645 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total covered loans | | $ | 1,717,632 | | | $ | 14,248 | | | $ | 70,183 | | | $ | 13,125 | | | $ | 10,492 | | | $ | 1,609,584 | |
1 Includes partial paydowns, accretion of the valuation discount and advances on revolving loans
2 Indemnified at 80% from the FDIC
During the third quarter 2010, the total balance of covered loans decreased $108.0 million, or 6.3%, as compared to the previous quarter. Of this decrease, $70.2 million, or 4.1%, was attributable to prepayments or renewals, $14.2 million, or 83 bps, pertained to loan sales, $13.1 million, or 76 bps, related to repayments in accordance with contractual obligations and $10.5 million, or 61 bps, resulted from charge-offs.
ALLOWANCE FOR LOAN LOSSES
Under the applicable accounting guidance, the allowance for loan losses related to covered loans as a result of impairment identified in on-going valuation procedures is generally recognized in the current period as provision expense. Improvement in the credit outlook, however, is not recognized immediately but instead is reflected as an adjustment to the yield earned on the related loan pools on a prospective basis. The timing inherent in this accounting treatment may result in earnings volatility in future periods.
The Company established an allowance for loan losses associated with covered loans during the second quarter 2010 based on its estimated valuation procedures performed during the period. This allowance, totaling $1.3 million, was the net effect of $19.0 million recognized as provision expense during the second quarter less $17.7 million of net charge-offs related to these loans. The related estimated reimbursement due from the FDIC under loss sharing agreements of $15.2 million was recorded as both FDIC loss sharing income and an increase to the FDIC indemnification asset. The net amount of this activity reflects the Company’s expected proportionate share of losses related to this impairment.
During the third quarter 2010, the Company updated its estimated valuation procedures related to loans covered under loss share agreements. As a result of impairment identified in certain loan pools, it recognized a provision expense related to covered loans of $20.7 million and realized net charge-offs of $10.4 million, resulting in an allowance for covered loan losses of $11.6 million as of September 30, 2010. The related receivable due from the FDIC under loss share agreements related to these loans of $17.8 million was recognized as FDIC loss share income and a corresponding increase to the FDIC indemnification asset.
Teleconference / Webcast Information
First Financial’s senior management will host a conference call to discuss the Company’s financial and operating results on Wednesday, November 3, 2010 at 9:00 a.m. 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 November 18, 2010 at (877) 344-7529 (U.S. toll free) and +1 (412) 317-0088 (International); conference number 445386. The webcast will be archived on the Investor Relations section of the Company’s website through November 3, 2011.
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 Statement
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’’, ‘‘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 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; |
| | § | mergers and acquisitions, including costs or difficulties related to the integration of acquired companies and the wind-down of non-strategic operations; |
| | § | 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, 2009, 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 September 30, 2010, the Company had $6.2 billion in assets, $4.4 billion in loans, $5.1 billion in deposits and $691 million in shareholders’ equity. The Company’s subsidiary, First Financial Bank, N.A., founded in 1863, provides banking and financial services products through its three lines of business: commercial, retail and wealth management. The commercial and retail units provide traditional banking services to business and consumer clients. The Wealth Resource Group provides financial planning, investment management, trust and estate, brokerage, insurance and retirement plan services and had approximately $2.2 billion in assets under management as of September 30, 2010. The Company’s strategic operating markets are located in Ohio, Indiana, Kentucky and Michigan where it operates 113 banking centers across 75 communities. Additional information about the Company, including its products, services and banking locations is available at www.bankatfirst.com.
| Contact Information | |
| Investors/Analysts | Media |
| Kenneth Lovik | Cheryl Lipp |
| Vice President, Investor Relations and | First Vice President, Director of Communications |
| Corporate Development | (513) 979-5797 |
| (513) 979-5837 | cheryl.lipp@bankatfirst.com |
| kenneth.lovik@bankatfirst.com | |
Selected Financial Information
September 30, 2010
(unaudited)
| Contents | Page |
| | |
| Consolidated Financial Highlights | 2 |
| | |
| Consolidated Statements of Income | 3 |
| | |
| Consolidated Quarterly Statements of Income | 4 – 5 |
| | |
| Consolidated Statements of Condition | 6 |
| | |
| Average Consolidated Statements of Condition | 7 |
| | |
| Net Interest Margin Rate / Volume Analysis | 8 – 9 |
| | |
| Credit Quality | 10 |
| | |
| Capital Adequacy | 11 |
FIRST FINANCIAL BANCORP.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share)
(Unaudited)
| | | | | | | | | Three months ended, | | | | | | | | | Nine months ended | |
| | | Sep. 30, | | | Jun. 30, | | | Mar. 31, | | | Dec. 31, | | | Sep. 30, | | | Sep. 30, | |
| | | 2010 | | | 2010 | | | 2010 | | | 2009 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | | | | | | | | | | |
| RESULTS OF OPERATIONS | | | | | | | | | | | | | | | | | | | | | |
| Net income | | $ | 15,579 | | | $ | 17,774 | | | $ | 11,598 | | | $ | 13,795 | | | $ | 200,357 | | | $ | 44,951 | | | $ | 207,542 | |
| Net income available to common shareholders | | $ | 15,579 | | | $ | 17,774 | | | $ | 9,733 | | | $ | 12,795 | | | $ | 199,357 | | | $ | 43,086 | | | $ | 204,964 | |
| Net earnings per common share - basic | | $ | 0.27 | | | $ | 0.31 | | | $ | 0.18 | | | $ | 0.25 | | | $ | 3.91 | | | $ | 0.76 | | | $ | 4.77 | |
| Net earnings per common share - diluted | | $ | 0.27 | | | $ | 0.30 | | | $ | 0.17 | | | $ | 0.25 | | | $ | 3.87 | | | $ | 0.75 | | | $ | 4.71 | |
| Dividends declared per common share | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.30 | | | $ | 0.30 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| KEY FINANCIAL RATIOS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.96 | % | | | 1.08 | % | | | 0.71 | % | | | 0.80 | % | | | 17.64 | % | | | 0.92 | % | | | 6.89 | % |
| Return on average shareholders' equity | | | 9.03 | % | | | 10.62 | % | | | 6.92 | % | | | 8.36 | % | | | 166.45 | % | | | 8.86 | % | | | 68.81 | % |
| Return on average common shareholders' equity | | | 9.03 | % | | | 10.62 | % | | | 6.25 | % | | | 8.81 | % | | | 198.06 | % | | | 8.69 | % | | | 84.29 | % |
| Return on average tangible common shareholders' equity | | | 9.87 | % | | | 11.64 | % | | | 6.89 | % | | | 9.82 | % | | | 233.03 | % | | | 9.53 | % | | | 103.33 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest margin | | | 4.59 | % | | | 4.53 | % | | | 4.89 | % | | | 4.65 | % | | | 3.90 | % | | | 4.67 | % | | | 3.71 | % |
Net interest margin (fully tax equivalent) (1) | | | 4.60 | % | | | 4.54 | % | | | 4.91 | % | | | 4.67 | % | | | 3.93 | % | | | 4.68 | % | | | 3.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending equity as a percent of ending assets | | | 11.23 | % | | | 10.35 | % | | | 10.20 | % | | | 9.76 | % | | | 8.92 | % | | | 11.23 | % | | | 8.92 | % |
| Ending common equity as a percent of ending assets | | | 11.23 | % | | | 10.35 | % | | | 10.20 | % | | | 8.57 | % | | | 7.84 | % | | | 11.23 | % | | | 7.84 | % |
| Ending tangible common equity as a percent of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending tangible assets | | | 10.38 | % | | | 9.55 | % | | | 9.38 | % | | | 7.75 | % | | | 7.07 | % | | | 10.38 | % | | | 7.07 | % |
| Risk-weighted assets | | | 17.61 | % | | | 17.17 | % | | | 16.39 | % | | | 13.10 | % | | | 12.65 | % | | | 17.61 | % | | | 12.65 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average equity as a percent of average assets | | | 10.68 | % | | | 10.14 | % | | | 10.22 | % | | | 9.57 | % | | | 10.60 | % | | | 10.34 | % | | | 10.02 | % |
| Average common equity as a percent of average assets | | | 10.68 | % | | | 10.14 | % | | | 9.51 | % | | | 8.42 | % | | | 8.86 | % | | | 10.10 | % | | | 8.08 | % |
| Average tangible common equity as a percent of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| average tangible assets | | | 9.86 | % | | | 9.33 | % | | | 8.70 | % | | | 7.62 | % | | | 7.63 | % | | | 9.30 | % | | | 6.69 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Book value per common share | | $ | 11.90 | | | $ | 11.74 | | | $ | 11.55 | | | $ | 11.10 | | | $ | 11.03 | | | $ | 11.90 | | | $ | 11.03 | |
| Tangible book value per common share | | $ | 10.90 | | | $ | 10.73 | | | $ | 10.53 | | | $ | 9.94 | | | $ | 9.86 | | | $ | 10.90 | | | $ | 9.86 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tier 1 Ratio (2) | | | 18.64 | % | | | 18.15 | % | | | 17.37 | % | | | 16.11 | % | | | 15.46 | % | | | 18.64 | % | | | 15.46 | % |
Total Capital Ratio (2) | | | 19.91 | % | | | 19.42 | % | | | 18.64 | % | | | 17.37 | % | | | 16.71 | % | | | 19.91 | % | | | 16.71 | % |
Leverage Ratio (2) | | | 10.50 | % | | | 9.99 | % | | | 9.76 | % | | | 9.24 | % | | | 13.86 | % | | | 10.50 | % | | | 13.86 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCE SHEET ITEMS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans (3) | | $ | 2,805,764 | | | $ | 2,806,616 | | | $ | 2,849,562 | | | $ | 2,929,850 | | | $ | 2,886,729 | | | $ | 2,820,487 | | | $ | 2,783,251 | |
| Covered loans and FDIC indemnification asset | | | 1,886,750 | | | | 2,041,820 | | | | 2,168,407 | | | | 2,254,989 | | | | 536,319 | | | | 2,031,294 | | | | 180,738 | |
| Investment securities | | | 691,700 | | | | 597,991 | | | | 558,595 | | | | 608,952 | | | | 575,697 | | | | 616,583 | | | | 687,689 | |
| Interest-bearing deposits with other banks | | | 483,097 | | | | 554,333 | | | | 394,741 | | | | 447,999 | | | | 136,210 | | | | 477,714 | | | | 51,177 | |
| Total earning assets | | $ | 5,867,311 | | | $ | 6,000,760 | | | $ | 5,971,305 | | | $ | 6,241,790 | | | $ | 4,134,955 | | | $ | 5,946,078 | | | $ | 3,702,855 | |
| Total assets | | $ | 6,408,479 | | | $ | 6,621,021 | | | $ | 6,647,541 | | | $ | 6,840,393 | | | $ | 4,505,740 | | | $ | 6,558,138 | | | $ | 4,025,236 | |
| Noninterest-bearing deposits | | $ | 721,501 | | | $ | 740,011 | | | $ | 774,393 | | | $ | 840,314 | | | $ | 554,471 | | | $ | 745,108 | | | $ | 462,084 | |
| Interest-bearing deposits | | | 4,448,929 | | | | 4,570,971 | | | | 4,544,471 | | | | 4,710,167 | | | | 3,054,226 | | | | 4,521,107 | | | | 2,628,793 | |
| Total deposits | | $ | 5,170,430 | | | $ | 5,310,982 | | | $ | 5,318,864 | | | $ | 5,550,481 | | | $ | 3,608,697 | | | $ | 5,266,215 | | | $ | 3,090,877 | |
| Borrowings | | $ | 352,370 | | | $ | 447,945 | | | $ | 458,876 | | | $ | 471,916 | | | $ | 377,406 | | | $ | 419,340 | | | $ | 494,903 | |
| Shareholders' equity | | $ | 684,112 | | | $ | 671,051 | | | $ | 679,567 | | | $ | 654,631 | | | $ | 477,550 | | | $ | 678,260 | | | $ | 403,248 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CREDIT QUALITY RATIOS (excluding covered assets) | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance to ending loans | | | 2.07 | % | | | 2.07 | % | | | 2.01 | % | | | 2.05 | % | | | 1.94 | % | | | 2.07 | % | | | 1.94 | % |
| Allowance to nonaccrual loans | | | 86.54 | % | | | 86.71 | % | | | 84.71 | % | | | 82.77 | % | | | 92.17 | % | | | 86.54 | % | | | 92.17 | % |
| Allowance to nonperforming loans | | | 71.99 | % | | | 72.79 | % | | | 76.08 | % | | | 76.25 | % | | | 87.68 | % | | | 71.99 | % | | | 87.68 | % |
| Nonperforming loans to total loans | | | 2.88 | % | | | 2.84 | % | | | 2.65 | % | | | 2.69 | % | | | 2.21 | % | | | 2.88 | % | | | 2.21 | % |
| Nonperforming assets to ending loans, plus OREO | | | 3.51 | % | | | 3.42 | % | | | 3.27 | % | | | 2.83 | % | | | 2.36 | % | | | 3.51 | % | | | 2.36 | % |
| Nonperforming assets to total assets | | | 1.59 | % | | | 1.46 | % | | | 1.41 | % | | | 1.23 | % | | | 0.94 | % | | | 1.59 | % | | | 0.94 | % |
| Net charge-offs to average loans (annualized) | | | 0.97 | % | | | 0.71 | % | | | 2.00 | % | | | 1.53 | % | | | 1.31 | % | | | 1.23 | % | | | 1.03 | % |
(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) September 30, 2010 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, | | | Nine months ended, | |
| | | Sep. 30, | | | Sep. 30, | |
| | | 2010 | | | 2009 | | | % Change | | | 2010 | | | 2009 | | | % Change | |
| Interest income | | | | | | | | | | | | | | | | | | |
| Loans, including fees | | $ | 75,957 | | | $ | 46,811 | | | | 62.3 | % | | $ | 230,239 | | | $ | 114,446 | | | | 101.2 | % |
| Investment securities | | | | | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 5,386 | | | | 6,241 | | | | (13.7 | %) | | | 16,226 | | | | 22,954 | | | | (29.3 | %) |
| Tax-exempt | | | 240 | | | | 352 | | | | (31.8 | %) | | | 720 | | | | 1,172 | | | | (38.6 | %) |
| Total investment securities interest | | | 5,626 | | | | 6,593 | | | | (14.7 | %) | | | 16,946 | | | | 24,126 | | | | (29.8 | %) |
| Other earning assets | | | 3,101 | | | | 1,311 | | | | 136.5 | % | | | 13,996 | | | | 1,311 | | | | 967.6 | % |
| Total interest income | | | 84,684 | | | | 54,715 | | | | 54.8 | % | | | 261,181 | | | | 139,883 | | | | 86.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 14,457 | | | | 11,490 | | | | 25.8 | % | | | 45,413 | | | | 30,373 | | | | 49.5 | % |
| Short-term borrowings | | | 25 | | | | 261 | | | | (90.4 | %) | | | 61 | | | | 1,295 | | | | (95.3 | %) |
| Long-term borrowings | | | 2,034 | | | | 1,977 | | | | 2.9 | % | | | 7,147 | | | | 4,534 | | | | 57.6 | % |
| Subordinated debentures and capital securities | | | 322 | | | | 323 | | | | (0.3 | %) | | | 956 | | | | 880 | | | | 8.6 | % |
| Total interest expense | | | 16,838 | | | | 14,051 | | | | 19.8 | % | | | 53,577 | | | | 37,082 | | | | 44.5 | % |
| Net interest income | | | 67,846 | | | | 40,664 | | | | 66.8 | % | | | 207,604 | | | | 102,801 | | | | 101.9 | % |
| Provision for loan and lease losses - uncovered | | | 6,287 | | | | 26,655 | | | | (76.4 | %) | | | 23,823 | | | | 41,272 | | | | (42.3 | %) |
| Provision for loan and lease losses - covered | | | 20,725 | | | | 0 | | | | N/M | | | | 49,147 | | | | 0 | | | | N/M | |
| Net interest income after provision for loan and lease losses | | | 40,834 | | | | 14,009 | | | | 191.5 | % | | | 134,634 | | | | 61,529 | | | | 118.8 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest income | | | | | | | | | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 5,632 | | | | 5,408 | | | | 4.1 | % | | | 17,098 | | | | 13,776 | | | | 24.1 | % |
| Trust and wealth management fees | | | 3,366 | | | | 3,339 | | | | 0.8 | % | | | 10,579 | | | | 9,881 | | | | 7.1 | % |
| Bankcard income | | | 2,193 | | | | 1,379 | | | | 59.0 | % | | | 6,263 | | | | 4,092 | | | | 53.1 | % |
| Net gains from sales of loans | | | 2,749 | | | | 63 | | | | 4263.5 | % | | | 3,391 | | | | 855 | | | | 296.6 | % |
| Gains on sales of investment securities | | | 0 | | | | 0 | | | | N/M | | | | 0 | | | | 3,349 | | | | (100.0 | %) |
| Gain on acquisition | | | 0 | | | | 342,494 | | | | (100.0 | %) | | | 0 | | | | 342,494 | | | | (100.0 | %) |
| FDIC loss sharing income | | | 17,800 | | | | 0 | | | | N/M | | | | 40,538 | | | | 0 | | | | N/M | |
| Accelerated discount on covered loans | | | 9,448 | | | | 0 | | | | N/M | | | | 22,954 | | | | 0 | | | | N/M | |
| Income (loss) on preferred securities | | | 0 | | | | 154 | | | | (100.0 | %) | | | (30 | ) | | | 277 | | | | (110.8 | %) |
| Other | | | 3,707 | | | | 1,599 | | | | 131.8 | % | | | 11,504 | | | | 5,842 | | | | 96.9 | % |
| Total noninterest income | | | 44,895 | | | | 354,436 | | | | (87.3 | %) | | | 112,297 | | | | 380,566 | | | | (70.5 | %) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest expenses | | | | | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 28,790 | | | | 22,051 | | | | 30.6 | % | | | 88,544 | | | | 55,927 | | | | 58.3 | % |
| Net occupancy | | | 4,663 | | | | 3,442 | | | | 35.5 | % | | | 18,125 | | | | 8,912 | | | | 103.4 | % |
| Furniture and equipment | | | 2,490 | | | | 1,874 | | | | 32.9 | % | | | 7,277 | | | | 5,527 | | | | 31.7 | % |
| Data processing | | | 1,191 | | | | 973 | | | | 22.4 | % | | | 3,559 | | | | 2,585 | | | | 37.7 | % |
| Marketing | | | 1,230 | | | | 871 | | | | 41.2 | % | | | 3,904 | | | | 2,211 | | | | 76.6 | % |
| Communication | | | 986 | | | | 737 | | | | 33.8 | % | | | 3,016 | | | | 2,077 | | | | 45.2 | % |
| Professional services | | | 2,117 | | | | 1,220 | | | | 73.5 | % | | | 6,306 | | | | 3,427 | | | | 84.0 | % |
| Debt extinguishment | | | 8,029 | | | | 0 | | | | N/M | | | | 8,029 | | | | 0 | | | | N/M | |
| State intangible tax | | | 724 | | | | 628 | | | | 15.3 | % | | | 3,481 | | | | 1,944 | | | | 79.1 | % |
| FDIC assessments | | | 2,123 | | | | 1,612 | | | | 31.7 | % | | | 6,040 | | | | 5,318 | | | | 13.6 | % |
| Other | | | 8,967 | | | | 12,893 | | | | (30.5 | %) | | | 29,109 | | | | 21,103 | | | | 37.9 | % |
| Total noninterest expenses | | | 61,310 | | | | 46,301 | | | | 32.4 | % | | | 177,390 | | | | 109,031 | | | | 62.7 | % |
| Income before income taxes | | | 24,419 | | | | 322,144 | | | | (92.4 | %) | | | 69,541 | | | | 333,064 | | | | (79.1 | %) |
| Income tax expense | | | 8,840 | | | | 121,787 | | | | (92.7 | %) | | | 24,590 | | | | 125,522 | | | | (80.4 | %) |
| Net income | | | 15,579 | | | | 200,357 | | | | (92.2 | %) | | | 44,951 | | | | 207,542 | | | | (78.3 | %) |
| Dividends on preferred stock | | | 0 | | | | 1,000 | | | | (100.0 | %) | | | 1,865 | | | | 2,578 | | | | (27.7 | %) |
| Income available to common shareholders | | $ | 15,579 | | | $ | 199,357 | | | | (92.2 | %) | | $ | 43,086 | | | $ | 204,964 | | | | (79.0 | %) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| ADDITIONAL DATA | | | | | | | | | | | | | | | | | | | | | | | | |
| Net earnings per common share - basic | | $ | 0.27 | | | $ | 3.91 | | | | | | | $ | 0.76 | | | $ | 4.77 | | | | | |
| Net earnings per common share - diluted | | $ | 0.27 | | | $ | 3.87 | | | | | | | $ | 0.75 | | | $ | 4.71 | | | | | |
| Dividends declared per common share | | $ | 0.10 | | | $ | 0.10 | | | | | | | $ | 0.30 | | | $ | 0.30 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.96 | % | | | 17.64 | % | | | | | | | 0.92 | % | | | 6.89 | % | | | | |
| Return on average shareholders' equity | | | 9.03 | % | | | 166.45 | % | | | | | | | 8.86 | % | | | 68.81 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest income | | $ | 84,684 | | | $ | 54,715 | | | | 54.8 | % | | $ | 261,181 | | | $ | 139,883 | | | | 86.7 | % |
| Tax equivalent adjustment | | | 222 | | | | 300 | | | | (26.0 | %) | | | 646 | | | | 970 | | | | (33.4 | %) |
| Interest income - tax equivalent | | | 84,906 | | | | 55,015 | | | | 54.3 | % | | | 261,827 | | | | 140,853 | | | | 85.9 | % |
| Interest expense | | | 16,838 | | | | 14,051 | | | | 19.8 | % | | | 53,577 | | | | 37,082 | | | | 44.5 | % |
| Net interest income - tax equivalent | | $ | 68,068 | | | $ | 40,964 | | | | 66.2 | % | | $ | 208,250 | | | $ | 103,771 | | | | 100.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net interest margin | | | 4.59 | % | | | 3.90 | % | | | | | | | 4.67 | % | | | 3.71 | % | | | | |
Net interest margin (fully tax equivalent) (1) | | | 4.60 | % | | | 3.93 | % | | | | | | | 4.68 | % | | | 3.75 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Full-time equivalent employees (2) | | | 1,535 | | | | 1,150 | | | | | | | | | | | | | | | | | |
(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 | |
| | | Third | | | Second | | | First | | | | | | % Change | |
| | | Quarter | | | Quarter | | | Quarter | | | YTD | | | Linked Qtr. | |
| Interest income | | | | | | | | | | | | | | | |
| Loans, including fees | | $ | 75,957 | | | $ | 74,944 | | | $ | 79,338 | | | $ | 230,239 | | | | 1.4 | % |
| Investment securities | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 5,386 | | | | 5,444 | | | | 5,396 | | | | 16,226 | | | | (1.1 | %) |
| Tax-exempt | | | 240 | | | | 245 | | | | 235 | | | | 720 | | | | (2.0 | %) |
| Total investment securities interest | | | 5,626 | | | | 5,689 | | | | 5,631 | | | | 16,946 | | | | (1.1 | %) |
| Other earning assets | | | 3,101 | | | | 5,305 | | | | 5,590 | | | | 13,996 | | | | (41.5 | %) |
| Total interest income | | | 84,684 | | | | 85,938 | | | | 90,559 | | | | 261,181 | | | | (1.5 | %) |
| | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 14,457 | | | | 15,308 | | | | 15,648 | | | | 45,413 | | | | (5.6 | %) |
| Short-term borrowings | | | 25 | | | | 17 | | | | 19 | | | | 61 | | | | 47.1 | % |
| Long-term borrowings | | | 2,034 | | | | 2,556 | | | | 2,557 | | | | 7,147 | | | | (20.4 | %) |
| Subordinated debentures and capital securities | | | 322 | | | | 319 | | | | 315 | | | | 956 | | | | 0.9 | % |
| Total interest expense | | | 16,838 | | | | 18,200 | | | | 18,539 | | | | 53,577 | | | | (7.5 | %) |
| Net interest income | | | 67,846 | | | | 67,738 | | | | 72,020 | | | | 207,604 | | | | 0.2 | % |
| Provision for loan and lease losses - uncovered | | | 6,287 | | | | 6,158 | | | | 11,378 | | | | 23,823 | | | | 2.1 | % |
| Provision for loan and lease losses - covered | | | 20,725 | | | | 18,962 | | | | 9,460 | | | | 49,147 | | | | 9.3 | % |
| Net interest income after provision for loan and lease losses | | | 40,834 | | | | 42,618 | | | | 51,182 | | | | 134,634 | | | | (4.2 | %) |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest income | | | | | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 5,632 | | | | 5,855 | | | | 5,611 | | | | 17,098 | | | | (3.8 | %) |
| Trust and wealth management fees | | | 3,366 | | | | 3,668 | | | | 3,545 | | | | 10,579 | | | | (8.2 | %) |
| Bankcard income | | | 2,193 | | | | 2,102 | | | | 1,968 | | | | 6,263 | | | | 4.3 | % |
| Net gains from sales of loans | | | 2,749 | | | | 473 | | | | 169 | | | | 3,391 | | | | 481.2 | % |
| Gains on sales of investment securities | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | N/M | |
| FDIC loss sharing income | | | 17,800 | | | | 15,170 | | | | 7,568 | | | | 40,538 | | | | 17.3 | % |
| Accelerated discount on covered loans | | | 9,448 | | | | 7,408 | | | | 6,098 | | | | 22,954 | | | | 27.5 | % |
| (Loss) income on preferred securities | | | 0 | | | | 0 | | | | (30 | ) | | | (30 | ) | | | N/M | |
| Other | | | 3,707 | | | | 5,791 | | | | 2,006 | | | | 11,504 | | | | (36.0 | %) |
| Total noninterest income | | | 44,895 | | | | 40,467 | | | | 26,935 | | | | 112,297 | | | | 10.9 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest expenses | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 28,790 | | | | 29,513 | | | | 30,241 | | | | 88,544 | | | | (2.4 | %) |
| Net occupancy | | | 4,663 | | | | 5,340 | | | | 8,122 | | | | 18,125 | | | | (12.7 | %) |
| Furniture and equipment | | | 2,490 | | | | 2,514 | | | | 2,273 | | | | 7,277 | | | | (1.0 | %) |
| Data processing | | | 1,191 | | | | 1,136 | | | | 1,232 | | | | 3,559 | | | | 4.8 | % |
| Marketing | | | 1,230 | | | | 1,600 | | | | 1,074 | | | | 3,904 | | | | (23.1 | %) |
| Communication | | | 986 | | | | 822 | | | | 1,208 | | | | 3,016 | | | | 20.0 | % |
| Professional services | | | 2,117 | | | | 2,446 | | | | 1,743 | | | | 6,306 | | | | (13.5 | %) |
| Debt extinguishment | | | 8,029 | | | | 0 | | | | 0 | | | | 8,029 | | | | N/M | |
| State intangible tax | | | 724 | | | | 1,426 | | | | 1,331 | | | | 3,481 | | | | (49.2 | %) |
| FDIC assessments | | | 2,123 | | | | 1,907 | | | | 2,010 | | | | 6,040 | | | | 11.3 | % |
| Other | | | 8,967 | | | | 9,115 | | | | 11,027 | | | | 29,109 | | | | (1.6 | %) |
| Total noninterest expenses | | | 61,310 | | | | 55,819 | | | | 60,261 | | | | 177,390 | | | | 9.8 | % |
| Income before income taxes | | | 24,419 | | | | 27,266 | | | | 17,856 | | | | 69,541 | | | | (10.4 | %) |
| Income tax expense | | | 8,840 | | | | 9,492 | | | | 6,258 | | | | 24,590 | | | | (6.9 | %) |
| Net income | | | 15,579 | | | | 17,774 | | | | 11,598 | | | | 44,951 | | | | (12.3 | %) |
| Dividends on preferred stock | | | 0 | | | | 0 | | | | 1,865 | | | | 1,865 | | | | N/M | |
| Income available to common shareholders | | $ | 15,579 | | | $ | 17,774 | | | $ | 9,733 | | | $ | 43,086 | | | | (12.3 | %) |
| | | | | | | | | | | | | | | | | | | | | |
| ADDITIONAL DATA | | | | | | | | | | | | | | | | | | | | |
| Net earnings per common share - basic | | $ | 0.27 | | | $ | 0.31 | | | $ | 0.18 | | | $ | 0.76 | | | | | |
| Net earnings per common share - diluted | | $ | 0.27 | | | $ | 0.30 | | | $ | 0.17 | | | $ | 0.75 | | | | | |
| Dividends declared per common share | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.30 | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.96 | % | | | 1.08 | % | | | 0.71 | % | | | 0.92 | % | | | | |
| Return on average shareholders' equity | | | 9.03 | % | | | 10.62 | % | | | 6.92 | % | | | 8.86 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest income | | $ | 84,684 | | | $ | 85,938 | | | $ | 90,559 | | | $ | 261,181 | | | | (1.5 | %) |
| Tax equivalent adjustment | | | 222 | | | | 212 | | | | 212 | | | | 646 | | | | 4.7 | % |
| Interest income - tax equivalent | | | 84,906 | | | | 86,150 | | | | 90,771 | | | | 261,827 | | | | (1.4 | %) |
| Interest expense | | | 16,838 | | | | 18,200 | | | | 18,539 | | | | 53,577 | | | | (7.5 | %) |
| Net interest income - tax equivalent | | $ | 68,068 | | | $ | 67,950 | | | $ | 72,232 | | | $ | 208,250 | | | | 0.2 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest margin | | | 4.59 | % | | | 4.53 | % | | | 4.89 | % | | | 4.67 | % | | | | |
Net interest margin (fully tax equivalent) (1) | | | 4.60 | % | | | 4.54 | % | | | 4.91 | % | | | 4.68 | % | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Full-time equivalent employees (2) | | | 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 QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share)
(Unaudited)
| | | 2009 | |
| | | Fourth | | | Third | | | Second | | | First | | | Full | |
| | | Quarter | | | Quarter | | | Quarter | | | Quarter | | | Year | |
| Interest income | | | | | | | | | | | | | | | |
| Loans, including fees | | $ | 81,471 | | | $ | 46,811 | | | $ | 33,978 | | | $ | 33,657 | | | $ | 195,917 | |
| Investment securities | | | | | | | | | | | | | | | | | | | | |
| Taxable | | | 6,422 | | | | 6,241 | | | | 8,023 | | | | 8,690 | | | | 29,376 | |
| Tax-exempt | | | 320 | | | | 352 | | | | 386 | | | | 434 | | | | 1,492 | |
| Total investment securities interest | | | 6,742 | | | | 6,593 | | | | 8,409 | | | | 9,124 | | | | 30,868 | |
| Other earning assets | | | 5,132 | | | | 1,311 | | | | 0 | | | | 0 | | | | 6,443 | |
| Total interest income | | | 93,345 | | | | 54,715 | | | | 42,387 | | | | 42,781 | | | | 233,228 | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 17,207 | | | | 11,490 | | | | 9,080 | | | | 9,803 | | | | 47,580 | |
| Short-term borrowings | | | 23 | | | | 261 | | | | 527 | | | | 507 | | | | 1,318 | |
| Long-term borrowings | | | 2,611 | | | | 1,977 | | | | 1,251 | | | | 1,306 | | | | 7,145 | |
| Subordinated debentures and capital securities | | | 322 | | | | 323 | | | | 320 | | | | 237 | | | | 1,202 | |
| Total interest expense | | | 20,163 | | | | 14,051 | | | | 11,178 | | | | 11,853 | | | | 57,245 | |
| Net interest income | | | 73,182 | | | | 40,664 | | | | 31,209 | | | | 30,928 | | | | 175,983 | |
| Provision for loan and lease losses | | | 14,812 | | | | 26,655 | | | | 10,358 | | | | 4,259 | | | | 56,084 | |
| Net interest income after provision for loan and lease losses | | | 58,370 | | | | 14,009 | | | | 20,851 | | | | 26,669 | | | | 119,899 | |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest income | | | | | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 5,886 | | | | 5,408 | | | | 4,289 | | | | 4,079 | | | | 19,662 | |
| Trust and wealth management fees | | | 3,584 | | | | 3,339 | | | | 3,253 | | | | 3,289 | | | | 13,465 | |
| Bankcard income | | | 1,869 | | | | 1,379 | | | | 1,422 | | | | 1,291 | | | | 5,961 | |
| Net gains from sales of loans | | | 341 | | | | 63 | | | | 408 | | | | 384 | | | | 1,196 | |
| Gains on sales of investment securities | | | 0 | | | | 0 | | | | 3,349 | | | | 0 | | | | 3,349 | |
| Gain on acquisition | | | 0 | | | | 342,494 | | | | 0 | | | | 0 | | | | 342,494 | |
| Accelerated discount on covered loans | | | 8,215 | | | | 386 | | | | 0 | | | | 0 | | | | 8,601 | |
| (Loss) income on preferred securities | | | (138 | ) | | | 154 | | | | 112 | | | | 11 | | | | 139 | |
| Other | | | 4,392 | | | | 1,213 | | | | 1,264 | | | | 2,979 | | | | 9,848 | |
| Total noninterest income | | | 24,149 | | | | 354,436 | | | | 14,097 | | | | 12,033 | | | | 404,715 | |
| | | | | | | | | | | | | | | | | | | | | |
| Noninterest expenses | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 30,141 | | | | 22,051 | | | | 16,223 | | | | 17,653 | | | | 86,068 | |
| Net occupancy | | | 7,290 | | | | 3,442 | | | | 2,653 | | | | 2,817 | | | | 16,202 | |
| Furniture and equipment | | | 2,527 | | | | 1,874 | | | | 1,851 | | | | 1,802 | | | | 8,054 | |
| Data processing | | | 890 | | | | 973 | | | | 794 | | | | 818 | | | | 3,475 | |
| Marketing | | | 1,283 | | | | 871 | | | | 700 | | | | 640 | | | | 3,494 | |
| Communication | | | 1,169 | | | | 737 | | | | 669 | | | | 671 | | | | 3,246 | |
| Professional services | | | 2,605 | | | | 1,220 | | | | 1,254 | | | | 953 | | | | 6,032 | |
| State intangible tax | | | 564 | | | | 628 | | | | 648 | | | | 668 | | | | 2,508 | |
| FDIC assessments | | | 1,529 | | | | 1,612 | | | | 3,424 | | | | 282 | | | | 6,847 | |
| Other | | | 13,609 | | | | 12,893 | | | | 4,580 | | | | 3,630 | | | | 34,712 | |
| Total noninterest expenses | | | 61,607 | | | | 46,301 | | | | 32,796 | | | | 29,934 | | | | 170,638 | |
| Income before income taxes | | | 20,912 | | | | 322,144 | | | | 2,152 | | | | 8,768 | | | | 353,976 | |
| Income tax expense | | | 7,117 | | | | 121,787 | | | | 702 | | | | 3,033 | | | | 132,639 | |
| Net income | | | 13,795 | | | | 200,357 | | | | 1,450 | | | | 5,735 | | | | 221,337 | |
| Dividends on preferred stock | | | 1,000 | | | | 1,000 | | | | 1,000 | | | | 578 | | | | 3,578 | |
| Net income available to common shareholders | | $ | 12,795 | | | $ | 199,357 | | | $ | 450 | | | $ | 5,157 | | | $ | 217,759 | |
| | | | | | | | | | | | | | | | | | | | | |
| ADDITIONAL DATA | | | | | | | | | | | | | | | | | | | | |
| Net earnings per common share - basic | | $ | 0.25 | | | $ | 3.91 | | | $ | 0.01 | | | $ | 0.14 | | | $ | 4.84 | |
| Net earnings per common share - diluted | | $ | 0.25 | | | $ | 3.87 | | | $ | 0.01 | | | $ | 0.14 | | | $ | 4.78 | |
| Dividends declared per common share | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.10 | | | $ | 0.40 | |
| | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.80 | % | | | 17.64 | % | | | 0.15 | % | | | 0.62 | % | | | 4.67 | % |
| Return on average shareholders' equity | | | 8.36 | % | | | 166.45 | % | | | 1.53 | % | | | 6.63 | % | | | 47.44 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Interest income | | $ | 93,345 | | | $ | 54,715 | | | $ | 42,387 | | | $ | 42,781 | | | $ | 233,228 | |
| Tax equivalent adjustment | | | 295 | | | | 300 | | | | 307 | | | | 363 | | | | 1,265 | |
| Interest income - tax equivalent | | | 93,640 | | | | 55,015 | | | | 42,694 | | | | 43,144 | | | | 234,493 | |
| Interest expense | | | 20,163 | | | | 14,051 | | | | 11,178 | | | | 11,853 | | | | 57,245 | |
| Net interest income - tax equivalent | | $ | 73,477 | | | $ | 40,964 | | | $ | 31,516 | | | $ | 31,291 | | | $ | 177,248 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest margin | | | 4.65 | % | | | 3.90 | % | | | 3.59 | % | | | 3.61 | % | | | 4.05 | % |
Net interest margin (fully tax equivalent) (1) | | | 4.67 | % | | | 3.93 | % | | | 3.63 | % | | | 3.65 | % | | | 4.08 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Full-time equivalent employees | | | 1,390 | | | | 1,150 | | | | 1,048 | | | | 1,063 | | | | | |
(1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons.
N/M = Not meaningful.
FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
| | | Sep. 30, | | | Jun. 30, | | | Mar. 31, | | | Dec. 31, | | | Sep. 30, | | | % Change | | | % Change | |
| | | 2010 | | | 2010 | | | 2010 | | | 2009 | | | 2009 | | | Linked Qtr. | | | Comparable Qtr. | |
| ASSETS | | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 144,101 | | | $ | 166,604 | | | $ | 308,330 | | | $ | 344,150 | | | $ | 243,924 | | | | (13.5 | %) | | | (40.9 | %) |
| Interest-bearing deposits with other banks | | | 280,457 | | | | 675,891 | | | | 416,619 | | | | 262,017 | | | | 728,853 | | | | (58.5 | %) | | | (61.5 | %) |
| Investment securities trading | | | 0 | | | | 0 | | | | 0 | | | | 200 | | | | 338 | | | | N/M | | | | (100.0 | %) |
| Investment securities available-for-sale | | | 616,175 | | | | 503,404 | | | | 430,519 | | | | 471,002 | | | | 523,355 | | | | 22.4 | % | | | 17.7 | % |
| Investment securities held-to-maturity | | | 17,842 | | | | 17,601 | | | | 17,903 | | | | 18,115 | | | | 17,928 | | | | 1.4 | % | | | (0.5 | %) |
| Other investments | | | 86,509 | | | | 86,509 | | | | 87,029 | | | | 89,830 | | | | 87,693 | | | | 0.0 | % | | | (1.4 | %) |
| Loans held for sale | | | 19,075 | | | | 11,946 | | | | 3,243 | | | | 6,413 | | | | 2,729 | | | | 59.7 | % | | | 599.0 | % |
| Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 763,449 | | | | 749,522 | | | | 763,084 | | | | 800,261 | | | | 818,608 | | | | 1.9 | % | | | (6.7 | %) |
| Real estate - construction | | | 178,914 | | | | 197,112 | | | | 216,289 | | | | 253,223 | | | | 245,535 | | | | (9.2 | %) | | | (27.1 | %) |
| Real estate - commercial | | | 1,095,543 | | | | 1,113,836 | | | | 1,091,830 | | | | 1,079,628 | | | | 1,037,121 | | | | (1.6 | %) | | | 5.6 | % |
| Real estate - residential | | | 283,914 | | | | 296,295 | | | | 306,769 | | | | 321,047 | | | | 331,678 | | | | (4.2 | %) | | | (14.4 | %) |
| Installment | | | 73,138 | | | | 75,862 | | | | 78,682 | | | | 82,989 | | | | 86,940 | | | | (3.6 | %) | | | (15.9 | %) |
| Home equity | | | 341,288 | | | | 332,928 | | | | 330,973 | | | | 328,940 | | | | 324,340 | | | | 2.5 | % | | | 5.2 | % |
| Credit card | | | 28,825 | | | | 28,567 | | | | 27,960 | | | | 29,027 | | | | 27,713 | | | | 0.9 | % | | | 4.0 | % |
| Lease financing | | | 138 | | | | 15 | | | | 15 | | | | 14 | | | | 19 | | | | 820.0 | % | | | 626.3 | % |
| Total loans, excluding covered loans | | | 2,765,209 | | | | 2,794,137 | | | | 2,815,602 | | | | 2,895,129 | | | | 2,871,954 | | | | (1.0 | %) | | | (3.7 | %) |
| Less | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan and lease losses | | | 57,249 | | | | 57,811 | | | | 56,642 | | | | 59,311 | | | | 55,770 | | | | (1.0 | %) | | | 2.7 | % |
| Net loans - uncovered | | | 2,707,960 | | | | 2,736,326 | | | | 2,758,960 | | | | 2,835,818 | | | | 2,816,184 | | | | (1.0 | %) | | | (3.8 | %) |
| Covered loans | | | 1,609,584 | | | | 1,717,632 | | | | 1,833,349 | | | | 1,934,740 | | | | 2,046,882 | | | | (6.3 | %) | | | (21.4 | %) |
| Less | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan and lease losses | | | 11,583 | | | | 1,273 | | | | 0 | | | | 0 | | | | 0 | | | | 809.9 | % | | | N/M | |
| Net loans - covered | | | 1,598,001 | | | | 1,716,359 | | | | 1,833,349 | | | | 1,934,740 | | | | 2,046,882 | | | | (6.9 | %) | | | (21.9 | %) |
| Net loans | | | 4,305,961 | | | | 4,452,685 | | | | 4,592,309 | | | | 4,770,558 | | | | 4,863,066 | | | | (3.3 | %) | | | (11.5 | %) |
| Premises and equipment | | | 116,959 | | | | 114,630 | | | | 115,836 | | | | 107,351 | | | | 106,401 | | | | 2.0 | % | | | 9.9 | % |
| Goodwill | | | 51,820 | | | | 51,820 | | | | 51,820 | | | | 51,820 | | | | 51,820 | | | | 0.0 | % | | | 0.0 | % |
| Other intangibles | | | 6,049 | | | | 6,614 | | | | 7,058 | | | | 7,461 | | | | 8,094 | | | | (8.5 | %) | | | (25.3 | %) |
| FDIC indemnification asset | | | 237,709 | | | | 251,633 | | | | 273,328 | | | | 287,407 | | | | 287,756 | | | | (5.5 | %) | | | (17.4 | %) |
| Accrued interest and other assets | | | 271,843 | | | | 244,298 | | | | 244,902 | | | | 241,269 | | | | 312,219 | | | | 11.3 | % | | | (12.9 | %) |
| Total Assets | | $ | 6,154,500 | | | $ | 6,583,635 | | | $ | 6,548,896 | | | $ | 6,657,593 | | | $ | 7,234,176 | | | | (6.5 | %) | | | (14.9 | %) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing | | $ | 999,922 | | | $ | 1,135,970 | | | $ | 1,042,790 | | | $ | 1,060,383 | | | $ | 1,105,450 | | | | (12.0 | %) | | | (9.5 | %) |
| Savings | | | 1,407,332 | | | | 1,350,161 | | | | 1,303,737 | | | | 1,231,081 | | | | 1,135,308 | | | | 4.2 | % | | | 24.0 | % |
| Time | | | 1,930,652 | | | | 2,042,824 | | | | 2,135,683 | | | | 2,229,500 | | | | 2,739,874 | | | | (5.5 | %) | | | (29.5 | %) |
| Total interest-bearing deposits | | | 4,337,906 | | | | 4,528,955 | | | | 4,482,210 | | | | 4,520,964 | | | | 4,980,632 | | | | (4.2 | %) | | | (12.9 | %) |
| Noninterest-bearing | | | 713,357 | | | | 718,381 | | | | 741,476 | | | | 829,676 | | | | 855,352 | | | | (0.7 | %) | | | (16.6 | %) |
| Total deposits | | | 5,051,263 | | | | 5,247,336 | | | | 5,223,686 | | | | 5,350,640 | | | | 5,835,984 | | | | (3.7 | %) | | | (13.4 | %) |
| Short-term borrowings | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Federal funds purchased and securities sold | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| under agreements to repurchase | | | 58,747 | | | | 38,299 | | | | 38,443 | | | | 37,430 | | | | 35,763 | | | | 53.4 | % | | | 64.3 | % |
| Federal Home Loan Bank | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 65,000 | | | | N/M | | | | (100.0 | %) |
| Total short-term borrowings | | | 58,747 | | | | 38,299 | | | | 38,443 | | | | 37,430 | | | | 100,763 | | | | 53.4 | % | | | (41.7 | %) |
| Long-term debt | | | 129,224 | | | | 384,775 | | | | 394,404 | | | | 404,716 | | | | 410,356 | | | | (66.4 | %) | | | (68.5 | %) |
| Other long-term debt | | | 20,620 | | | | 20,620 | | | | 20,620 | | | | 20,620 | | | | 20,620 | | | | 0.0 | % | | | 0.0 | % |
| Accrued interest and other liabilities | | | 203,715 | | | | 211,049 | | | | 203,984 | | | | 194,229 | | | | 221,036 | | | | (3.5 | %) | | | (7.8 | %) |
| Total Liabilities | | | 5,463,569 | | | | 5,902,079 | | | | 5,881,137 | | | | 6,007,635 | | | | 6,588,759 | | | | (7.4 | %) | | | (17.1 | %) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock | | | 0 | | | | 0 | | | | 0 | | | | 79,195 | | | | 78,271 | | | | N/M | | | | (100.0 | %) |
| Common stock | | | 579,309 | | | | 578,362 | | | | 581,747 | | | | 490,532 | | | | 490,854 | | | | 0.2 | % | | | 18.0 | % |
| Retained earnings | | | 301,777 | | | | 292,004 | | | | 280,030 | | | | 276,119 | | | | 268,401 | | | | 3.3 | % | | | 12.4 | % |
| Accumulated other comprehensive loss | | | (9,106 | ) | | | (7,831 | ) | | | (9,091 | ) | | | (10,487 | ) | | | (6,659 | ) | | | 16.3 | % | | | 36.7 | % |
| Treasury stock, at cost | | | (181,049 | ) | | | (180,979 | ) | | | (184,927 | ) | | | (185,401 | ) | | | (185,450 | ) | | | 0.0 | % | | | (2.4 | %) |
| Total Shareholders' Equity | | | 690,931 | | | | 681,556 | | | | 667,759 | | | | 649,958 | | | | 645,417 | | | | 1.4 | % | | | 7.1 | % |
| Total Liabilities and Shareholders' Equity | | $ | 6,154,500 | | | $ | 6,583,635 | | | $ | 6,548,896 | | | $ | 6,657,593 | | | $ | 7,234,176 | | | | (6.5 | %) | | | (14.9 | %) |
N/M = Not meaningful.
FIRST FINANCIAL BANCORP.
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
| | | Quarterly Averages | | | Year-to-Date Averages | |
| | | Sep. 30, | | | Jun. 30, | | | Mar. 31, | | | Dec. 31, | | | Sep. 30, | | | Sep. 30, | |
| | | 2010 | | | 2010 | | | 2010 | | | 2009 | | | 2009 | | | 2010 | | | 2009 | |
| ASSETS | | | | | | | | | | | | | | | | | | | | | |
| Cash and due from banks | | $ | 185,322 | | | $ | 273,162 | | | $ | 336,333 | | | $ | 274,601 | | | $ | 107,216 | | | $ | 264,386 | | | $ | 86,098 | |
| Interest-bearing deposits with other banks | | | 483,097 | | | | 554,333 | | | | 394,741 | | | | 447,999 | | | | 136,210 | | | | 477,714 | | | | 51,177 | |
| Investment securities | | | 691,700 | | | | 597,991 | | | | 558,595 | | | | 608,952 | | | | 575,697 | | | | 616,583 | | | | 687,689 | |
| Loans held for sale | | | 14,909 | | | | 7,615 | | | | 2,292 | | | | 2,936 | | | | 2,629 | | | | 8,318 | | | | 4,543 | |
| Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 735,228 | | | | 746,636 | | | | 785,579 | | | | 839,456 | | | | 855,996 | | | | 755,630 | | | | 841,638 | |
| Real estate - construction | | | 187,401 | | | | 202,513 | | | | 231,853 | | | | 256,915 | | | | 261,601 | | | | 207,093 | | | | 254,015 | |
| Real estate - commercial | | | 1,135,547 | | | | 1,110,562 | | | | 1,079,577 | | | | 1,048,650 | | | | 1,002,073 | | | | 1,108,767 | | | | 910,680 | |
| Real estate - residential | | | 295,917 | | | | 301,880 | | | | 309,104 | | | | 333,858 | | | | 333,981 | | | | 302,252 | | | | 351,747 | |
| Installment | | | 71,739 | | | | 77,299 | | | | 79,437 | | | | 87,825 | | | | 87,506 | | | | 76,130 | | | | 90,721 | |
| Home equity | | | 336,288 | | | | 332,044 | | | | 333,275 | | | | 332,169 | | | | 315,629 | | | | 333,880 | | | | 303,032 | |
| Credit card | | | 28,664 | | | | 28,052 | | | | 28,430 | | | | 28,025 | | | | 27,292 | | | | 28,383 | | | | 26,839 | |
| Lease financing | | | 71 | | | | 15 | | | | 15 | | | | 16 | | | | 22 | | | | 34 | | | | 36 | |
| Total loans, excluding covered loans | | | 2,790,855 | | | | 2,799,001 | | | | 2,847,270 | | | | 2,926,914 | | | | 2,884,100 | | | | 2,812,169 | | | | 2,778,708 | |
| Less | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan and lease losses | | | 60,871 | | | | 60,430 | | | | 59,891 | | | | 54,164 | | | | 42,034 | | | | 60,401 | | | | 38,640 | |
| Net loans - uncovered | | | 2,729,984 | | | | 2,738,571 | | | | 2,787,379 | | | | 2,872,750 | | | | 2,842,066 | | | | 2,751,768 | | | | 2,740,068 | |
| Covered loans | | | 1,648,030 | | | | 1,781,741 | | | | 1,887,608 | | | | 1,973,327 | | | | 464,989 | | | | 1,771,582 | | | | 156,700 | |
| Less | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan and lease losses | | | 882 | | | | 14 | | | | 0 | | | | 0 | | | | 0 | | | | 302 | | | | 0 | |
| Net loans - covered | | | 1,647,148 | | | | 1,781,727 | | | | 1,887,608 | | | | 1,973,327 | | | | 464,989 | | | | 1,771,280 | | | | 156,700 | |
| Net loans | | | 4,377,132 | | | | 4,520,298 | | | | 4,674,987 | | | | 4,846,077 | | | | 3,307,055 | | | | 4,523,048 | | | | 2,896,768 | |
| Premises and equipment | | | 115,518 | | | | 115,587 | | | | 108,608 | | | | 106,999 | | | | 91,252 | | | | 113,263 | | | | 87,229 | |
| Goodwill | | | 51,820 | | | | 51,820 | | | | 51,820 | | | | 51,820 | | | | 42,196 | | | | 51,820 | | | | 32,957 | |
| Other intangibles | | | 6,384 | | | | 6,848 | | | | 7,431 | | | | 7,885 | | | | 2,553 | | | | 6,884 | | | | 1,347 | |
| FDIC indemnification asset | | | 238,720 | | | | 260,079 | | | | 280,799 | | | | 281,662 | | | | 71,330 | | | | 259,712 | | | | 24,038 | |
| Accrued interest and other assets | | | 243,877 | | | | 233,288 | | | | 231,935 | | | | 211,462 | | | | 169,602 | | | | 236,410 | | | | 153,390 | |
| Total Assets | | $ | 6,408,479 | | | $ | 6,621,021 | | | $ | 6,647,541 | | | $ | 6,840,393 | | | $ | 4,505,740 | | | $ | 6,558,138 | | | $ | 4,025,236 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing | | $ | 1,029,350 | | | $ | 1,139,001 | | | $ | 1,050,697 | | | $ | 1,093,735 | | | $ | 735,258 | | | $ | 1,072,938 | | | $ | 673,517 | |
| Savings | | | 1,412,441 | | | | 1,341,194 | | | | 1,318,374 | | | | 1,233,715 | | | | 838,381 | | | | 1,357,681 | | | | 701,228 | |
| Time | | | 2,007,138 | | | | 2,090,776 | | | | 2,175,400 | | | | 2,382,717 | | | | 1,480,587 | | | | 2,090,488 | | | | 1,254,048 | |
| Total interest-bearing deposits | | | 4,448,929 | | | | 4,570,971 | | | | 4,544,471 | | | | 4,710,167 | | | | 3,054,226 | | | | 4,521,107 | | | | 2,628,793 | |
| Noninterest-bearing | | | 721,501 | | | | 740,011 | | | | 774,393 | | | | 840,314 | | | | 554,471 | | | | 745,108 | | | | 462,084 | |
| Total deposits | | | 5,170,430 | | | | 5,310,982 | | | | 5,318,864 | | | | 5,550,481 | | | | 3,608,697 | | | | 5,266,215 | | | | 3,090,877 | |
| Short-term borrowings | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Federal funds purchased and securities sold | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| under agreements to repurchase | | | 50,580 | | | | 37,353 | | | | 38,413 | | | | 41,456 | | | | 55,197 | | | | 42,160 | | | | 119,548 | |
| Federal Home Loan Bank | | | 0 | | | | 0 | | | | 0 | | | | 1,096 | | | | 72,855 | | | | 0 | | | | 152,900 | |
| Other | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 22,826 | | | | 0 | | | | 39,458 | |
| Total short-term borrowings | | | 50,580 | | | | 37,353 | | | | 38,413 | | | | 42,552 | | | | 150,878 | | | | 42,160 | | | | 311,906 | |
| Long-term debt | | | 281,170 | | | | 389,972 | | | | 399,843 | | | | 408,744 | | | | 205,908 | | | | 356,560 | | | | 162,377 | |
| Other long-term debt | | | 20,620 | | | | 20,620 | | | | 20,620 | | | | 20,620 | | | | 20,620 | | | | 20,620 | | | | 20,620 | |
| Total borrowed funds | | | 352,370 | | | | 447,945 | | | | 458,876 | | | | 471,916 | | | | 377,406 | | | | 419,340 | | | | 494,903 | |
| Accrued interest and other liabilities | | | 201,567 | | | | 191,043 | | | | 190,234 | | | | 163,365 | | | | 42,087 | | | | 194,323 | | | | 36,208 | |
| Total Liabilities | | | 5,724,367 | | | | 5,949,970 | | | | 5,967,974 | | | | 6,185,762 | | | | 4,028,190 | | | | 5,879,878 | | | | 3,621,988 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred stock | | | 0 | | | | 0 | | | | 47,521 | | | | 78,573 | | | | 78,221 | | | | 15,666 | | | | 78,129 | |
| Common stock | | | 578,810 | | | | 580,299 | | | | 549,428 | | | | 490,889 | | | | 490,596 | | | | 569,620 | | | | 434,746 | |
| Retained earnings | | | 294,346 | | | | 282,634 | | | | 277,775 | | | | 276,950 | | | | 103,440 | | | | 284,979 | | | | 86,447 | |
| Accumulated other comprehensive loss | | | (8,021 | ) | | | (8,320 | ) | | | (9,873 | ) | | | (6,372 | ) | | | (9,290 | ) | | | (8,731 | ) | | | (9,296 | ) |
| Treasury stock, at cost | | | (181,023 | ) | | | (183,562 | ) | | | (185,284 | ) | | | (185,409 | ) | | | (185,417 | ) | | | (183,274 | ) | | | (186,778 | ) |
| Total Shareholders' Equity | | | 684,112 | | | | 671,051 | | | | 679,567 | | | | 654,631 | | | | 477,550 | | | | 678,260 | | | | 403,248 | |
| Total Liabilities and Shareholders' Equity | | $ | 6,408,479 | | | $ | 6,621,021 | | | $ | 6,647,541 | | | $ | 6,840,393 | | | $ | 4,505,740 | | | $ | 6,558,138 | | | $ | 4,025,236 | |
FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS
(Dollars in thousands)
(Unaudited)
| | | Quarterly Averages | | | Year-to-Date Averages | |
| | | Sep. 30, 2010 | | | Jun. 30, 2010 | | | Sep. 30, 2009 | | | Sep. 30, 2010 | | | Sep. 30, 2009 | |
| | | Balance | | | Yield | | | Balance | | | Yield | | | Balance | | | Yield | | | Balance | | | Yield | | | Balance | | | Yield | |
| Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment securities | | $ | 691,700 | | | | 3.23 | % | | $ | 597,991 | | | | 3.82 | % | | $ | 575,697 | | | | 4.54 | % | | $ | 616,583 | | | | 3.67 | % | | $ | 687,689 | | | | 4.69 | % |
| Interest-bearing deposits with other banks | | | 483,097 | | | | 0.33 | % | | | 554,333 | | | | 0.33 | % | | | 136,210 | | | | 0.25 | % | | | 477,714 | | | | 0.33 | % | | | 51,177 | | | | 0.25 | % |
Gross loans, including covered loans and indemnification asset (2) | | | 4,692,514 | | | | 6.65 | % | | | 4,848,436 | | | | 6.60 | % | | | 3,423,048 | | | | 5.58 | % | | | 4,851,781 | | | | 6.70 | % | | | 2,963,989 | | | | 5.22 | % |
| Total earning assets | | | 5,867,311 | | | | 5.73 | % | | | 6,000,760 | | | | 5.74 | % | | | 4,134,955 | | | | 5.25 | % | | | 5,946,078 | | | | 5.87 | % | | | 3,702,855 | | | | 5.05 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonearning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan and lease losses | | | (61,753 | ) | | | | | | | (60,444 | ) | | | | | | | (42,034 | ) | | | | | | | (60,703 | ) | | | | | | | (38,640 | ) | | | | |
| Cash and due from banks | | | 185,322 | | | | | | | | 273,162 | | | | | | | | 107,216 | | | | | | | | 264,386 | | | | | | | | 86,098 | | | | | |
| Accrued interest and other assets | | | 417,599 | | | | | | | | 407,543 | | | | | | | | 305,603 | | | | | | | | 408,377 | | | | | | | | 274,923 | | | | | |
| Total assets | | $ | 6,408,479 | | | | | | | $ | 6,621,021 | | | | | | | $ | 4,505,740 | | | | | | | $ | 6,558,138 | | | | | | | $ | 4,025,236 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest-bearing deposits | | $ | 4,448,929 | | | | 1.29 | % | | $ | 4,570,971 | | | | 1.34 | % | | $ | 3,054,226 | | | | 1.49 | % | | $ | 4,521,107 | | | | 1.34 | % | | $ | 2,628,793 | | | | 1.54 | % |
| Borrowed funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Short-term borrowings | | | 50,580 | | | | 0.20 | % | | | 37,353 | | | | 0.18 | % | | | 150,878 | | | | 0.69 | % | | | 42,160 | | | | 0.19 | % | | | 311,906 | | | | 0.56 | % |
| Long-term debt | | | 281,170 | | | | 2.87 | % | | | 389,972 | | | | 2.63 | % | | | 205,908 | | | | 3.81 | % | | | 356,560 | | | | 2.68 | % | | | 162,377 | | | | 3.73 | % |
| Other long-term debt | | | 20,620 | | | | 6.20 | % | | | 20,620 | | | | 6.21 | % | | | 20,620 | | | | 6.21 | % | | | 20,620 | | | | 6.20 | % | | | 20,620 | | | | 5.71 | % |
| Total borrowed funds | | | 352,370 | | | | 2.68 | % | | | 447,945 | | | | 2.59 | % | | | 377,406 | | | | 2.69 | % | | | 419,340 | | | | 2.60 | % | | | 494,903 | | | | 1.81 | % |
| Total interest-bearing liabilities | | | 4,801,299 | | | | 1.39 | % | | | 5,018,916 | | | | 1.45 | % | | | 3,431,632 | | | | 1.62 | % | | | 4,940,447 | | | | 1.45 | % | | | 3,123,696 | | | | 1.59 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Noninterest-bearing demand deposits | | | 721,501 | | | | | | | | 740,011 | | | | | | | | 554,471 | | | | | | | | 745,108 | | | | | | | | 462,084 | | | | | |
| Other liabilities | | | 201,567 | | | | | | | | 191,043 | | | | | | | | 42,087 | | | | | | | | 194,323 | | | | | | | | 36,208 | | | | | |
| Shareholders' equity | | | 684,112 | | | | | | | | 671,051 | | | | | | | | 477,550 | | | | | | | | 678,260 | | | | | | | | 403,248 | | | | | |
| Total liabilities & shareholders' equity | | $ | 6,408,479 | | | | | | | $ | 6,621,021 | | | | | | | $ | 4,505,740 | | | | | | | $ | 6,558,138 | | | | | | | $ | 4,025,236 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income (1) | | $ | 67,846 | | | | | | | $ | 67,738 | | | | | | | $ | 40,664 | | | | | | | $ | 207,604 | | | | | | | $ | 102,801 | | | | | |
Net interest spread (1) | | | | | | | 4.34 | % | | | | | | | 4.29 | % | | | | | | | 3.63 | % | | | | | | | 4.42 | % | | | | | | | 3.46 | % |
Net interest margin (1) | | | | | | | 4.59 | % | | | | | | | 4.53 | % | | | | | | | 3.90 | % | | | | | | | 4.67 | % | | | | | | | 3.71 | % |
(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 (1)
(Dollars in thousands)
(Unaudited)
| | | Linked Qtr. Income Variance | | | Comparable Qtr. Income Variance | | | Year-to-Date Income Variance | |
| | | Rate | | | Volume | | | Total | | | Rate | | | Volume | | | Total | | | Rate | | | Volume | | | Total | |
| Earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Investment securities | | $ | (878 | ) | | $ | 815 | | | $ | (63 | ) | | $ | (1,911 | ) | | $ | 944 | | | $ | (967 | ) | | $ | (5,226 | ) | | $ | (1,954 | ) | | $ | (7,180 | ) |
| Interest-bearing deposits with other banks | | | (10 | ) | | | (53 | ) | | | (63 | ) | | | 112 | | | | 284 | | | | 396 | | | | 128 | | | | 1,068 | | | | 1,196 | |
Gross loans, including covered loans and indemnification asset (2) | | | 602 | | | | (1,730 | ) | | | (1,128 | ) | | | 9,260 | | | | 21,280 | | | | 30,540 | | | | 32,717 | | | | 94,565 | | | | 127,282 | |
| Total earning assets | | | (286 | ) | | | (968 | ) | | | (1,254 | ) | | | 7,461 | | | | 22,508 | | | | 29,969 | | | | 27,619 | | | | 93,679 | | | | 121,298 | |
| Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total interest-bearing deposits | | $ | (616 | ) | | $ | (235 | ) | | $ | (851 | ) | | $ | (1,565 | ) | | $ | 4,532 | | | $ | 2,967 | | | $ | (3,968 | ) | | $ | 19,008 | | | $ | 15,040 | |
| Borrowed funds | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Short-term borrowings | | | 1 | | | | 7 | | | | 8 | | | | (186 | ) | | | (50 | ) | | | (236 | ) | | | (844 | ) | | | (390 | ) | | | (1,234 | ) |
| Long-term debt | | | 234 | | | | (756 | ) | | | (522 | ) | | | (487 | ) | | | 544 | | | | 57 | | | | (1,279 | ) | | | 3,892 | | | | 2,613 | |
| Other long-term debt | | | (1 | ) | | | 4 | | | | 3 | | | | (1 | ) | | | 0 | | | | (1 | ) | | | 76 | | | | 0 | | | | 76 | |
| Total borrowed funds | | | 234 | | | | (745 | ) | | | (511 | ) | | | (674 | ) | | | 494 | | | | (180 | ) | | | (2,047 | ) | | | 3,502 | | | | 1,455 | |
| Total interest-bearing liabilities | | | (382 | ) | | | (980 | ) | | | (1,362 | ) | | | (2,239 | ) | | | 5,026 | | | | 2,787 | | | | (6,015 | ) | | | 22,510 | | | | 16,495 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income (1) | | $ | 96 | | | $ | 12 | | | $ | 108 | | | $ | 9,700 | | | $ | 17,482 | | | $ | 27,182 | | | $ | 33,634 | | | $ | 71,169 | | | $ | 104,803 | |
(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)
| | | | | | | | | | | | | | | | | | Nine months ended | |
| | | Sep. 30, | | | Jun. 30, | | | Mar. 31, | | | Dec. 31, | | | Sep. 30, | | | Sep. 30, | | | Sep. 30, | |
| | | 2010 | | | 2010 | | | 2010 | | | 2009 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | | | | | | | | | | |
| ALLOWANCE FOR LOAN AND LEASE LOSS ACTIVITY | | | | | | | | | | | |
| Balance at beginning of period | | $ | 57,811 | | | $ | 56,642 | | | $ | 59,311 | | | $ | 55,770 | | | $ | 38,649 | | | | 59,311 | | | | 35,873 | |
| Provision for uncovered loan and lease losses | | | 6,287 | | | | 6,158 | | | | 11,378 | | | | 14,812 | | | | 26,655 | | | | 23,823 | | | | 41,272 | |
| Gross charge-offs | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 762 | | | | 1,156 | | | | 6,275 | | | | 1,143 | | | | 2,924 | | | | 8,193 | | | | 10,152 | |
| Real estate - construction | | | 3,607 | | | | 2,386 | | | | 2,126 | | | | 6,788 | | | | 4,552 | | | | 8,119 | | | | 5,892 | |
| Real estate - commercial | | | 2,013 | | | | 359 | | | | 3,932 | | | | 1,854 | | | | 927 | | | | 6,304 | | | | 2,660 | |
| Real estate - residential | | | 717 | | | | 246 | | | | 534 | | | | 262 | | | | 471 | | | | 1,497 | | | | 1,053 | |
| Installment | | | 205 | | | | 304 | | | | 414 | | | | 449 | | | | 315 | | | | 923 | | | | 1,019 | |
| Home equity | | | 389 | | | | 580 | | | | 684 | | | | 1,105 | | | | 382 | | | | 1,653 | | | | 932 | |
| All other | | | 431 | | | | 426 | | | | 520 | | | | 454 | | | | 492 | | | | 1,377 | | | | 1,186 | |
| Total gross charge-offs | | | 8,124 | | | | 5,457 | | | | 14,485 | | | | 12,055 | | | | 10,063 | | | | 28,066 | | | | 22,894 | |
| Recoveries | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | | 334 | | | | 120 | | | | 109 | | | | 148 | | | | 91 | | | | 563 | | | | 484 | |
| Real estate - construction | | | 0 | | | | 24 | | | | 0 | | | | 0 | | | | 0 | | | | 24 | | | | 0 | |
| Real estate - commercial | | | 728 | | | | 99 | | | | 12 | | | | 360 | | | | 167 | | | | 839 | | | | 197 | |
| Real estate - residential | | | 11 | | | | 4 | | | | 3 | | | | 3 | | | | 2 | | | | 18 | | | | 24 | |
| Installment | | | 116 | | | | 127 | | | | 160 | | | | 195 | | | | 205 | | | | 403 | | | | 662 | |
| Home equity | | | 21 | | | | 10 | | | | 87 | | | | 6 | | | | 9 | | | | 118 | | | | 10 | |
| All other | | | 65 | | | | 84 | | | | 67 | | | | 72 | | | | 55 | | | | 216 | | | | 142 | |
| Total recoveries | | | 1,275 | | | | 468 | | | | 438 | | | | 784 | | | | 529 | | | | 2,181 | | | | 1,519 | |
| Total net charge-offs | | | 6,849 | | | | 4,989 | | | | 14,047 | | | | 11,271 | | | | 9,534 | | | | 25,885 | | | | 21,375 | |
| Ending allowance for uncovered loan and lease losses | | $ | 57,249 | | | $ | 57,811 | | | $ | 56,642 | | | $ | 59,311 | | | $ | 55,770 | | | $ | 57,249 | | | $ | 55,770 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES (ANNUALIZED) | | | | | | | | | | | | | | | | |
| Commercial | | | 0.23 | % | | | 0.56 | % | | | 3.18 | % | | | 0.47 | % | | | 1.31 | % | | | 1.35 | % | | | 1.54 | % |
| Real estate - construction | | | 7.64 | % | | | 4.68 | % | | | 3.72 | % | | | 10.48 | % | | | 6.90 | % | | | 5.23 | % | | | 3.10 | % |
| Real estate - commercial | | | 0.45 | % | | | 0.09 | % | | | 1.47 | % | | | 0.57 | % | | | 0.30 | % | | | 0.66 | % | | | 0.36 | % |
| Real estate - residential | | | 0.95 | % | | | 0.32 | % | | | 0.70 | % | | | 0.31 | % | | | 0.56 | % | | | 0.65 | % | | | 0.39 | % |
| Installment | | | 0.49 | % | | | 0.92 | % | | | 1.30 | % | | | 1.15 | % | | | 0.50 | % | | | 0.91 | % | | | 0.53 | % |
| Home equity | | | 0.43 | % | | | 0.69 | % | | | 0.73 | % | | | 1.31 | % | | | 0.47 | % | | | 0.61 | % | | | 0.41 | % |
| All other | | | 5.05 | % | | | 4.89 | % | | | 6.46 | % | | | 5.40 | % | | | 6.35 | % | | | 5.46 | % | | | 5.19 | % |
| Total net charge-offs | | | 0.97 | % | | | 0.71 | % | | | 2.00 | % | | | 1.53 | % | | | 1.31 | % | | | 1.23 | % | | | 1.03 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| COMPONENTS OF NONPERFORMING LOANS, NONPERFORMING ASSETS, AND UNDERPERFORMING ASSETS | | | | | | |
| Nonaccrual loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commercial | | $ | 17,320 | | | $ | 12,874 | | | $ | 21,572 | | | $ | 13,756 | | | $ | 13,244 | | | $ | 17,320 | | | $ | 13,244 | |
| Real estate - construction | | | 13,454 | | | | 18,890 | | | | 17,710 | | | | 35,604 | | | | 26,575 | | | | 13,454 | | | | 26,575 | |
| Real estate - commercial | | | 27,945 | | | | 28,272 | | | | 21,196 | | | | 15,320 | | | | 12,407 | | | | 27,945 | | | | 12,407 | |
| Real estate - residential | | | 4,801 | | | | 4,571 | | | | 4,116 | | | | 3,993 | | | | 5,253 | | | | 4,801 | | | | 5,253 | |
| Installment | | | 279 | | | | 267 | | | | 365 | | | | 660 | | | | 493 | | | | 279 | | | | 493 | |
| Home equity | | | 2,358 | | | | 1,797 | | | | 1,910 | | | | 2,324 | | | | 2,534 | | | | 2,358 | | | | 2,534 | |
| Total nonaccrual loans | | | 66,157 | | | | 66,671 | | | | 66,869 | | | | 71,657 | | | | 60,506 | | | | 66,157 | | | | 60,506 | |
| Restructured loans | | | 13,365 | | | | 12,752 | | | | 7,584 | | | | 6,125 | | | | 3,102 | | | | 13,365 | | | | 3,102 | |
| Total nonperforming loans | | | 79,522 | | | | 79,423 | | | | 74,453 | | | | 77,782 | | | | 63,608 | | | | 79,522 | | | | 63,608 | |
| Other real estate owned (OREO) | | | 18,305 | | | | 16,818 | | | | 18,087 | | | | 4,145 | | | | 4,301 | | | | 18,305 | | | | 4,301 | |
| Total nonperforming assets | | | 97,827 | | | | 96,241 | | | | 92,540 | | | | 81,927 | | | | 67,909 | | | | 97,827 | | | | 67,909 | |
| Accruing loans past due 90 days or more | | | 233 | | | | 276 | | | | 286 | | | | 417 | | | | 308 | | | | 233 | | | | 308 | |
| Total underperforming assets | | $ | 98,060 | | | $ | 96,517 | | | $ | 92,826 | | | $ | 82,344 | | | $ | 68,217 | | | $ | 98,060 | | | $ | 68,217 | |
| Total classified assets | | $ | 212,552 | | | $ | 201,859 | | | $ | 171,112 | | | $ | 163,451 | | | $ | 137,288 | | | $ | 212,552 | | | $ | 137,288 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| CREDIT QUALITY RATIOS (excluding covered assets) | | | | | | | | | |
| Allowance for loan and lease losses to | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | | 86.54 | % | | | 86.71 | % | | | 84.71 | % | | | 82.77 | % | | | 92.17 | % | | | 86.54 | % | | | 92.17 | % |
| Nonperforming loans | | | 71.99 | % | | | 72.79 | % | | | 76.08 | % | | | 76.25 | % | | | 87.68 | % | | | 71.99 | % | | | 87.68 | % |
| Total ending loans | | | 2.07 | % | | | 2.07 | % | | | 2.01 | % | | | 2.05 | % | | | 1.94 | % | | | 2.07 | % | | | 1.94 | % |
| Nonperforming loans to total loans | | | 2.88 | % | | | 2.84 | % | | | 2.65 | % | | | 2.69 | % | | | 2.21 | % | | | 2.88 | % | | | 2.21 | % |
| Nonperforming assets to | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending loans, plus OREO | | | 3.51 | % | | | 3.42 | % | | | 3.27 | % | | | 2.83 | % | | | 2.36 | % | | | 3.51 | % | | | 2.36 | % |
| Total assets | | | 1.59 | % | | | 1.46 | % | | | 1.41 | % | | | 1.23 | % | | | 0.94 | % | | | 1.59 | % | | | 0.94 | % |
FIRST FINANCIAL BANCORP.
CAPITAL ADEQUACY
(Dollars in thousands, except per share)
(Unaudited)
| | | | | | | | | | | | | | | | | | Nine months ended, | |
| | | Sep. 30, | | | Jun. 30, | | | Mar. 31, | | | Dec. 31, | | | Sep. 30, | | | Sep. 30, | | | Sep. 30, | |
| | | 2010 | | | 2010 | | | 2010 | | | 2009 | | | 2009 | | | 2010 | | | 2009 | |
| PER COMMON SHARE | | | | | | | | | | | | | | | | | | | | | |
| Market Price | | | | | | | | | | | | | | | | | | | | | |
| High | | $ | 17.10 | | | $ | 21.32 | | | $ | 19.00 | | | $ | 15.48 | | | $ | 12.07 | | | $ | 21.32 | | | $ | 12.10 | |
| Low | | $ | 14.19 | | | $ | 14.95 | | | $ | 13.89 | | | $ | 11.83 | | | $ | 7.52 | | | $ | 13.89 | | | $ | 5.58 | |
| Close | | $ | 16.68 | | | $ | 14.95 | | | $ | 17.78 | | | $ | 14.56 | | | $ | 12.05 | | | $ | 16.68 | | | $ | 12.05 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Average common shares outstanding - basic | | | 57,570,709 | | | | 57,539,901 | | | | 55,161,551 | | | | 51,030,661 | | | | 51,027,887 | | | | 56,765,933 | | | | 43,005,983 | |
| Average common shares outstanding - diluted | | | 58,531,505 | | | | 58,604,039 | | | | 56,114,424 | | | | 51,653,562 | | | | 51,457,189 | | | | 57,758,906 | | | | 43,502,561 | |
| Ending common shares outstanding | | | 58,057,934 | | | | 58,062,655 | | | | 57,833,969 | | | | 51,433,821 | | | | 51,431,422 | | | | 58,057,934 | | | | 51,431,422 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| REGULATORY CAPITAL | | Preliminary | | | | | | | | | | | | | | | | | | | Preliminary | | | | | |
| Tier 1 Capital | | $ | 670,121 | | | $ | 658,623 | | | $ | 645,467 | | | $ | 628,982 | | | $ | 619,867 | | | $ | 670,121 | | | $ | 619,867 | |
| Tier 1 Ratio | | | 18.64 | % | | | 18.15 | % | | | 17.37 | % | | | 16.11 | % | | | 15.46 | % | | | 18.64 | % | | | 15.46 | % |
| Total Capital | | $ | 715,938 | | | $ | 704,752 | | | $ | 692,630 | | | $ | 678,024 | | | $ | 670,243 | | | $ | 715,938 | | | $ | 670,243 | |
| Total Capital Ratio | | | 19.91 | % | | | 19.42 | % | | | 18.64 | % | | | 17.37 | % | | | 16.71 | % | | | 19.91 | % | | | 16.71 | % |
| Total Capital in excess of minimum | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| requirement | | $ | 428,314 | | | $ | 414,434 | | | $ | 395,408 | | | $ | 365,739 | | | $ | 349,404 | | | $ | 428,314 | | | $ | 349,404 | |
| Total Risk-Weighted Assets | | $ | 3,595,296 | | | $ | 3,628,978 | | | $ | 3,715,280 | | | $ | 3,903,566 | | | $ | 4,010,482 | | | $ | 3,595,296 | | | $ | 4,010,482 | |
| Leverage Ratio | | | 10.50 | % | | | 9.99 | % | | | 9.76 | % | | | 9.24 | % | | | 13.86 | % | | | 10.50 | % | | | 13.86 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| OTHER CAPITAL RATIOS | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending shareholders' equity to ending | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| assets | | | 11.23 | % | | | 10.35 | % | | | 10.20 | % | | | 9.76 | % | | | 8.92 | % | | | 11.23 | % | | | 8.92 | % |
| Ending common shareholders' equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| to ending assets | | | 11.23 | % | | | 10.35 | % | | | 10.20 | % | | | 8.57 | % | | | 7.84 | % | | | 11.23 | % | | | 7.84 | % |
| Ending tangible shareholders' equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| to ending tangible assets | | | 10.38 | % | | | 9.55 | % | | | 9.38 | % | | | 8.95 | % | | | 8.16 | % | | | 10.38 | % | | | 8.16 | % |
| Ending tangible common shareholders' | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| equity to ending tangible assets | | | 10.38 | % | | | 9.55 | % | | | 9.38 | % | | | 7.75 | % | | | 7.07 | % | | | 10.38 | % | | | 7.07 | % |
| Average shareholders' equity to | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| average assets | | | 10.68 | % | | | 10.14 | % | | | 10.22 | % | | | 9.57 | % | | | 10.60 | % | | | 10.34 | % | | | 10.02 | % |
| Average common shareholders' equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| to average assets | | | 10.68 | % | | | 10.14 | % | | | 9.51 | % | | | 8.42 | % | | | 8.86 | % | | | 10.10 | % | | | 8.08 | % |
| Average tangible shareholders' equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| to average tangible assets | | | 9.86 | % | | | 9.33 | % | | | 9.42 | % | | | 8.78 | % | | | 9.39 | % | | | 9.54 | % | | | 8.66 | % |
| Average tangible common shareholders' | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| equity to average tangible assets | | | 9.86 | % | | | 9.33 | % | | | 8.70 | % | | | 7.62 | % | | | 7.63 | % | | | 9.30 | % | | | 6.69 | % |
