Back to GetFilings.com
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
--------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
ACT OF 1934
Commission File Number 0-12379
FIRST FINANCIAL BANCORP.
(Exact name of registrant as specified in its charter)
--------------
Ohio 31-1042001
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 High Street 45011
Hamilton, Ohio (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (513) 867-4700
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(a) OF THE ACT:
Common Stock, no par value
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.[ ]
As of March 2, 1999, there were issued and outstanding 36,237,836 shares of
Registrant's Common Stock. The aggregate market value of the voting stock held
by non-affiliates of the Registrant, computed by reference to the sales price of
the last trade of such stock as of March 2, 1999, was $903,681,000. (The
exclusion from such amount of the market value of the shares owned by any person
shall not be deemed an admission by the Registrant that such person is an
affiliate of the Registrant.)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the year ended
December 31, 1998 are incorporated by reference into Parts I, II and IV.
Portions of the proxy statement dated March 23, 1999 for the annual meeting of
shareholders to be held April 27, 1999 are incorporated by reference into
Part III.
2
FORM 10-K CROSS REFERENCE INDEX
PAGE
----
PART I Item 1 Business F-1
Item 2 Properties F-5
Item 3 Legal Proceedings F-6
Item 4 Submission of Matters to a Vote of Security Holders
(during the fourth quarter of 1998) F-6
Additional Item - Executive Officers F-6
- -------------------------------------------------------------------------------------
PART II Item 5 Market for the Registrant's Common Equity and Related
Shareholder Matters F-8
Item 6 Selected Financial Data F-8
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations F-8
Item 7a Quantitative and Qualitative Disclosures about
Market Risk F-12
Item 8 Financial Statements and Supplementary Data F-12
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure F-12
- -------------------------------------------------------------------------------------
PART III Item 10 Directors and Executive Officers of the Registrant F-13
Item 11 Executive Compensation F-13
Item 12 Security Ownership of Certain Beneficial Owners and
Management F-13
Item 13 Certain Relationships and Related Transactions F-13
- -------------------------------------------------------------------------------------
PART IV Item 14 Exhibits, Financial Statement Schedules, and Reports
on Form 8-K F-14
- -------------------------------------------------------------------------------------
SIGNATURES F-17
3
F-1
PART I
ITEM 1. BUSINESS.
FIRST FINANCIAL BANCORP.
First Financial Bancorp., an Ohio corporation (Bancorp), is a bank and savings
and loan holding company that engages in the business of commercial banking, and
other permissible activities closely related to banking, through fifteen wholly
owned subsidiary financial institutions: First National Bank of Southwestern
Ohio (First Southwestern), Bright National Bank (Bright National), and National
Bank of Hastings (Hastings), all national banking associations, Community First
Bank & Trust (Community First), The Clyde Savings Bank Company (Clyde), both
Ohio banking corporations, Union Trust Bank (Union Trust), Indiana Lawrence Bank
(Indiana Lawrence), Citizens First State Bank (Citizens First), Union Bank &
Trust Company (Union Bank), Peoples Bank and Trust Company (Peoples Bank),
Farmers State Bank (Farmers) and Vevay Deposit Bank (Vevay), all Indiana banking
corporations, Fidelity Federal Savings Bank (Fidelity Federal), and Home Federal
Bank, a Federal Savings Bank (Home Federal), both federal savings banks. First
Finance Mortgage Company of Southwestern Ohio (First Finance) is Bancorp's only
finance company. Bancorp provides
4
F-2
management and similar services for its subsidiary financial institutions. Since
it does not itself conduct any operating businesses, Bancorp must depend largely
upon its fifteen subsidiaries for funds with which to pay the expenses of its
operation and, to the extent applicable, any dividends on its outstanding shares
of stock. For further information see Note 6 of the Notes to Consolidated
Financial Statements appearing on page 17 of Bancorp's Annual Report to
Shareholders, which is incorporated by reference in response to this item.
Bancorp was formed in 1982 for the purpose of becoming the parent holding
company of First Southwestern. For additional information, please see
"Subsidiaries" on page F-2.
Bancorp is registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended. Bancorp is also a savings and loan holding company
under the savings and loan holding company provisions of the Home Owners' Loan
Act of 1933, as amended by the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA). As such, Bancorp is subject to strict
regulation regarding the acquisition of additional financial institutions and
the conduct, through subsidiaries, of non-banking activities (see "Regulation"
on page F-3).
Bancorp faces strong competition from both financial institutions and other
non-financial organizations. Its competitors include local and regional
financial institutions, savings and loans, and bank holding companies, as well
as some of the largest banking organizations in the United States. In addition,
other types of financial institutions, such as credit unions, also offer a wide
range of loan and deposit services that are directly competitive with those
offered by Bancorp's subsidiaries. The consumer is also served by brokerage
firms and mutual funds that provide checking services, credit cards, and other
services similar to those offered by Bancorp's subsidiaries. Major stores
compete for loans by offering credit cards and retail installment contracts. It
is anticipated that competition from entities other than financial institutions
will continue to grow.
The range of banking services provided by Bancorp's subsidiaries to their
customers includes commercial lending, real estate lending, consumer credit,
credit card, and other personal loan financing. First Southwestern, Community
First, Citizens First, Clyde, and Bright National also offer lease financing. In
addition, Bancorp's financial institutions offer deposit services that include
interest-bearing and noninterest-bearing deposit accounts and time deposits.
Most subsidiaries provide safe deposit facilities. A full range of trust and
asset management services is provided by Bancorp's subsidiaries, excluding the
savings banks and the finance company. Each subsidiary retains its local
identity and operates under the direction of its own board of directors and
officers.
Bancorp and its subsidiaries operate in one business segment--the financial
institutions industry. Foreign transactions are nominal. Information regarding
statistical disclosure required by Industry Guide 3 is included in Bancorp's
Annual Report to Shareholders for the year ended December 31, 1998, and is
incorporated herein by reference.
At December 31, 1998, Bancorp and its subsidiaries employed 1,338 employees.
Bancorp's executive office is located at 300 High Street, Hamilton, Ohio 45012,
and its telephone number is (513) 867-4700.
SUBSIDIARIES
The following table lists each of Bancorp's subsidiaries, their acquisition
dates, the number of offices that each subsidiary has, total deposits, and the
number of ATMs owned by each subsidiary:
DEPOSITS
ACQUISITION 12/31/98 NUMBER OF
SUBSIDIARY/LOCATION DATE ($ IN 000) OFFICES ATMS
------------------- ----------- ---------- --------- -------
FIRST SOUTHWESTERN/
HAMILTON, OHIO 04/26/83 $811,843 30 30
COMMUNITY FIRST/
5
F-3
CELINA/VAN WERT, OHIO 04/29/83 531,644 21 12
UNION TRUST/
UNION CITY, INDIANA 09/01/89 42,488 3 2
INDIANA LAWRENCE/
NORTH MANCHESTER, INDIANA 09/01/89 132,981 8 3
FIDELITY FEDERAL/
MARION, INDIANA 09/21/90 62,207 3 1
CITIZENS FIRST/
HARTFORD CITY, INDIANA 10/01/90 85,437 6 4
HOME FEDERAL/
HAMILTON, OHIO 10/01/91 231,962 7 5
UNION BANK/
NORTH VERNON, INDIANA 01/04/93 80,456 3 4
CLYDE/CLYDE, OHIO 06/01/94 60,376 2 1
PEOPLES BANK/
SUNMAN, INDIANA 07/16/95 46,967 2 2
BRIGHT NATIONAL/
FLORA, INDIANA 10/01/95 111,031 7 6
FIRST FINANCE/
FAIRFIELD, OHIO 05/08/96 N/A 2 N/A
FARMERS/
LIBERTY, INDIANA 12/01/96 50,918 5 1
6
F-4
DEPOSITS
ACQUISITION 12/31/98 NUMBER OF
SUBSIDIARY/LOCATION DATE ($ IN 000) OFFICES ATMS
------------------- ----------- ---------- --------- -------
HASTINGS/
HASTINGS, MICHIGAN 01/01/97 49,227 2 2
VEVAY/VEVAY, INDIANA 06/01/97 48,026 4 2
Community First was formed on November 1, 1997 as a result of the merger of two
of Bancorp's affiliates, the Citizens Commercial Bank & Trust Company and Van
Wert National Bank. On December 8, 1997, Community First purchased the assets
and assumed the liabilities of eleven branches of KeyBank National Association.
The purchase of The Union State Bank, completed on April 1, 1998, resulted in
the addition of another branch and $53 million in deposits for Community First.
In April 1996, Bancorp acquired Farmers & Merchants Bank of Rochester,
Rochester, Indiana (F&M). Upon completion of the merger F&M was merged with
Indiana Lawrence.
In November 1995, Home Federal combined operations with Fayette Federal,
resulting in Fayette Federal operating as a division of Home Federal.
REGULATION
First Southwestern, Bright National and Hastings, as national banking
associations, are subject to supervision and regular examination by the
Comptroller of the Currency. Community First and Clyde, as Ohio state chartered
banks, are subject to supervision and regular examination by the Superintendent
of Banks of the State of Ohio. First Southwestern, Community First, Clyde,
Peoples Bank, Bright National, and Hastings are members of the Federal Reserve
System and, as such, are subject to the applicable provisions of the Federal
Reserve Act. Community First is also subject to regular examination by the
Federal Reserve System. Union Trust, Indiana Lawrence, Citizens First, Union
Bank, Peoples Bank, Farmers and Vevay, as Indiana state chartered banks, are
subject to supervision and regular examination by the Indiana Department of
Financial Institutions. Fidelity Federal and Home Federal, as federal savings
banks, are subject to supervision and regular examination by the Office of
Thrift Supervision. Since Fidelity Federal is located in Indiana, it is also
subject to examination by the Indiana Department of Financial Institutions.
First Finance is subject to supervision and regular examinations by the State of
Ohio Division of Consumer Finance. All depository institutions are insured by
the Federal Deposit Insurance Corporation and are subject to the provisions of
the Federal Deposit Insurance Act.
To the extent that the information below consists of summaries of certain
statutes or regulations, it is qualified in its entirety by reference to the
statutory or regulatory provisions described.
Bancorp is subject to the provisions of the Bank Holding Company Act of 1956, as
amended (the Act), which requires a bank holding company to register under the
Act and to be subject to supervision and examination by the Board of Governors
of the Federal Reserve System. As a bank holding company, Bancorp is required to
file with the Board of Governors an annual report and such additional
information as the Board of Governors may require pursuant to the Act. The Act
requires prior approval by the Board of Governors of the acquisition by a bank
holding company, or any subsidiary thereof, of 5% or more of the voting stock or
substantially all the assets of any bank within the United States. Prior to the
passage of FIRREA, it was not possible for bank holding companies, such as
Bancorp, to acquire "healthy" thrift institutions. Although such acquisitions
are now authorized, mergers between bank holding companies and thrift
institutions must be approved by the Federal Reserve Board and the Office of
Thrift Supervision. When a bank holding company acquires a thrift institution,
it is then considered a savings and loan holding company which subjects the bank
holding company to regulation and examination by the Office of Thrift
Supervision. As a bank holding company located in the State of Ohio, Bancorp is
not permitted to acquire a bank or other financial institution located in
another state unless such acquisition is specifically authorized by the statutes
of such state, as
7
F-5
is the case in Indiana, Michigan, and Kentucky. The Act further provides that
the Board of Governors shall not approve any such acquisition that would result
in a monopoly or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any part of the
United States, or the effect of which may be to substantially lessen competition
or to create a monopoly in any section of the country, or that in any other
manner would be in restraint of trade, unless the anti-competitive effects of
the proposed transaction are clearly outweighed in the public interest by the
probable effect of the transaction in meeting the convenience and needs of the
community to be served.
The Act also prohibits a bank holding company, with certain exceptions, from
acquiring 5% or more of the voting stock of any company that is not a bank and
from engaging in any business other than banking or performing services for its
banking subsidiaries without the approval of the Board of Governors. In
addition, the acquisition of a thrift institution must be approved by the Office
of Thrift Supervision pursuant to the savings and loan holding company
provisions of the Home Owners' Loan Act of 1933, as amended by FIRREA. The Board
of Governors is also authorized to approve, among other things, the ownership of
shares by a bank holding company in any company the activities of which the
Board of Governors has determined to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. The Board of
Governors has, by regulation, determined that certain activities, including
mortgage banking, operating small loan companies, factoring, furnishing certain
data processing operations, holding or operating properties used by banking
subsidiaries or acquired for such future use, providing certain investment and
financial advice, leasing (subject to certain conditions) real or personal
property, providing management consulting advice to certain depository
institutions, providing securities brokerage services, arranging commercial real
estate equity financing, underwriting and dealing in government obligations and
money market instruments, providing consumer financial counseling, operating a
collection agency, owning and operating a savings association, operating a
credit bureau and conducting certain real estate investment activities and
acting as insurance agent for certain types of insurance, are closely related to
banking within the meaning of the Act. It also has determined that certain other
activities, including real estate brokerage and syndication, land development,
and property management, are not related to credit transactions and are not
permissible.
The Act and the regulations of the Board of Governors prohibit a bank holding
company and its subsidiaries from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property, or
furnishing of services. The Act also imposes certain restrictions upon dealings
by affiliated banks with the holding company and among themselves, including
restrictions on interbank borrowing and upon dealings in respect to the
securities or obligations of the holding company or other affiliates.
The earnings of banks, and therefore the earnings of Bancorp (and its
subsidiaries), are affected by the policies of regulatory authorities, including
the Board of Governors of the Federal Reserve System. An important function of
the Federal Reserve Board is to regulate the national supply of bank credit in
an effort to prevent recession and to restrain inflation. Among the procedures
used to implement these objectives are open market operations in U.S. Government
securities, changes in the discount rate on member bank borrowings, and changes
in reserve requirements against member bank deposits.
These procedures are used in varying combinations to influence overall growth
and distribution of bank loans, investments and deposits, and their use also may
affect interest rates charged on loans or paid for deposits.
Monetary policies of the Federal Reserve Board have had a significant effect on
the operating results of commercial banks in the past and are expected to
continue to do so in the future. The effect, if any, of such policies upon the
future business and earnings of Bancorp cannot accurately be predicted.
Bancorp makes no attempt to predict the effect on its revenues and earnings of
changes in general economic, industrial, and international conditions or in
legislation and governmental regulations.
YEAR 2000
The information contained on page 5 of the Management's Discussion and Analysis
of Financial Condition and Results of Operations (Management's Discussion and
Analysis) section
8
F-6
of Bancorp's Annual Report to Shareholders for the year ended
December 31, 1998 is incorporated herein by reference in response to this item.
ITEM 2. PROPERTIES.
The registrant and its subsidiaries operate from 61 offices in Ohio, including
Bancorp's executive office in Hamilton, Ohio, 42 offices in Indiana and two in
Michigan. Thirty of the offices are located in Butler County, Ohio, of which
four branches are built on leased land and there are seven branches wherein the
land and building are leased. Excess space in three facilities is leased to
third parties. Nine offices are located in Mercer County, Ohio, six in Van Wert
County, Ohio, two in Preble County, Ohio, three in Warren County, Ohio, three in
Hamilton County, Ohio, two in Sandusky County, Ohio, two in Paulding County,
Ohio, one in Allen County, Ohio, three in Auglaize County, Ohio, and one in
Williams County, Ohio. Five offices are located in Wabash County, Indiana, of
which one office is built on leased land with a purchase option on the land.
Three offices are in Randolph County, Indiana, three in Grant County, Indiana,
one in Jay County, Indiana, four in Blackford County, Indiana, one in Fayette
County, Indiana, one in Franklin County, Indiana, two in Jennings County,
Indiana, four in Carroll County, Indiana, two in Tippecanoe County, Indiana,
three in Fulton, County, Indiana, two in Union County, Indiana, three in Rush
County, Indiana, one in Clinton County, Indiana, one in Ripley County, Indiana,
one in Dearborn County, Indiana, and four in Switzerland, County, Indiana. One
office is located in Delaware County, Indiana, of which both the land and
building are leased. One office is located in Barry County, Michigan and one in
Allegan County, Michigan. All leases are comparable to other leases in the
respective market areas and do not contain provisions detrimental to the
registrant or its subsidiaries.
ITEM 3. LEGAL PROCEEDINGS.
Except for routine litigation incident to their business, the registrant and its
subsidiaries are not a party to any material pending legal proceedings and none
of their property is the subject of any such proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the shareholders during the fourth quarter of 1998.
ADDITIONAL ITEM - EXECUTIVE OFFICERS.
Shown in the table below are the Executive Officers of Bancorp as of December
31, 1998. The Executive Officers will serve until the first meeting of the Board
of Directors following the next annual meeting of shareholders, scheduled to be
held on April 27, 1999 or until their successors are elected and duly qualified.
All Executive Officers are chosen by the Board of Directors by a majority vote.
NAME AGE POSITION
- --------------------- ----- ---------------------------------------
STANLEY N. PONTIUS 52 PRESIDENT AND CHIEF EXECUTIVE OFFICER, DIRECTOR
RICK L. BLOSSOM 51 SENIOR VICE PRESIDENT, CHIEF LENDING OFFICER
MARK W. IMMELT 53 SENIOR VICE PRESIDENT, TRUST SERVICES
BRIAN D. MORIARTY 56 SENIOR VICE PRESIDENT, HUMAN RESOURCES
MICHAEL R. O'DELL 47 SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
MICHAEL T. RILEY 48 SENIOR VICE PRESIDENT, CONSUMER BANKING AND
OPERATIONS
C. DOUGLAS LEFFERSON 34 FIRST VICE PRESIDENT, COMPTROLLER
The following is a brief description of the business experience over the past
five years of the individuals named above.
Stanley N. Pontius became Chief Executive Officer of Bancorp in July 1992. Upon
joining Bancorp in March 1991, he assumed the responsibilities of President and
Chief Operating Officer, as well as a director. He served as Chief Operating
Officer until July 1992. Also in
9
F-7
March 1991, he became President, Chief Executive Officer, and a director of
First Southwestern. Effective July 1, 1997, Mr. Pontius was promoted to Chairman
of the Board of First Southwestern and retained the position of Chief Executive
Officer until November 24, 1998.
Rick L. Blossom became Chief Lending Officer of Bancorp effective January 12,
1996. He remains Senior Vice President of Bancorp, a position he has held since
September 26, 1990. On November 24, 1998, Mr. Blossom was promoted to President
and Chief Executive Officer of First Southwestern. Mr. Blossom had served as
First Southwestern's President and Chief Operating Officer since July 1, 1997.
On January 12, 1996, he became Executive Vice President of First Southwestern,
retaining his Chief Lending Officer status. He previously held the title of
Senior Vice President/Retail Lending of First Southwestern, a position he held
since March 1991.
Mark W. Immelt became Senior Vice President of Bancorp Trust Services on July 1,
1997. Mr. Immelt joined First Southwestern in December 1996 as Senior Vice
President and Senior Trust Officer, a position that he still retains. Before
joining First Southwestern, he spent 28 years managing personal trust, corporate
trust, employee benefit programs and private banking programs in the Northern
Indiana and Northeast Ohio area.
Brian D. Moriarty became Senior Vice President of Bancorp, responsible for the
human resources function, on January 12, 1996. Mr. Moriarty also became Senior
Vice President of First Southwestern in January 1996, where he had been First
Vice President since 1991.
Michael R. O'Dell became Senior Vice President, Chief Financial Officer and
Secretary of Bancorp on January 12, 1996. He had served as Bancorp's Comptroller
since December 1994. Mr. O'Dell had served as Senior Vice President and Chief
Financial Officer of First Southwestern from January 1996 to July 1997, and as
First Vice President and Comptroller of First Southwestern from 1991 to January
1996.
Michael T. Riley became Senior Vice President of Bancorp, responsible for
Marketing, data processing, operations and public relations, on January 12,
1996. Mr. Riley also became Senior Vice President of First Southwestern in
January 1996, where his duties include marketing, data processing and
operations. He had served as First Vice President of Consumer Banking for First
Southwestern since 1989.
C. Douglas Lefferson became First Vice President and Comptroller of Bancorp
effective November 25, 1998. He had served as Vice President and Chief Financial
Officer of First Southwestern since July 1997. Mr. Lefferson previously held the
title of Vice President and Comptroller of First Southwestern since December
1995 and Assistant Vice President and Assistant Comptroller since 1993.
10
F-8
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
Bancorp had 4,321 common stock shareholders of record as of February 22, 1999.
Bancorp's common equity is listed with the National Association of Securities
Dealers, Inc. (NASDAQ) and is traded on The NASDAQ Stock Market. The information
contained on page 28 of the Notes to Consolidated Financial Statements in
Bancorp's Annual Report to Shareholders for the year ended December 31, 1998 is
incorporated herein by reference in response to this item.
ITEM 6. SELECTED FINANCIAL DATA.
The information contained in Table 1 on page 2 of the Management's Discussion
and Analysis section of Bancorp's Annual Report to Shareholders for the year
ended December 31, 1998 is incorporated herein by reference in response to this
item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information contained in the Management's Discussion and Analysis section of
Bancorp's Annual Report to Shareholders for the year ended December 31, 1998 is
incorporated herein by reference in response to this item.
The financial and statistical data presented on the following pages, when viewed
along with the financial and statistical data presented in pages 1 through 28 of
Management's Discussion and Analysis, Consolidated Financial Statements, and
Notes to Consolidated Financial Statements in Bancorp's Annual Report to
Shareholders for the year ended December 31, 1998, provides a detailed review of
Bancorp's business activities.
INVESTMENT PORTFOLIO
At December 31, 1998, Bancorp's investment portfolio included no investments
which were not issued by the U.S. Government, its agencies, or corporations and
which exceeded ten percent of Bancorp's shareholders' equity.
LOAN PORTFOLIO
The table below shows the composition of Bancorp's loan portfolio at the end of
each of the last five years:
DECEMBER 31
-------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
COMMERCIAL $ 631,906 $ 502,919 $ 398,034 $ 340,942 $ 286,635
REAL ESTATE--CONSTRUCTION 72,518 63,308 43,262 41,845 29,273
REAL ESTATE--MORTGAGE 1,042,579 927,985 863,414 788,805 746,150
INSTALLMENT 474,783 439,744 366,051 329,034 285,412
CREDIT CARD 18,521 17,369 16,107 15,406 15,599
LEASE FINANCING 29,212 27,260 14,821 16,557 16,102
---------- ---------- ---------- ---------- ----------
TOTAL LOANS $2,269,519 $1,978,585 $1,701,689 $1,532,589 $1,379,171
========== ========== ========== ========== ==========
NONPERFORMING ASSETS
The accrual of interest on a loan is discontinued and interest collected on such
loan is credited to loan principal if, in the opinion of management, full
collection of principal is doubtful. The table on the following page summarizes
Bancorp's nonaccrual loans, restructured loans, other real estate owned, and
past due loans as of the end of each of the last five years:
DECEMBER 31
--------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- ------
(DOLLARS IN THOUSANDS)
NONACCRUAL LOANS $ 6,152 $ 5,257 $ 4,850 $ 2,764 $ 2,412
RESTRUCTURED LOANS 78 1,581 890 517 1,429
OREO* 221 950 264 1,677 2,116
------- ------- ------- ------- -------
TOTAL NONPERFORMING ASSETS $ 6,451 $ 7,788 $ 6,004 $ 4,958 $ 5,957
======= ======= ======= ======= =======
NONPERFORMING ASSETS AS A
11
F-9
PERCENT OF TOTAL LOANS PLUS
OREO 0.28% 0.39% 0.35% 0.32% 0.43%
ACCRUING LOANS PAST DUE
90 DAYS OR MORE $ 1,839 $ 1,203 $ 906 $ 1,071 $ 683
*OTHER REAL ESTATE OWNED
POTENTIAL PROBLEM LOANS
At December 31, 1998, Bancorp had $191,000 in loans for which payments were
presently current, but the borrowers were experiencing financial difficulties.
These loans are a combination of commercial, real estate, and installment loans
and are not included as part of nonaccrual loans, restructured loans or loans
past due 90 days or more and still accruing. However, these loans are subject to
constant monitoring by management, and their status is reviewed on a continual
basis. These loans were considered by management in determining the adequacy of
the recorded allowance for loan losses at December 31, 1998.
12
F-10
LOAN LOSS DATA
1998 1997 1996 1995 1994
------- ------- ------- ------- ------
(DOLLARS IN THOUSANDS)
TRANSACTIONS IN THE ALLOWANCE FOR LOAN LOSSES:
BALANCE AT JANUARY 1 $27,510 $22,672 $20,437 $18,609 $18,380
LOANS CHARGED OFF:
COMMERCIAL 1,861 1,072 1,210 790 648
REAL ESTATE--CONSTRUCTION 28
REAL ESTATE--MORTGAGE 329 247 226 26 124
INSTALLMENT AND OTHER
CONSUMER FINANCING 3,276 2,506 2,340 1,721 1,248
LEASE FINANCING 293 57 187 107 132
------- ------- ------- ------- -------
TOTAL LOANS CHARGED OFF 5,759 3,910 3,963 2,644 2,152
------- ------- ------- ------- -------
RECOVERIES OF LOANS PREVIOUSLY CHARGED OFF:
COMMERCIAL 246 273 346 546 384
REAL ESTATE--CONSTRUCTION 8
REAL ESTATE--MORTGAGE 58 92 54 39 41
INSTALLMENT AND OTHER
CONSUMER FINANCING 712 619 711 592 653
LEASE FINANCING 34 15 62 17 35
------- ------- ------- ------- -------
TOTAL RECOVERIES 1,050 999 1,173 1,202 1,113
------- ------- ------- ------- -------
NET CHARGE-OFFS 4,709 2,911 2,790 1,442 1,039
ALLOWANCE ACQUIRED THROUGH MERGERS
AND ACQUISITIONS 806 3,013 1,592 1,162
PROVISION FOR LOAN LOSSES 6,077 4,736 3,433 2,108 1,268
------- ------- ------- ------- -------
BALANCE AT DECEMBER 31 $29,684 $27,510 $22,672 $20,437 $18,609
======= ======= ======= ======= =======
RATIOS:
NET CHARGE-OFFS AS A PERCENT OF:
AVERAGE LOANS OUTSTANDING 0.22% 0.16% 0.17% 0.10% 0.08%
PROVISION 77.49% 61.47% 81.27% 68.41% 81.94%
ALLOWANCE 15.86% 10.58% 12.31% 7.06% 5.58%
ALLOWANCE AS A PERCENT OF:
5 YEAR MOVING AVERAGE OF
NET CHARGE-OFFS 1,151.35% 1,302.19% 759.79% 603.64% 402.18%
YEAR-END LOANS, NET OF
UNEARNED INCOME 1.31% 1.39% 1.33% 1.33% 1.35%
13
F-11
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following table shows an allocation of the allowance for loan losses for
each of the five years indicated:
DECEMBER 31
----------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------ -----------
$ % $ % $ % $ % $ %
------- ---- ------- ---- ------- ---- ------ ---- ------ ---
(DOLLARS IN THOUSANDS)
BALANCE AT END
OF PERIOD APPLI-
CABLE TO:
COMMERCIAL $ 6,472 28% $ 5,372 26% $ 4,826 23% $ 4,254 22% $ 4,395 21%
REAL ESTATE-
CONSTRUCTION 910 3% 246 3% 172 3% 210 3% 340 2%
REAL ESTATE-
MORTGAGE 5,018 46% 5,320 47% 3,510 51% 3,713 52% 2,552 54%
INSTALLMENT &
CREDIT CARD 8,448 22% 7,328 23% 5,419 22% 4,184 22% 3,298 22%
LEASE FINANCING 630 1% 483 1% 327 1% 196 1% 154 1%
UNALLOCATED 8,206 N/A 8,761 N/A 8,418 N/A 7,880 N/A 7,870 N/A
------- ---- ------- ---- ------- ---- ------- ---- ------- ----
$29,684 100% $27,510 100% $22,672 100% $20,437 100% $18,609 100%
======= ==== ======= ==== ======= ==== ======= ==== ======= ====
$ - DOLLAR AMOUNT
% - PERCENT OF LOANS IN EACH CATEGORY TO TOTAL LOANS
DIVIDEND PAYOUT RATIO
The dividend payout ratios for 1998, 1997 and 1996 were 46.1%, 47.0%, and 48.1%,
respectively.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K 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 Bancorp with the Securities
and Exchange Commission, in press releases, and in oral and written statements
made by or with the approval of Bancorp 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 Bancorp or its management or Board of
Directors; and statements of future economic performance 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.
Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from those in such statements. 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, interest rates, market and monetary
fluctuations; technological changes; mergers and acquisitions; the 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 Securities and Exchange
Commission; the costs and effects of litigation and of unexpected or adverse
outcomes in such litigation; the ability to achieve satisfactory results
regarding the Year 2000 issue; and the success of Bancorp at managing the risks
involved in the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and Bancorp undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the
14
F-12
occurrence of unanticipated events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information contained on pages 8 and 9 of the Management's Discussion and
Analysis section of Bancorp's Annual Report to Shareholders for the year ended
December 31, 1998 is incorporated herein by reference in response to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements and report of independent auditors
included on pages 11 through 27 of the Consolidated Financial Statements and the
Notes to Consolidated Financial Statements in Bancorp's Annual Report to
Shareholders for the year ended December 31, 1998 are incorporated herein by
reference.
The Quarterly Financial and Common Stock Data on page 28 of the Notes to
Consolidated Financial Statements in Bancorp's Annual Report to Shareholders for
the year ended December 31, 1998 is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
No disagreements with accountants on any accounting or financial disclosure
occurred during the periods covered by this report.
15
F-13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information called for by Item 10 is contained under "Shareholdings of
Directors, Executive Officers, and Nominees for Director" on pages 2 through 4
of Bancorp's Proxy Statement, dated March 23, 1999 with respect to the Annual
Meeting of Shareholders to be held on April 27, 1999, which was filed pursuant
to Regulation 14A of the Securities Exchange Act of 1934 and which is
incorporated herein by reference in response to this item.
Reference is also made to "Additional Item - Executive Officers" included in
Part I of this Form 10-K in partial response to Item 10.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing under "Meetings of the Board of Directors and
Committees of the Board" on page 11, "Executive Compensation" on pages 12
through 16, and under "Compensation Committee Report" on pages 18 and 19 of
Bancorp's Proxy Statement dated March 23, 1999 is incorporated herein by
reference in response to this item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information appearing under "Shareholdings of Directors, Executive Officers,
and Nominees for Director" on pages 2 through 4 of Bancorp's Proxy Statement
dated March 23, 1999 is incorporated herein by reference in response to this
item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information appearing in Note 17 of the Notes to Consolidated Financial
Statements included on page 24 of Bancorp's Annual Report to Shareholders is
incorporated herein by reference in response to this item.
16
F-14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents filed as a part of the Report: PAGE*
----
(1) Report of Ernst & Young LLP, Independent Auditors ........................ 27
Consolidated Balance Sheets as of December 31, 1998 and 1997............... 11
Consolidated Statements of Earnings for year ended
December 31, 1998, 1997, and 1996 ........................................ 12
Consolidated Statements of Comprehensive Income for year ended
December 31, 1998, 1997, and 1996.......................................... 12
Consolidated Statements of Cash Flows for year ended
December 31, 1998, 1997, and 1996 ........................................ 13
Consolidated Statements of Changes in Shareholders' Equity
for year ended December 31, 1998, 1997 and 1996 .......................... 14
Notes to Consolidated Financial Statements................................. 15
(2) Financial Statement Schedules:
Schedules to the consolidated financial statements
required by Regulation S-X are not required under the
related instructions, or are inapplicable, and therefore
have been omitted ......................................................... N/A
- --------------------------------------------------------------------------------
*The page numbers indicated refer to pages of the registrant's Annual Report to
Shareholders for the fiscal year ended December 31, 1998 which are incorporated
herein by reference.
17
F-15
(3) Exhibits:
Exhibit
Number
-------
(3)a Articles of Incorporation, as amended as of April 28, 1998.
(3)b Amended and Restated Regulations, as of April 22, 1997 and incorporated
herein by reference to Form10-K for year ended December 31, 1997.
File No. 000-12379.
(4) Rights Agreement between First Financial Bancorp and First National Bank
of Southwestern Ohio dated as of November 23, 1993.
(4.1) First Amendment to Rights Agreement dated as of May 1, 1998 and
incorporated herein by reference to Form 10-Q for the quarter ended March
31, 1998.
(10.1) See Exhibit (4) above.
(10.2) See Exhibit (4.1) above.
(10)(iii)A(1) First Financial Bancorp. 1991 Stock Incentive Plan, dated September 24,
1991 and incorporated herein by reference to a Registration Statement on
Form S-8, Registration No. 33-46819.
(10)(iii)A(2) Agreement between Stanley N. Pontius and First Financial Bancorp dated
January 27, 1998 and incorporated herein by reference to Form10-K for year
ended December 31, 1997. File No. 000-12379.
(10)(iii)A(3) Agreement between Rick L. Blossom and First Financial Bancorp dated
January 27, 1998 and incorporated herein by reference to Form10-K for year
ended December 31, 1997. File No. 000-12379.
(10)(iii)A(4) Agreement between Michael R. O'Dell and First Financial Bancorp dated
January 27, 1998 and incorporated herein by reference to Form10-K for year
ended December 31, 1997. File No. 000-12379.
(10)(iii)A(5) Agreement between Mark W. Immelt and First Financial Bancorp dated
January 27, 1998 and incorporated herein by reference to Form10-K for year
ended December 31, 1997. File No. 000-12379.
(10)(iii)A(6) Agreement between Michael T. Riley and First Financial Bancorp dated
January 27, 1998 and incorporated herein by reference to Form10-K for year
ended December 31, 1997. File No. 000-12379.
(10)(iii)A(7) First Financial Bancorp Dividend Reinvestment and Share Purchase Plan,
Dated April 24, 1997 and incorporated herein by reference to a Registration
Statement on Form S-3, Registration No. 333-25745.
(13) Registrant's annual report to security holders for the year ended December
31, 1998.
(21) First Financial Bancorp. Subsidiaries.
18
F-16
(23) Consent of Ernst & Young LLP, Independent Auditors.
(27) Financial Data Schedule
- --------------------------------------------------------------------------------
The Company will furnish, without charge, to a security holder upon request a
copy of the documents, portions of which are incorporated by reference (Annual
Report to Shareholders and Proxy Statement), and will furnish any other Exhibit
upon payment of reproductions costs.
(b) Reports on Form 8-K:
During the fourth quarter of the year ended December 31, 1998, the
registrant did not file any reports on Form 8-K.
19
F-17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
FIRST FINANCIAL BANCORP.
By: /s/ Stanley N. Pontius
- --------------------------------------
Stanley N. Pontius, Director
President and Chief Executive Officer
Date March 23, 1999
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Stanley N. Pontius /s/ Michael R. O'Dell
- -------------------------------------- --------------------------------------
Stanley N. Pontius, Director Michael R. O'Dell
President and Chief Executive Officer Senior Vice President, Chief Financial
Officer, and Secretary
Date March 23, 1999 Date March 23, 1999
---------------------------------- -----------------------------------
/s/ Barry S. Porter /s/ Carl R. Fiora
- -------------------------------------- --------------------------------------
Barry S. Porter, Director Carl R. Fiora, Director
Date March 23, 1999 Date March 23, 1999
---------------------------------- -----------------------------------
/s/ Vaden Fitton /s/ Perry D. Thatcher
- -------------------------------------- --------------------------------------
Vaden Fitton, Director Perry D. Thatcher, Director
Date March 23, 1999 Date March 23, 1999
---------------------------------- -----------------------------------
/s/ Arthur W. Bidwell /s/ Stephen S. Marcum
- -------------------------------------- --------------------------------------
Arthur W. Bidwell, Director Stephen S. Marcum, Director
Date March 23, 1999 Date March 23, 1999
---------------------------------- -----------------------------------
/s/ Richard L. Alderson /s/ Steven C. Posey
- -------------------------------------- --------------------------------------
Richard L. Alderson, Director Steven C. Posey, Director
Date March 23, 1999 Date March 23, 1999
---------------------------------- ----------------------------------
/s/ C. Douglas Lefferson
- --------------------------------------
C. Douglas Lefferson, First Vice President
and Comptroller
Date March 23, 1999
----------------------------------