FORM 10-Q

[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to ___________________

Commission file number 0-12379

FIRST FINANCIAL BANCORP.

Registrant’s telephone number, including area code (513) 867-5447

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]          No [   ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes [X]          No [   ]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

FIRST FINANCIAL BANCORP.

INDEX

PART I – FINANCIAL INFORMATION

See notes to consolidated financial statements.

1

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

See notes to consolidated financial statements.

2

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

(Dollars in thousands)

3

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)

See notes to consolidated financial statements.

4

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

See notes to consolidated financial statements.

5

FIRST FINANCIAL BANCORP. AND SUBSIDIARIES

The consolidated financial statements for interim periods are unaudited; however, in the opinion of the management of First Financial Bancorp. (Bancorp), all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation have been included.

NOTE 1: BASIS OF PRESENTATION

The consolidated financial statements of Bancorp, a bank and savings and loan holding company, include the accounts of Bancorp and its wholly-owned subsidiaries - First Financial Bank, Community First Bank & Trust, Fidelity Federal Savings Bank, Citizens First State Bank, Heritage Community Bank, Sand Ridge Bank, First Financial Bancorp Service Corp., and First Financial Capital Advisors LLC, a registered investment advisory company. All significant intercompany transactions and accounts have been eliminated in consolidation.

The accompanying financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary to be in conformity with U.S. generally accepted accounting principles.

The consolidated balance sheet at December 31, 2003 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the First Financial Bancorp. Annual Report on Form 10-K for the year ended December 31, 2003.

Certain reclassifications of prior year’s amounts have been made to conform to current year presentation. Such reclassifications had no effect on earnings.

NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, Bancorp offers a variety of financial instruments with off-balance sheet risk to its customers to aid them in meeting their requirements for liquidity and credit enhancement and to reduce its own exposure to fluctuations in interest rates. These financial instruments include standby letters of credit and commitments outstanding to extend credit. U.S. generally accepted accounting principles do not require these financial instruments to be recorded in the consolidated balance sheets, statements of earnings, changes in shareholders’ equity or cash flows. However, a discussion of these instruments follows.

Bancorp’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for standby letters of credit and commitments outstanding to extend credit is represented by the contractual amounts of those instruments. Bancorp uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Following is a discussion of these transactions.

Standby letters of credit are conditional commitments issued by Bancorp to guarantee the performance of a customer to a third party. Bancorp’s portfolio of standby letters of credit consists primarily of performance assurances made on behalf of customers who have a contractual commitment to produce or deliver goods or services. The risk to Bancorp arises from its obligation to make payment in the event of the customers’ contractual default. As of September 30, 2004, Bancorp had issued standby letters of credit aggregating $43,217 compared to $42,229 issued as of December 31, 2003. Management conducts regular reviews of these instruments on an individual customer basis, and the results are considered in assessing the adequacy of Bancorp’s allowance for loan losses. Management does not anticipate any material losses as a result of these letters of credit.

6

Loan commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Bancorp evaluates each customer’s creditworthiness on an individual basis. The amount of collateral obtained, if deemed necessary by Bancorp upon extension of credit, is based on management’s credit evaluation of the counterparty. The collateral held varies, but may include securities, real estate, inventory, plant, or equipment. Bancorp had commitments outstanding to extend credit totaling $490,592 at September 30, 2004 and $480,632 at December 31, 2003. Management does not anticipate any material losses as a result of these commitments.

NOTE 3: COMPREHENSIVE INCOME

Bancorp discloses comprehensive income in the “Consolidated Statements of Changes in Shareholders’ Equity.” Disclosure of the reclassification adjustments for the nine and three months ended September 30, 2004 and 2003 are shown in the table below.

NOTE 4: ACCOUNTING FOR DERIVATIVES

Bancorp follows the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” in accounting for its derivative activities. Bancorp has interest rate swaps that are accounted for as fair value hedges under SFAS No. 133. Bancorp utilizes interest rate swap agreements to effectively modify its exposure to interest rate risk by converting certain fixed rate assets to a floating rate. The use of these interest rate swaps allows Bancorp’s subsidiary banks to offer a long-term fixed-rate loan to commercial borrowers. The interest rate swaps allow Bancorp to convert the fixed interest rate to a variable rate that better suits its funding position. The swap agreements involve the receipt of floating rate amounts in exchange for fixed interest payments over the life of the agreements without an exchange of the underlying principal amount. The swaps are accounted for under the short-cut method. These contracts are designated as hedges of specific assets. The net interest receivable or payable on swaps is accrued and recognized as an adjustment to the interest income or expense of the hedged asset. Bancorp had interest rate swaps with a notional value of $11,961 at September 30, 2004 and $12,549 at December 31, 2003. The fair value of the swaps was an unrealized loss of $179 and $305 at September 30, 2004 and 2003, respectively. These amounts are included with other assets on the balance sheet. The fair value adjustment was made to the hedged item on the balance sheet.

7

Bancorp is exposed to losses if a counterparty fails to make its payment under a contract in which Bancorp is in the receiving position. Although collateral or other security may not be obtained, Bancorp minimizes its credit risk by monitoring the credit standing of each counterparty and believes that each will be able to fully satisfy its obligation under the agreement.

NOTE 5: CORPORATION-OBLIGATED MANDATORILY REDEEMABLE CAPITAL SECURITIES OF SUBSIDIARY TRUST

The corporation-obligated mandatorily redeemable capital securities (the capital securities) of subsidiary trust, which appears on the balance sheet, are commonly known as Trust Preferred Securities. The subsidiary trust holds solely the junior subordinated debt securities of Bancorp (the debentures). Capital securities were issued in third quarter of 2003 by a statutory business trust - First Financial (OH) Statutory Trust II and in the third quarter of 2002 by another statutory business trust - First Financial (OH) Statutory Trust I. Bancorp owns 100% of the common equity of both of the trusts. The trusts were formed with the sole purpose of issuing the capital securities and investing the proceeds from the sale of such capital securities in the debentures. The debentures held by the trust are the sole assets of the trust. Distributions on the capital securities are payable quarterly at a variable rate of interest, which is equal to the interest rate being earned by the trust on the debentures and are recorded as interest expense of Bancorp. The interest rate is variable and is subject to change every three months. The base index is three month LIBOR (London Inter-Bank Offered Rate). On September 30, 2004, the rates on Trust I and Trust II were 5.35% and 4.69%, respectively. Bancorp has the option to defer interest for up to five years on the debentures. However, the covenants prevent the payment of dividends on common stock if the interest is deferred. The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the debentures. Bancorp has entered into agreements which, taken collectively, fully or unconditionally guarantee the capital securities subject to the terms of the guarantees. The debentures issued in 2003 are first redeemable, in whole or in part, by Bancorp on September 30, 2008 and mature on September 30, 2033. The amount outstanding, net of offering costs, as of September 30, 2004 was $20,000. The debentures issued in 2002 are first redeemable, in whole or in part, by Bancorp on September 25, 2007 and mature on September 25, 2032. The amount outstanding, net of offering costs, as of September 30, 2004 was $10,000.

During the first quarter of 2004, Bancorp deconsolidated the accounts of these trust preferred entities in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 46, “Consolidation of Variable Interest Entities”. The deconsolidation of the net assets increased Bancorp’s consolidated debt obligation by $930, the difference representing Bancorp’s common ownership in the trusts. The deconsolidation has no impact on Bancorp’s liquidity position because it continues to be obligated to repay the debentures held by the trust preferred entities and guarantees repayment of the capital securities issued by the trusts.

The debentures currently qualify as Tier I capital under Federal Reserve Board guidelines. The Federal Reserve Board is currently evaluating whether the capital securities will continue to qualify as Tier I capital due to the deconsolidation of the related trust preferred entities. If the Federal Reserve Board does not qualify the capital securities as Tier I capital, the effect of the change would be minimal to Bancorp’s regulatory capital ratios. Therefore, Bancorp would continue to have capital ratios that are well above the minimum regulatory requirements.

8

NOTE 6: STOCK OPTIONS

As of September 30, 2004, Bancorp had two stock-based compensation plans. Bancorp accounts for those plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if Bancorp had applied the fair value recognition provisions of FASB Statement No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.

NOTE 7: EMPLOYEE BENEFIT PLANS

FASB Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” requires additional disclosures about assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. The provisions of this Statement are effective for interim periods beginning after December 15, 2003. The components for earlier interim periods presented for comparative purposes have been restated for the components of net benefit cost.

9

Bancorp sponsors a non-contributory defined benefit pension plan covering substantially all employees. Bancorp expects to contribute $6,696 to its pension plan in 2004. The following table sets forth information concerning amounts recognized in Bancorp’s Consolidated Balance Sheets and Consolidated Statements of Earnings.

Some of Bancorp’s subsidiaries maintain health care and, in limited instances, life insurance plans for current retired employees. The following table sets forth the components of net periodic postretirement benefit costs.

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act (the Act) of 2003 was enacted. Bancorp elected the deferral provided by Financial Staff Position No. FAS 106-1. Any measures of the net periodic postretirement benefit cost in the financial statements or the accompanying notes do not reflect the effects of the Act on the plan. Specific authoritative guidance on the accounting for the federal subsidy is pending and the guidance, when issued, could require Bancorp to change previously reported information. However, Bancorp anticipates the effect of this Act to be immaterial.

NOTE 8: OTHER MATTERS

Core deposit intangibles and mortgage servicing rights are to be amortized over their useful lives. Core deposit balances are being amortized over varying periods, none of which exceeds 10 years.

Bancorp expects to complete its original plan for regionalization in the first quarter of 2005. Subject to regulatory approval, the plan calls for the merger of Citizens First State Bank and Fidelity Federal Savings Bank into Community First Bank & Trust, headquartered in Celina, Ohio.

Additionally, Bancorp plans to merge its Columbus, Indiana-headquartered Heritage Community Bank affiliate into First Financial Bank, headquartered in Hamilton, Ohio. Subject to regulatory approval, this merger is expected to occur in the first half of 2005. While this was not included in Bancorp’s original plan for regionalization, Bancorp has recently concluded that such a merger is the best strategic direction for the affiliates serving the contiguous markets of southeastern Indiana, southwestern Ohio, and northern Kentucky. Bancorp’s current plan is to operate three regional financial institutions: First Financial Bank, Sand Ridge Bank, and Community First Bank & Trust. The approximate asset size and the region served by each of these banks will be as follows: First Financial Bank with $2 billion serving southeastern Indiana,

10

southwestern Ohio, and northern Kentucky; Sand Ridge Bank with $881 million serving northwestern Indiana and southern Michigan; and Community First Bank & Trust with $1.1 billion serving northeastern Indiana and northwestern Ohio.

Bancorp expects the non-recurring costs associated with the merger of Heritage Community Bank into First Financial Bank to be two cents per share in the fourth quarter of 2004. Resulting annual savings are expected to be one to two cents per share fully realized in 2005. With the departure of the CEO of Heritage Community Bank, in September of this year, C. Douglas Lefferson, First Financial Bancorp senior vice president and chief financial officer and Heritage Community Bank board chairman, has been the interim CEO for Heritage.

NOTE 9: SUBSEQUENT EVENT

On October 29, 2004, Bancorp delivered to James C. Hall, its Executive Vice President, a written 30-day notice of termination terminating that certain Employment Agreement between James C. Hall and Bancorp, dated June 21, 2001, as amended (the “Employment Agreement”). Mr. Hall’s termination is a result of a decision to eliminate his position as Executive Vice President. Other than the Employment Agreement, there does not exist any material relationship between Bancorp or its affiliates and Mr. Hall.

Pursuant to the terms of the Employment Agreement, Mr. Hall is entitled to receive his full salary and benefits during the 30-day period commencing October 29, 2004. After November 29, 2004, provided that Mr. Hall provides Bancorp with a release and a covenant not to sue for all claims arising out of his employment and termination of employment as provided in the Employment Agreement, Mr. Hall is entitled to receive the following benefits: (i) his base salary of $21,727 per month for a period of 24 months from November 29, 2004; (ii) a lump sum payment of $30,082 which represents 2.0 times Mr. Hall’s most recent payment under the performance incentive plan; (iii) continuation of employer paid health benefits as if employed until November 29, 2006; and (iv) payment for outplacement services(at a cost not to exceed $13,037).

11

ITEM 2-MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
(Unaudited, dollars in thousands)

SELECTED QUARTERLY FINANCIAL DATA

NET INTEREST INCOME

Net interest income, Bancorp’s principal source of earnings, is the amount by which interest and fees generated by earning assets exceed the interest costs of liabilities obtained to fund them. For analytical purposes, net interest income is also presented in the table that follows, adjusted to a tax equivalent basis assuming a 35% marginal tax rate for interest earned on tax-exempt assets such as municipal loans, tax-free leases, and investments. This is to recognize the income tax savings that facilitates a comparison between taxable and tax-exempt assets.

Net interest income for the third quarter of 2004 was $36,201, compared to $36,373 in the third quarter of 2003, a decline of 0.47% or $172. Net interest income on a linked-quarter basis (third quarter 2004 compared to second quarter 2004) remained relatively stable, increasing by $201 or 0.56%. Net interest income for 2004 on a year-to-date basis decreased $2,430 or 2.19% from the comparable period in 2003. Bancorp’s net interest margin decreased to 3.93% in the third quarter of 2004 from 3.98% in the third quarter of 2003. Year-to-date net interest margin was 3.97% compared to 4.17% in 2003. Linked quarter net interest margin has decreased five basis points from 3.98% to 3.93% due to the strategic decision to lengthen the maturities of interest-bearing liabilities in a relatively low interest rate environment.

12

Average loans, net of unearned income, for the third quarter of 2004 increased 3.21% and year-to-date average loans, net of unearned income, increased 2.28% from the comparable periods a year ago. This increase was achieved even though Bancorp sold approximately $46 million in loan balances through branch sales, a distressed loan portfolio sale, and a mobile home portfolio sale since the third quarter of 2003. Primarily, loan growth has been centered in the commercial real estate category as demand improved primarily in the southwestern Ohio market. On a linked-quarter basis, average outstanding loan balances were 2.15% higher, reflecting growth in commercial and residential real estate, installment, and real estate construction loans.

Average deposit balances for the third quarter decreased $57,928 or 1.94% and year-to-date average deposits were relatively flat from the comparable periods a year ago. Since the third quarter of 2003, deposit balances were impacted by the sale of two banking centers that reduced deposit balances by $48 million. Bancorp also opened three new banking centers in growing markets—two in the fourth quarter of 2003 and one in the second quarter of 2004. Construction is underway for two new offices expected to open in December of 2004. Bancorp continues to evaluate its branch network for opportunities to better position itself for both growth and service.

*

Margins are calculated using net interest income annualized divided by average earning assets

RATE/VOLUME ANALYSIS

The impact of changes in volume and interest rates on net interest income is illustrated in the following table. As shown, the decrease in market interest rates had a significant effect on Bancorp’s rates impacting both interest income and interest expense for both the nine months and quarter ended September 30, 2004 in comparison to 2003. Bancorp’s adjustable and variable rate loans repriced downward at a greater magnitude than Bancorp was able to lower its deposit costs. The increase in volume on earning assets affected interest income more than the increase in volume on interest-bearing liabilities affected interest expense. While the effect of the change in volume was to increase net interest income, the change in the rates was greater causing overall net interest income to decrease for both the third quarter and the year of 2004 from the comparable periods of 2003. The change in interest due to the combined effect of both rate and volume has been allocated to the volume and rate variance on a prorated basis.

13

OPERATING RESULTS

Net earnings for the first nine months of 2004 were $31,109 or $0.71 in diluted earnings per share versus $29,065 or $0.65 for the first nine months of 2003. This 9.23% increase in diluted earnings per share was the result of a decline in the provision for loan loss expense of $4,580 from the first nine months of 2003 and an increase in noninterest income of $2,177 for the same period. These positive effects were partially offset by negative variances in net interest income of $2,430 as outlined in the “Rate/Volume Analysis” and “Net Interest Income” sections and noninterest expense of $1,760. Net earnings for the third quarter of 2004 were $10,824 or $0.25 in diluted earnings per share compared to $7,824 or $0.18 in diluted earnings per share for the same period in 2003—an increase in earnings per share of 38.89%.

Third quarter 2004 noninterest income was $16,016, an increase of 5.86% from the third quarter of 2003. Service charge income decreased $64 or 1.28% from the same quarter a year ago, largely due to the sale of $48 million in retail deposit balances since the third quarter of 2003. Trust revenues for the third quarter of 2004 increased 4.17% or $151 from the comparable period last year primarily as a result of year-over-year market value improvements. Bankcard interchange income increased $249 or 21.58% due to increased card usage. Gains on the sale of mortgage loans were $424 for the third quarter of 2004 versus $1,978 for the comparable period in 2003, a decrease of $1,554. The other category of noninterest income increased $2,141 or 63.68% from a year ago. Included in other noninterest income for the third quarter of 2004 was the recapture of impairment charges on the mortgage-servicing assets of approximately $256 compared with impairment charges of $ 1,072 for the third quarter of 2003, a net change of $1,328. Also included in the third quarter of 2004 was a gain on the sale of the Kewanna office of Indiana Lawrence Bank of approximately $750 versus a gain on the sale of the Chickasaw office of Community First Bank & Trust in the same quarter of 2003 of approximately $1,000. This increase was also due to improvements in brokerage income, income from the life insurance asset, and the insurance line of business.

Year-to-date noninterest income increased $2,177 to $45,362 in 2004. This increase was primarily the result of an increase in trust fees, additional life insurance income, and increased brokerage fees. Recapture of impairment on the mortgage-servicing assets was approximately $943 in 2004 compared with impairment charges of $1,700 in 2003. This positive swing was also offset on a year-to-date basis by a decrease in gains on sale of mortgage loans of $3,369 to $1,121 in 2004 from $4,490 in the comparable period a year ago.

Total noninterest expense decreased $1,297 or 3.63% for the third quarter of 2004 from the third quarter of 2003. Salaries and employee benefits decreased $2,173 or 10.03% due to the $3.1 million Separation Agreement and Release charge in the third quarter of 2003 for former CEO, Stanley N. Pontius. The decrease was partially offset by other severance charges in the third quarter of 2004 of approximately $300. Net occupancy expenses for the third quarter of 2004 increased $220 or 11.59% as a result of increased building rent, depreciation, and related expenses. Data processing expense for the quarter increased $83 or 4.91%. Professional services increased $478 or 40.34% from the third quarter of 2003 primarily due to direct consulting work in regard to Sarbanes-Oxley Section 404 control documentation and testing. Year-to-date noninterest expense for 2004 was $1,760 or 1.77% more than 2003 as a result of higher salaries and employee benefits, net occupancy expenses, data processing, professional services, and other expenses as discussed above.

14

INCOME TAXES

For the first nine months of 2004, income tax expense was $14,596 compared to $14,073 for the same period in 2003, or an increase of $523. In 2004, $14,601 of the tax expense was related to operating income with a tax benefit of $5 related to securities transactions. In the first nine months of 2003, income tax expense related to operating income was $14,111, with a tax benefit of $38 related to securities transactions. Bancorp’s effective taxes rates for the first nine months of 2004 and 2003 were 31.94% and 32.62%, respectively.

Income tax expense for the third quarter of 2004 was $4,854, an increase of $1,279 when compared to $3,575 reported for the same period in 2003. Tax expense related to operating income totaled $4,856 and $3,565 for the quarters ended September 30, 2004 and 2003, respectively, with a tax benefit of $2 and a tax expense of $10 related to securities transactions for the those quarters, respectively. Bancorp’s effective tax rates for the thirds quarters of 2004 and 2003 were 30.96% and 31.34%, respectively.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained at a level believed adequate by management to absorb estimated probable credit losses. Management’s periodic evaluation of the adequacy of the allowance is based on Bancorp’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions, and other relevant factors. This evaluation is inherently subjective, as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. The evaluation of these factors is completed by a group of senior officers from the risk management, credit administration, financial, and lending areas.

The provision for loan loss expense for the third quarter of 2004 was $2,097 compared to $4,364 for the same period in 2003. Net charge-offs of $1,331 for the third quarter were $3,229 less than the $4,560 net charge-offs for the third quarter of 2003. Year-to-date provision expense was $6,940 or $4,580 less than 2003. Year-to-date net charge-offs were $6,121 in 2004, down $4,896 from the $11,017 recorded in 2003. Decreases in commercial loans charged-off and continued strong recoveries on commercial and consumer loans positively impacted net charge-offs for both the third quarter and year-to-date. The percentage of net charge-offs to average loans for the third quarter of 2004 was 0.18% compared to 0.64% for the same period in 2003. The percentage of net charge-offs to average loans was 0.29% for year-to-date 2004, compared to 0.53% for the same period in 2003. Bancorp continued to maintain appropriate reserves with an allowance to ending loans ratio of 1.66% at quarter end versus 1.73% for the same quarter a year ago. It is management’s belief that the allowance for loan losses is adequate to absorb inherent credit losses.

At September 30, 2004 and 2003, the recorded investment in loans that are considered to be impaired under FASB Statement No. 114 was $3,672 and $8,207, respectively, all of which were on a nonaccrual basis. The related allowance for loan losses on these impaired loans was $1,497 at September 30, 2004, and $2,162 at September 30, 2003. At September 30, 2004 and 2003, there were no impaired loans that did not have an allowance for loan losses. The average recorded investment in impaired loans for the quarter ended September 30, 2004, and 2003, was approximately $3,833 and $5,120. For the nine months and quarter ended September 30, 2004, Bancorp recognized interest income on those impaired loans of $229 and $130 compared to $123 and $22 for the same period in 2003. Bancorp recognizes income on impaired loans using the cash basis method. The table that follows indicates the activity in the allowance for loan losses for the quarters presented.

15

NONPERFORMING/UNDERPERFORMING ASSETS

Total underperforming assets, which includes nonaccrual loans, restructured loans, other real estate owned, and loans 90 days or more past due and still accruing, decreased $12,752 to $28,394 at the end of the third quarter of 2004 from $41,146 at the end of the third quarter of 2003. On a linked quarter basis, total underperforming assets remained relatively constant, decreasing $201. Nonaccrual loans are composed primarily of commercial, multi-family, and 1-4 family residential properties. Nonaccrual loans decreased $6,171 from the third quarter of 2003, and $520 from the linked quarter. Restructured loans decreased significantly from $6,532 a year ago to $2,344 at September 30, 2004. Other real estate owned decreased $323 from the third quarter of 2003.

The nonperforming assets to ending loans ratio decreased to 0.93% as of September 30, 2004, from 1.34% as of the end of the third quarter of 2003. This ratio has shown steady improvement each quarter since September of 2003.

Accruing loans past due 90 days or more decreased 64.97% to $1,116 at the end of the third quarter of 2004 from $3,186 at the end of the third quarter of 2003.

Accruing loans, including loans impaired under FASB Statement No. 114, which are past due 90 days or more, for which there is not a likelihood of becoming current, are transferred to nonaccrual loans. However, those loans which management believes will become current and therefore accruing are classified as “Accruing loans 90 days or more past due” until they become current. Bancorp does not have a concentration of credit in any particular industry.

16

The table that follows shows the categories that are included in nonperforming and underperforming assets.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity management is the process by which Bancorp provides for the continuing flow of funds necessary to meet its financial commitments on a timely basis. These commitments include withdrawals by depositors, funding credit commitments to borrowers, shareholder dividends, paying expenses of operations, and funding capital expenditures.

Liquidity is derived primarily from deposit growth, maturing loans, the maturity of investment securities, access to other funding sources and markets, and a strong capital position. Average deposits on a linked quarter basis increased $8,025. However, year-to-date average deposits are down $20,110 from the prior year. Year-to-date average deposits would have increased had it not been for the sale of two banking centers which resulted in a decrease in deposits of $48,000. Short-term borrowings decreased $14,746 from year-end, while long-term borrowings increased $34,971, in conjunction with asset/liability management and funding strategies.

The principal source of asset-funded liquidity is marketable investment securities, particularly those of shorter maturities. At September 30, 2004, securities maturing in one year or less amounted to $15,269, representing 2.16% of the total of the investment securities portfolio. In addition, other types of assets such as cash and due from banks, federal funds sold and securities purchased under agreements to resell, as well as loans and interest-bearing deposits with other banks maturing within one year, are sources of liquidity. Total asset-funded sources of liquidity at September 30, 2004, amounted to $709,103, representing 17.89% of total assets. Sources of long-term asset funded liquidity are derived from the maturity of investment securities and maturing loans in excess of one year.

At September 30, 2004, Bancorp had classified $693,255 in investment securities available-for-sale. Management examines Bancorp’s liquidity needs in establishing this classification in accordance with the FASB Statement No. 115 on accounting for certain investments in debt and equity securities.

17

Liquidity is very important and as such is both monitored and managed closely by the asset/liability committee at each affiliate and on a consolidated basis. Liquidity may be used to fund capital expenditures. Capital expenditures were $8,168 for the first nine months of 2004. In addition, remodeling is a planned and ongoing process given the 106 offices of Bancorp and its subsidiaries. Material commitments for capital expenditures as of September 30, 2004, were approximately $7,397 which primarily reflects commitments for four new branches. Management believes that Bancorp has sufficient liquidity to fund its current commitments.

CAPITAL ADEQUACY

The Federal Reserve established risk-based capital requirements for U.S. banking organizations which have been adopted by the Office of Thrift Supervision for savings and loan associations. Risk weights are assigned to on-and off-balance sheet items in arriving at risk-adjusted total assets. Regulatory capital is divided by risk-adjusted total assets, with the resulting ratios compared to minimum standards to determine whether a bank has adequate capital.

Regulatory guidelines require a 4.00% Tier 1 capital ratio, an 8.00% total risk-based capital ratio, and a 4.00% leverage ratio. Tier 1 capital consists primarily of common shareholders’ equity, net of certain intangibles, and total risked-based capital is Tier 1 capital plus Tier 2 supplementary capital, which is primarily the allowance for loan losses subject to certain limits. The leverage ratio is a result of Tier 1 capital divided by average total assets less certain intangibles.

Bancorp’s Tier I ratio at September 30, 2004, was 13.24%, its total risked-based capital was 14.50% and its leverage ratio was 9.35%. While Bancorp subsidiaries’ ratios are well above regulatory requirements, management will continue to monitor the asset mix which affects these ratios due to the risk weights assigned various assets, and the allowance for loan losses, which influences the total risk-based capital ratio.

The following table illustrates the risk-based capital calculations and ratios for the last five quarters.

18

FORWARD-LOOKING INFORMATION

The Form 10-Q should be read in conjunction with the consolidated financial statements, notes and table included elsewhere in the report and in the First Financial Bancorp. Annual Report on Form 10-K for the year ended December 31, 2003.

Management’s analysis may contain forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties 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, the strength of the local economies in which operations are conducted, the effects of and changes in policies and laws of regulatory agencies, inflation, and interest rates. For further discussion of certain factors that may cause such forward-looking statements to differ materially from actual results, refer to the 2003 Form 10-K.

CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of Bancorp comply with U.S. generally accepted accounting principles and conform to general practices within the banking industry. These policies require estimates and assumptions. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on Bancorp’s future financial condition and results of operations. In management’s opinion, some of these areas have a more significant impact than others on Bancorp’s financial reporting. For Bancorp, these areas currently include accounting for the allowance for loan losses, pension costs, and goodwill.

Allowance for Loan Losses—The level of the allowance for loan losses is based upon management’s evaluation of the loan and lease portfolios, past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, and other pertinent factors. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. The level of allowance maintained is believed by management to be adequate to cover losses inherent in the portfolio. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off.

Pension—Bancorp sponsors a non-contributory defined benefit pension plan covering substantially all employees. In accordance with applicable accounting rules, Bancorp does not consolidate the assets and liabilities associated with the pension plan. At the end of 2003, Bancorp’s fair value of the plan assets was less than its benefit obligation. Therefore, Bancorp recognized an accrued benefit liability. The measurement of the accrued benefit liability and the annual pension expense involves actuarial and economic assumptions. The assumptions used in pension accounting relate to the discount rates, the expected return on plan assets, and the rate of compensation increase.

Goodwill—Statement of Financial Accounting Standards No. 141 “Business Combinations” and No. 142 “Goodwill and Other Intangible Assets” were issued in June of 2001 and were effective for fiscal years beginning after December 15, 2001. Under these rules, goodwill and intangible assets deemed to have indefinite lives, if any, will no longer be amortized, but will be subject to annual impairment tests in accordance with the Statements. Bancorp has selected October 1 as its date for annual impairment testing.

19

ACCOUNTING AND REGULATORY MATTERS

The $6,718 in lease financing presented on Bancorp’s balance sheet in the loan portfolio was reviewed in the first quarter of 2003 and has been determined to be largely operating leases rather than direct financing leases, as they are currently reported. Due to the immateriality of the lease portfolio, amounts currently presented as direct financing leases will continue to be reported as such until their maturity. The related balance sheet and income statement impact of the misclassification is immaterial. The difference in presentation between direct financing leases and operating leases is the asset classification on the balance sheet and the timing and classification of the income from the transactions. Operating leases are reported as fixed assets with periodic depreciation expense and rental income, whereas direct financing leases are reported as loan assets with periodic interest income.

Management is not aware of any other events or regulatory recommendations that, if implemented, are likely to have a material effect on Bancorp’s liquidity, capital resources, or operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As described in Bancorp’s Form 10-K for the year ended December 31, 2003, Bancorp’s market risk is composed primarily of interest rate risk. There have been no material changes in market risk or the manner in which Bancorp manages market risk since December 31, 2003.

ITEM 4. CONTROLS AND PROCEDURES

     Bancorp has established controls and other procedures designed to ensure that the information required to be disclosed in this report is recorded, processed, summarized, and reported within the required time periods (the disclosure controls and procedures). Bancorp’s Chief Executive Officer and Chief Financial Officer, together with members of senior management, have evaluated the disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, Bancorp’s Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are effective (i) to ensure that material information relating to Bancorp, including its consolidated subsidiaries, is communicated to them on a timely basis, and (ii) to accomplish the purposes for which they were designed.

     There were no changes in Bancorp’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, Bancorp’s internal control over financial reporting.

20

PART II-OTHER INFORMATION

Item 2. Unregistered Sales Of Equity Securities and Use of Proceeds.

(a)		The provisions of the First Financial Bancorp. 1999 Stock Incentive Plan for Officers and Employees (“Incentive Plan”) and the First Financial Bancorp. 1999 Stock Option Plan of Non-Employee Directors (together, the “Plans”) provide that participants in the Plans may elect to have shares of Bancorp’s common stock withheld by the company (i) to pay the exercise price and all taxes required by law to be withheld upon the exercise of a stock option, and (ii) (under the Incentive Plan only) to pay all taxes required by law to be withheld upon the vesting of a restricted stock award. Beginning in January of 2001, Bancorp adopted a procedure under which shares of its common stock withheld upon the exercise of certain stock options and upon the vesting of restricted stock awards, for the purposes described above, were accumulated by Bancorp and then delivered on a quarterly basis to a broker for resale. The broker sold to the public the common shares at market price on a date within its discretion and remitted the proceeds (net of sales commissions) to Bancorp. Bancorp has recently become aware that, although shares of common stock issued to participants under the Plans were registered pursuant to the Securities Act of 1933 (“Securities Act”), the shares withheld by Bancorp and subsequently sold as described above were not. Bancorp has discontinued this procedure.
		The following table sets forth the date and number of shares, the price per share, the aggregate price and the aggregate commissions for shares of unregistered common stock sold by Bancorp pursuant to the above-described procedure within the last three years.

The common shares sold pursuant to the above-described procedure were not exempt from registration under the Securities Act, and such sales should have been registered under the Securities Act. Under the applicable provisions of federal securities laws, those persons who purchased the unregistered common shares may have obtained “restricted securities” as that term is defined in Rule 144 of the Securities Act and may seek to rescind the transaction within one year following the date of purchase. Bancorp is in the process of attempting to identify those persons to whom the shares were sold within the last year. Bancorp believes that the amount of its rescission obligation, if any, under applicable federal securities laws to persons who purchased the unregistered common shares is not material and is estimated to be $31,000.

21

(c)

The following table shows the total number of shares repurchased in the third quarter of 2004.

Issuer Purchases of Equity Securities

(1)

The number of shares purchased in column (a) and the average price paid per share in column (b) include the purchase of shares other than through publicly announced plans. The shares purchased other than through publicly announced plans were purchased pursuant to Bancorp’s Thrift Plan, Director Fee Stock Plan, 1999 Stock Option Plan for Non-Employee Directors and 1999 Stock Incentive Plan for Officers and Employees. (The last two plans are referred to hereafter as the Stock Option Plans.) The following tables show the number of shares purchased pursuant to those plans and the average price paid per share. The purchases for the Thrift Plan and the Director Fee Stock Plan were made in open-market transactions. Under the Stock Option Plans, shares were purchased from plan participants at the then current market value in satisfaction of stock option exercise prices.

22