FIRST FINANCIAL BANCORP /OH/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8-K - FIRST FINANCIAL BANCORP /OH/	a8kearningsrelease1q14.htm
EX-99.2 - EXHIBIT 99.2 - FIRST FINANCIAL BANCORP /OH/	exh992earningsrelease1q1.htm

EXHIBIT 99.1

First Financial Bancorp Reports First Quarter 2014 Financial Results

Cincinnati, Ohio - April 29, 2014 - First Financial Bancorp (Nasdaq: FFBC) (“First Financial” or the “Company”) announced today financial and operational results for the first quarter 2014.

First quarter net income was $15.1 million and earnings per diluted common share were $0.26. This compares with fourth quarter net income of $3.8 million and earnings per diluted common share of $0.07 and first quarter 2013 net income of $13.8 million and earnings per diluted common share of $0.24.

Continued solid quarterly performance


•	Quarterly results included several items which reduced earnings per diluted share by approximately $0.02 on a net basis


•	Return on average assets of 0.96%; 1.02% as adjusted for the items noted below


•	Return on average tangible common equity of 10.49%; 11.13% as adjusted for the items noted below


•


▪	Capital ratios remain strong


•	Tangible common equity to tangible assets of 9.23%


•	Tier 1 capital ratio of 14.42%


•	Total risk-based capital ratio of 15.67%


▪	Total uncovered loan growth for the quarter of 12.6% on an annualized basis

•Strong performance in traditional C&I / owner-occupied CRE and franchise lending

•Solid growth in investment CRE lending


▪	Quarterly net interest margin of 3.82%


•	Decline of 8 bps on a reported basis and 4 bps on an adjusted basis compared to the linked quarter


•	Yield on investment securities increased 14 bps to 2.52%


▪	Continued improvement in asset quality metrics


•	Total nonperforming assets declined $11.0 million, or 15.2%, and represent 0.95% of total assets compared to 1.13% for the linked quarter


•	Net charge-offs declined $1.6 million, or 44.4%, compared to the linked quarter and totaled 23 bps of average uncovered loans on an annualized basis

During the quarter, the Company incurred certain pre-tax expenses of $0.4 million resulting from the execution of its efficiency initiatives. The Company also incurred pre-tax acquisition-related and market expansion costs of $0.6 million as well as legal settlement expenses of $0.5 million. Additionally, pre-tax net gains of $0.1 million were recognized resulting from the sales of investment securities. In the aggregate, these items reduced pre-tax earnings by $1.4 million, or approximately $0.02 per diluted share after taxes.

The board of directors has authorized a dividend of $0.15 per common share for the next regularly scheduled dividend, payable on July 1, 2014 to shareholders of record as of May 30, 2014.

Under the announced share repurchase plan, the Company repurchased 40,255 shares during the first quarter 2014 at an average price of $17.32 per share. Subsequent to the signing of a definitive merger agreement to acquire Guernsey Bancorp, Inc. in a transaction including $13.5 million of cash consideration and an increasingly active M&A environment industry-wide, the Company expects to continue the first quarter suspension of its share repurchase plan for the second quarter 2014.

Claude Davis, President and Chief Executive Officer, commented, “Our financial results for the first quarter were impacted by seasonal and weather-related events that drove a decline in noninterest income and increases in employee benefit-related expenses and occupancy costs. Excluding the effect of these items, our operating performance remained strong and was consistent with our results from the prior quarter.

“As we announced in a separate release, we strengthened our entry to the dynamic Columbus, Ohio market with the signing of a definitive merger agreement to acquire the parent of The Guernsey Bank, an institution with $122.9 million in assets and $100.5 million in deposits across three banking centers, all of which are located in demographically attractive communities. Guernsey has built a strong retail banking franchise that provides an excellent strategic complement to the asset generation platforms of The First Bexley Bank and Insight Bank. Taken as a whole, these transactions position First Financial as one of the larger community banks serving the growth oriented Columbus market and provide a strong foundation for future growth. Integration activities related to the First Bexley and Insight transactions are progressing well and we continue to expect that the deals will close during the second quarter.

“Regarding our expansion into Fort Wayne, we are pleased with the progress our new commercial and mortgage lending teams are making as they build the First Financial brand in the market. The commercial team has been active with origination and commitment levels exceeding expectations to date, and with the long winter behind us, the mortgage team is building a strong pipeline as we move into the second quarter.

“Our solid pipeline at the end of the year translated into strong loan production during the first quarter as our uncovered portfolio increased $108.6 million, or 12.6% on an annualized basis, compared to the linked quarter and was up $365.4 million, or 11.2%, year-over-year. Furthermore, uncovered loan production outpaced the decline in covered loan balances as total loan balances increased $60.1 million during the quarter. As business confidence continues to improve in our markets, the level of new business opportunities continues to grow as well and we remain optimistic about our ability to keep our loan production momentum moving forward into the second quarter.

“From a credit perspective, our resolution efforts have continued to produce positive results as our level of nonperforming assets has declined to its lowest level since the second quarter of 2009. Additionally, the positive trend experienced in charge-off activity over the last five quarters continued as net charge-offs dropped to 23 bps of average loan balances for the quarter and contributed to a decline in credit costs.”

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income for the first quarter was $54.8 million as compared to $55.8 million for the fourth quarter 2013 and $58.7 million for the first quarter 2013. Compared to the linked quarter, total interest income decreased $0.9 million, or 1.4%, and total interest expense increased $0.1 million, or 3.1%. Net interest margin was 3.82% for the first quarter as compared to 3.90% for the fourth quarter 2013 and 4.04% for the first quarter 2013. Included in the fourth quarter 2013’s interest income was the recognition of $0.6 million of previously reserved interest related to loans that returned to accrual status. Excluding this amount, net interest margin for the fourth quarter 2013 was 3.86%, resulting in a decline of 4 bps during the first quarter.

Interest income earned on loans decreased $3.2 million, or 6.1%, compared to the prior quarter. Excluding the reserved interest recognized in the fourth quarter 2013 discussed above, interest income on loans decreased $2.6 million, or 5.1%, during the first quarter. The decrease in interest income earned on loans was driven primarily by a decline of $55.5 million, or 11.3%, in average covered loan balances as well as a decline in loan fees earned on the uncovered loan portfolio. Partially offsetting the negative impact from covered loan activity was the lower amortization of the FDIC indemnification asset which declined $1.0 million, or 41.9%, as the average balance of the asset declined $34.5 million, or 44.1%, during the quarter.

Growth in average uncovered loan balances of $85.3 million, or 2.5% on a linked quarter basis, helped to partially offset the impact on net interest income from covered loan activity during the quarter as well as the lower level of loan fees. Excluding the reserved interest recognized in the fourth quarter 2013, the yield earned on the uncovered portfolio during the quarter was approximately 4.34%, an 11 bp decrease compared to the linked quarter.

Interest income earned from investment securities increased $1.3 million, or 13.3%, compared to the prior quarter as average balances increased $153.2 million, or 9.3%, and the yield earned on the portfolio increased 14 bps to 2.52%.

The slight increase in total interest expense was due to an increase in deposit and short-term borrowing costs. Average time deposit balances increased $20.5 million, or 2.2%, with the related cost of funds increasing 4 bps compared to the linked quarter. The cost of funds related to total interest-bearing deposits increased 1 bp to 36 bps compared to the fourth quarter 2013. Average short-term borrowing balances increased $259.5 million, or 49.6%, during the quarter with the impact on net interest margin partially offset by a decline of 3 bps in the related cost of funds.

NONINTEREST INCOME

The following table presents noninterest income for the three months ended March 31, 2014 and for the trailing four quarters, adjusted to exclude the impact of covered loan activity and other select items on the Company’s reported balance.




Table I
	For the Three Months Ended
	March 31,			December 31,			September 30,		June 30,			March 31,
(Dollars in thousands)	2014			2013			2013		2013			2013

Total noninterest income	$	14,175		$	13,043		$	22,291	$	11,615		$	26,698
Selected components of noninterest income
Accelerated discount on covered loans¹	1,015			1,572			1,711		1,935			1,935
FDIC loss sharing income	(508		)	(3,385		)	5,555		(7,384		)	8,934
Gain on sale of investment securities	50			—			—		188			1,536
Other items not expected to recur	—			—			—		442			—
Total noninterest income excluding items noted above	$	13,618		$	14,856		$	15,025	$	16,434		$	14,293

¹ Net of the related adjustment on the FDIC indemnification asset

Excluding the items highlighted in Table I, noninterest income earned in the first quarter was $13.6 million compared to $14.9 million in the fourth quarter 2013 and $14.3 million in the first quarter 2013. The decrease of $1.2 million compared to the linked quarter was driven by seasonal declines in service charges on deposit accounts and bankcard income as well as lower net gains on sales of residential

mortgages, rental income from covered OREO and portfolio valuations related to client derivatives, partially offset by higher trust and wealth management fees.

NONINTEREST EXPENSE

The following table presents noninterest expense for the three months ended March 31, 2014 and for the trailing four quarters, adjusted to exclude the impact of covered asset activity and other select items on the Company’s reported balance.




	Table II
		For the Three Months Ended
		March 31,		December 31,		September 30,		June 30,			March 31,
	(Dollars in thousands)	2014		2013		2013		2013			2013

	Total noninterest expense	$	47,842	$	70,285	$	48,801	$	53,283		$	53,106
	Selected components of noninterest expense
	Loss (gain) - covered real estate owned	33		946		204		(2,212		)	(157		)
	Loss sharing expense	1,569		1,495		1,724		1,578			2,286
	Pension settlement charges	—		462		1,396		4,316			—
	Expenses associated with efficiency initiative	350		1,450		1,051		1,518			2,878
	FDIC indemnification asset valuation adjustment	—		22,417		—		—			—
	Acquisition-related expense	620		284		—		—			—
	Other items not expected to recur	465		—		—		—			390
	Total noninterest expense excluding items noted above	$	44,805	$	43,231	$	44,426	$	48,083		$	47,709

	FDIC loss share support ¹	$	862	$	844	$	841	$	795		$	776

¹ Represents direct expenses associated with credit management and loan administration related to covered assets as well as compliance with FDIC loss sharing agreements; included in total noninterest expense excluding the items noted above and comprised of several noninterest expense line items

Excluding the items highlighted in Table II, noninterest expense in the first quarter was $44.8 million compared to $43.2 million in the fourth quarter 2013 and $47.7 million in the first quarter 2013. The increase of $1.6 million compared to the linked quarter was due to seasonal increases in benefit expenses and higher weather-related occupancy costs, partially offset by lower state intangible tax, marketing and other noninterest expenses. Acquisition-related expenses include $0.2 million of professional services expenses, $0.2 million of data processing costs and $0.2 million of employee benefit expenses. Other items not expected to recur from the first quarter 2014 consist of legal settlement expenses.

INCOME TAXES

For the first quarter, income tax expense was $7.1 million, resulting in an effective tax rate of 31.9%, compared with an income tax benefit of $1.2 million and an effective tax rate of -47.4% during the fourth quarter 2013 and income tax expense of $6.4 million and an effective tax rate of 31.5% during the first quarter 2013. The increase in the effective tax rate as compared to the linked quarter is primarily related to higher pre-tax income in the first quarter as a result of the valuation adjustment to the FDIC indemnification asset recognized during the fourth quarter 2013 as well as favorable state tax adjustments resulting from the completion of 2012 state tax returns and a related adjustment to deferred taxes recognized during the prior quarter. While the effective tax rate may fluctuate from quarter to quarter due to tax jurisdiction changes and the level of tax-enhanced assets, the overall effective tax rate for the full year is expected to be in the range of approximately 32.0% - 34.0%.

CREDIT QUALITY - EXCLUDING COVERED ASSETS

The following table presents certain credit quality metrics related to the Company's uncovered loan portfolio as of March 31, 2014 and the trailing four quarters.




Table III
	As of or for the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(Dollars in thousands)	2014			2013			2013			2013			2013

Total nonaccrual loans	$	35,334		$	37,605		$	57,926		$	62,011		$	64,452
Troubled debt restructurings - accruing	13,400			15,094			16,278			12,924			12,757
Total nonperforming loans	48,734			52,699			74,204			74,935			77,209
Total nonperforming assets	61,477			72,505			86,008			86,733			89,202
Nonperforming assets as a % of:
Period-end loans plus OREO	1.70		%	2.06		%	2.50		%	2.56		%	2.74		%
Total assets	0.95		%	1.13		%	1.38		%	1.38		%	1.40		%
Nonperforming assets ex. accruing TDRs as a % of:
Period-end loans plus OREO	1.33		%	1.63		%	2.03		%	2.17		%	2.34		%
Total assets	0.74		%	0.89		%	1.12		%	1.18		%	1.20		%
Nonperforming loans as a % of total loans	1.35		%	1.50		%	2.16		%	2.22		%	2.38		%
Provision for loan and lease losses - uncovered	$	1,159		$	1,851		$	1,413		$	2,409		$	3,041
Allowance for uncovered loan & lease losses	$	43,023		$	43,829		$	45,514		$	47,047		$	48,306
Allowance for loan & lease losses as a % of:
Total loans	1.19		%	1.25		%	1.33		%	1.39		%	1.49		%
Nonaccrual loans	121.8		%	116.6		%	78.6		%	75.9		%	75.0		%
Nonperforming loans	88.3		%	83.2		%	61.3		%	62.8		%	62.6		%
Total net charge-offs	$	1,965		$	3,536		$	2,946		$	3,668		$	2,512
Annualized net-charge-offs as a % of average
loans & leases	0.23		%	0.41		%	0.34		%	0.45		%	0.32		%

¹ Includes nonaccrual troubled debt restructurings

Net Charge-offs

For the first quarter, net charge-offs declined $1.6 million, or 44.4%, to $2.0 million compared to the linked quarter. Significant charge-offs during the quarter included a $0.5 million valuation adjustment related to a commercial credit as well as a $0.4 million charge-off associated with the disposition of a commercial real estate credit.

Nonperforming Assets

Nonaccrual loans, including nonaccrual troubled debt restructurings, decreased $2.3 million, or 6.0%, to $35.3 million as of March 31, 2014 from $37.6 million as of December 31, 2013. The decline in nonaccrual loans as compared to the linked quarter was primarily related to payments on two commercial real estate credits totaling $1.0 million as well as the charge-offs discussed above.

Accruing troubled debt restructurings decreased $1.7 million, or 11.2%, to $13.4 million as of March 31, 2014 from $15.1 million as of December 31, 2013. This decline was primarily related to a $0.7 million performing loan that was refinanced at market terms upon maturity and is no longer classified as a troubled debt restructuring as well as a $0.8 million loan that was reclassified to nonaccrual status during the first quarter.

OREO decreased $7.1 million, or 35.7%, to $12.7 million during the first quarter as resolutions and valuation adjustments of $8.3 million exceeded additions of $1.2 million during the quarter. While there were no individually significant additions during the first quarter, resolutions during the period included a single commercial property totaling $7.9 million which was added to OREO during the fourth quarter 2013.

Classified assets declined $7.0 million, or 6.4%, to $103.5 million as of March 31, 2014 from $110.5 million as of December 31, 2013 and decreased $27.0 million, or 20.7%, from $130.4 million as of March 31, 2013. Classified assets are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse.

Delinquent Loans

As of March 31, 2014, loans 30-to-89 days past due totaled $13.9 million, or 0.38% of period-end loans, compared to $13.6 million, or 0.39%, as of December 31, 2013 and $18.2 million, or 0.56%, as of March 31, 2013. The increase of $0.3 million, or 2.0%, during the first quarter was driven primarily by a $2.1 million increase in delinquent commercial real estate loans, partially offset by declines in delinquencies across the commercial, residential real estate and home equity loan portfolios during the period.

LOANS (EXCLUDING COVERED LOANS)

The following table presents the loan portfolio, excluding covered loans, as of March 31, 2014, December 31, 2013 and March 31, 2013.




Table IV
	As of
	March 31, 2014				December 31, 2013				March 31, 2013
			Percent				Percent				Percent
(Dollars in thousands)	Balance		of Total		Balance		of Total		Balance		of Total

Commercial	$	1,118,057	30.9	%	$	1,035,668	29.5	%	$	892,381	27.5	%
Real estate - construction	87,996		2.4	%	80,741		2.3	%	87,542		2.7	%
Real estate - commercial	1,513,891		41.9	%	1,496,987		42.7	%	1,433,182		44.1	%
Real estate - residential	360,671		10.0	%	352,931		10.1	%	330,260		10.2	%
Installment	44,911		1.2	%	47,133		1.3	%	53,509		1.6	%
Home equity	374,427		10.4	%	376,454		10.7	%	365,943		11.3	%
Credit card	34,458		1.0	%	35,592		1.0	%	32,465		1.0	%
Lease financing	79,792		2.2	%	80,135		2.3	%	53,556		1.6	%
Total	$	3,614,203	100.0	%	$	3,505,641	100.0	%	$	3,248,838	100.0	%

Loans, excluding covered loans, totaled $3.6 billion as of March 31, 2014, increasing $108.6 million, or 12.6% on an annualized basis, compared to the linked quarter and $365.4 million, or 11.2%, compared to March 31, 2013. The increase relative to the linked quarter was driven by growth in traditional C&I and owner-occupied commercial real estate, franchise finance and investment commercial real estate.

INVESTMENTS

The following table presents a summary of the total investment portfolio at March 31, 2014.




Table V
	As of March 31, 2014
	Held-to-		Available-for-						Percent of
(Dollars in thousands)	Maturity		Sale		Other		Total		Portfolio

Debt obligations of the U.S. Government	$	—	$	20,901	—		$	20,901	1.2	%
Debt obligations of U.S. Government Agency	18,603		9,726		—		28,329		1.6	%
Residential Mortgage Backed Securities
Pass-through securities:
Agency fixed rate	83,590		104,791		—		188,381		10.5	%
Agency adjustable rate	140,386		40,992		—		181,378		10.1	%
Non-Agency fixed rate	—		10,086		—		10,086		0.6	%
Collateralized mortgage obligations:
Agency fixed rate	356,663		261,262		—		617,925		34.3	%
Agency variable rate	—		96,023		—		96,023		5.3	%
Agency collateralized and insured municipal securities	67,348		103,308		—		170,656		9.5	%
Commercial mortgage backed securities	223,039		115,635		—		338,674		18.8	%
Municipal bond securities	1,177		1,392		—		2,569		0.1	%
Corporate securities	—		40,913		—		40,913		2.3	%
Asset-backed securities	—		49,430		—		49,430		2.7	%
Regulatory stock	—		—		42,576		42,576		2.4	%
Other	—		8,067		5,083		13,150		0.7	%
	$	890,806	$	862,526	$	47,659	$	1,800,991	100.0	%

The investment portfolio remained flat on a linked quarter basis as $139.7 million of purchases were offset by sales, amortizations and other portfolio reductions. The Company sold $92.5 million of securities during the quarter consisting primarily of certain CLOs in response to the potential regulatory impact under the Dodd-Frank Act (the “Volcker Rule”) and, to a lesser extent, hybrid securities, CMOs and corporate securities, recognizing a net pre-tax gain of $0.1 million. As of March 31, 2014, the overall duration of the investment portfolio decreased slightly to 4.2 years compared to 4.3 years as of December 31, 2013. The yield earned on the portfolio during the quarter increased 14 bps to 2.52% from 2.38% for the linked quarter, driven by higher reinvestment rates and continued stabilization in premium amortization. Due primarily to a tightening of mortgage and fixed income spreads during the quarter, the net unrealized loss included in accumulated other comprehensive loss related to the investment portfolio decreased $3.9 million to $12.4 million as of March 31, 2014.

DEPOSITS

Non-time deposit balances totaled $3.9 billion as of March 31, 2014, decreasing $20.8 million, or 0.5%, compared to the linked quarter. Seasonal factors drove declines in commercial and public fund transaction balances of $21.5 million and $49.1 million, respectively. This was offset by an increase in consumer balances of $50.0 million across multiple product offerings.

Time deposit balances increased $3.7 million, or 0.4%, due to an increase in public fund balances, partially offset by a slight decline in consumer balances.

The Company’s total cost of deposit funding, inclusive of noninterest-bearing balances, was 28 bps for the quarter, representing an increase of 1 bp compared to the prior quarter and a decrease of 4 bps compared to the first quarter 2013.

CAPITAL MANAGEMENT

The following table presents First Financial’s regulatory and other capital ratios as of March 31, 2014, December 31, 2013 and March 31, 2013.




Table VI
	As of
	March 31,			December 31,			March 31,
	2014			2013			2013

Leverage Ratio	9.94		%	10.11		%	10.00		%
Tier 1 Capital Ratio	14.42		%	14.61		%	15.87		%
Total Risk-Based Capital Ratio	15.67		%	15.88		%	17.15		%
Ending tangible shareholders' equity
to ending tangible assets	9.23		%	9.20		%	9.60		%
Ending tangible common shareholders'
equity to ending tangible assets	9.23		%	9.20		%	9.60		%

Tangible book value per share	$	10.24		$	10.10		$	10.33

Shareholders’ equity increased $9.2 million during the quarter due to net income for the quarter and a decline in the unrealized loss related to the investment portfolio, partially offset by dividends declared and share repurchases. The Company’s regulatory capital ratios declined during the quarter due primarily to increases in tangible assets and risk-weighted assets resulting from the increase in uncovered loans. The Company’s tangible common equity ratio increased modestly during the quarter as the increase in tangible common equity outweighed the increase in tangible assets. Regulatory capital ratios as of March 31, 2014 are considered preliminary pending the filing of the Company’s regulatory reports.

Teleconference / Webcast Information

First Financial’s executive management will host a conference call to discuss the Company’s financial and operating results on Wednesday, April 30, 2014 at 8:30 a.m. Eastern Time. Members of the public who would like to listen to the conference call should dial (888) 317-6016 (U.S. toll free), (855) 669-9657 (Canada toll free) or +1 (412) 317-6016 (International) (no passcode required). The number should be dialed five to ten minutes prior to the start of the conference call. The conference call will also be accessible as an audio webcast via the Investor Relations section of the Company’s website at www.bankatfirst.com. A replay of the conference call will be available beginning one hour after the completion of the live call through May 15, 2014 at (877) 344-7529 (U.S. toll free), (855) 669-9658 (Canada toll free) and +1 (412) 317-0088 (International); conference number 10045038. The webcast will be archived on the Investor Relations section of the Company’s website through April 30, 2015.

Press Release and Additional Information on Website

This press release as well as supplemental information and any non-GAAP reconciliations related to this release is available to the public through the Investor Relations section of First Financial's website at www.bankatfirst.com/investor.

About First Financial Bancorp

First Financial Bancorp is a Cincinnati, Ohio based bank holding company. As of March 31, 2014, the Company had $6.5 billion in assets, $4.0 billion in loans, $4.8 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 four lines of business: commercial, consumer, wealth management and mortgage. The commercial, consumer and mortgage units provide traditional banking services to business and retail clients. First Financial Wealth Management provides wealth planning, portfolio management, trust and estate, brokerage and retirement plan services and had approximately $2.5 billion in assets under management as of March 31, 2014. The Company’s strategic operating markets are located in Ohio, Indiana and Kentucky where it operates 106 banking centers. Additional information about the Company, including its products, services and banking locations is available at www.bankatfirst.com.

Important Information for Investors and Shareholders

This communication does not constitute an offer of any securities for sale. This communication is being made in respect of the proposed transactions involving First Financial, The First Bexley Bank and Insight Bank. In connection with the proposed transactions, the Company filed with the SEC registration statements on Form S-4 that included proxy statements/prospectuses for the shareholders of First Bexley and Insight. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENTS/PROSPECTUSES AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTIONS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT FIRST FINANCIAL, FIRST BEXLEY AND INSIGHT AND THE PROPOSED TRANSACTIONS. Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. Investors may also obtain these documents, without charge, from First Financial’s website at http://www.bankatfirst.com or by contacting First Financial’s investor relations department at (877) 322-9530.

Forward-Looking Statement

Certain statements contained in this release which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Examples of forward-looking statements include, but are not limited to, projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure and other financial items, statements of plans and objectives of First Financial or its management or board of directors and statements of future economic performances and statements of assumptions underlying such statements. Words such as ‘‘believes,’’ ‘‘anticipates,’’ “likely,” “expected,” ‘‘intends,’’ and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Management’s analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially. These factors include, but are not limited to: economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company’s business; 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); management’s ability to effectively execute its business plan; mergers and acquisitions, including costs or difficulties related to the integration of acquired companies, including the recently announced proposed acquisitions of The First Bexley Bank, Insight Bank and Guernsey Bancorp; the Company’s ability to comply with the terms of loss sharing agreements with the FDIC; the effect of changes in accounting policies and practices; and the costs and effects of litigation and of unexpected or adverse outcomes in such litigation. Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as well as its other filings with the SEC, for a more detailed discussion of these risks, uncertainties and other factors that could cause actual results to differ from those discussed in the forward-looking statements. Such forward-looking statements are meaningful only on the date when such statements are made, and the Company 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.

Contact Information

Investors/Analysts Media

Kenneth Lovik Jenny Keighley

Senior Vice President, Investor Relations Assistant Vice President, Media Relations Manager

and Corporate Development (513) 979-5852

(513) 979-5837 jennifer.keighley@bankatfirst.com

kenneth.lovik@bankatfirst.com

Selected Financial Information

March 31, 2014

(unaudited)



Contents	Page
Consolidated Financial Highlights	2
Consolidated Statements of Income	3
Consolidated Statements of Condition	4
Average Consolidated Statements of Condition	5
Net Interest Margin Rate / Volume Analysis	6
Credit Quality	7
Capital Adequacy	8
Supplemental Information on Covered Assets	9 - 11



FIRST FINANCIAL BANCORP.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)

	Three Months Ended
	Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
	2014			2013			2013			2013			2013
RESULTS OF OPERATIONS
Net income	$	15,104		$	3,785		$	14,911		$	15,829		$	13,824
Net earnings per share - basic	$	0.26		$	0.07		$	0.26		$	0.28		$	0.24
Net earnings per share - diluted	$	0.26		$	0.07		$	0.26		$	0.27		$	0.24
Dividends declared per share	$	0.15		$	0.15		$	0.27		$	0.24		$	0.28

KEY FINANCIAL RATIOS
Return on average assets	0.96		%	0.24		%	0.96		%	1.01		%	0.88		%
Return on average shareholders' equity	8.95		%	2.15		%	8.53		%	9.02		%	7.91		%
Return on average tangible shareholders' equity	10.49		%	2.51		%	10.00		%	10.54		%	9.24		%

Net interest margin	3.82		%	3.90		%	3.91		%	4.02		%	4.04		%
Net interest margin (fully tax equivalent) ⁽¹⁾	3.87		%	3.94		%	3.95		%	4.06		%	4.07		%

Ending shareholders' equity as a percent of ending assets	10.64		%	10.63		%	11.07		%	11.08		%	11.05		%
Ending tangible shareholders' equity as a percent of:
Ending tangible assets	9.23		%	9.20		%	9.60		%	9.62		%	9.60		%
Risk-weighted assets	13.50		%	13.59		%	14.27		%	14.50		%	15.05		%

Average shareholders' equity as a percent of average assets	10.69		%	11.23		%	11.19		%	11.15		%	11.09		%
Average tangible shareholders' equity as a percent of
average tangible assets	9.27		%	9.77		%	9.71		%	9.70		%	9.65		%

Book value per share	$	11.98		$	11.86		$	11.99		$	12.05		$	12.09
Tangible book value per share	$	10.24		$	10.10		$	10.24		$	10.29		$	10.33

Tier 1 Ratio ⁽²⁾	14.42		%	14.61		%	15.26		%	15.41		%	15.87		%
Total Capital Ratio ⁽²⁾	15.67		%	15.88		%	16.53		%	16.68		%	17.15		%
Leverage Ratio ⁽²⁾	9.94		%	10.11		%	10.29		%	10.12		%	10.00		%

AVERAGE BALANCE SHEET ITEMS
Loans ⁽³⁾	$	3,532,311		$	3,450,069		$	3,410,102		$	3,313,731		$	3,205,781
Covered loans and FDIC indemnification asset	478,326			568,385			655,654			758,875			840,190
Investment securities	1,807,571			1,654,374			1,589,666			1,705,219			1,838,783
Interest-bearing deposits with other banks	2,922			4,906			4,010			13,890			3,056
Total earning assets	$	5,821,130		$	5,677,734		$	5,659,432		$	5,791,715		$	5,887,810
Total assets	$	6,399,235		$	6,232,971		$	6,193,722		$	6,310,602		$	6,391,049
Noninterest-bearing deposits	$	1,096,509		$	1,129,097		$	1,072,259		$	1,063,102		$	1,049,943
Interest-bearing deposits	3,695,177			3,720,809			3,654,311			3,792,891			3,785,402
Total deposits	$	4,791,686		$	4,849,906		$	4,726,570		$	4,855,993		$	4,835,345
Borrowings	$	842,479		$	583,522		$	667,706		$	644,058		$	735,327
Shareholders' equity	$	684,332		$	700,063		$	693,158		$	703,804		$	708,862

CREDIT QUALITY RATIOS (excluding covered assets)
Allowance to ending loans	1.19		%	1.25		%	1.33		%	1.39		%	1.49		%
Allowance to nonaccrual loans	121.76		%	116.55		%	78.57		%	75.87		%	74.95		%
Allowance to nonperforming loans	88.28		%	83.17		%	61.34		%	62.78		%	62.57		%
Nonperforming loans to total loans	1.35		%	1.50		%	2.16		%	2.22		%	2.38		%
Nonperforming assets to ending loans, plus OREO	1.70		%	2.06		%	2.50		%	2.56		%	2.74		%
Nonperforming assets to total assets	0.95		%	1.13		%	1.38		%	1.38		%	1.40		%
Net charge-offs to average loans (annualized)	0.23		%	0.41		%	0.34		%	0.45		%	0.32		%

(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) March 31, 2014 regulatory capital ratios are preliminary.

(3) Includes loans held for sale.



FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

	2014			2013
	First			Fourth			Third			Second			First			Full
	Quarter			Quarter			Quarter			Quarter			Quarter			Year
Interest income
Loans, including fees	$	49,147		$	52,351		$	52,908		$	55,022		$	56,025		$	216,306
Investment securities
Taxable	10,437			9,209			8,267			8,295			8,376			34,147
Tax-exempt	810			719			541			560			580			2,400
Total investment securities interest	11,247			9,928			8,808			8,855			8,956			36,547
Other earning assets	(1,406		)	(2,432		)	(2,185		)	(1,556		)	(1,472		)	(7,645		)
Total interest income	58,988			59,847			59,531			62,321			63,509			245,208

Interest expense
Deposits	3,316			3,247			2,856			3,284			3,860			13,247
Short-term borrowings	329			257			286			305			329			1,177
Long-term borrowings	524			539			617			654			654			2,464
Total interest expense	4,169			4,043			3,759			4,243			4,843			16,888
Net interest income	54,819			55,804			55,772			58,078			58,666			228,320
Provision for loan and lease losses - uncovered	1,159			1,851			1,413			2,409			3,041			8,714
Provision for loan and lease losses - covered	(2,192		)	(5,857		)	5,293			(8,283		)	9,042			195
Net interest income after provision for loan and lease losses	55,852			59,810			49,066			63,952			46,583			219,411

Noninterest income
Service charges on deposit accounts	4,772			5,226			5,447			5,205			4,717			20,595
Trust and wealth management fees	3,746			3,506			3,366			3,497			3,950			14,319
Bankcard income	2,433			2,699			2,637			3,145			2,433			10,914
Net gains from sales of loans	396			604			751			1,089			706			3,150
Gain on sale of investment securities	50			0			0			188			1,536			1,724
FDIC loss sharing income	(508		)	(3,385		)	5,555			(7,384		)	8,934			3,720
Accelerated discount on covered loans	1,015			1,572			1,711			1,935			1,935			7,153
Other	2,271			2,821			2,824			3,940			2,487			12,072
Total noninterest income	14,175			13,043			22,291			11,615			26,698			73,647

Noninterest expenses
Salaries and employee benefits	25,261			24,023			23,834			26,216			27,329			101,402
Pension settlement charges	0			462			1,396			4,316			0			6,174
Net occupancy	5,299			4,557			5,101			5,384			6,165			21,207
Furniture and equipment	2,077			2,136			2,213			2,250			2,371			8,970
Data processing	2,858			2,617			2,584			2,559			2,469			10,229
Marketing	786			999			1,192			1,182			897			4,270
Communication	623			728			865			781			833			3,207
Professional services	1,724			1,781			1,528			1,764			1,803			6,876
State intangible tax	644			901			1,010			1,004			1,014			3,929
FDIC assessments	1,134			1,121			1,107			1,148			1,125			4,501
Loss (gain) - other real estate owned	418			348			184			216			502			1,250
Loss (gain) - covered other real estate owned	33			946			204			(2,212		)	(157		)	(1,219		)
Loss sharing expense	1,569			1,495			1,724			1,578			2,286			7,083
FDIC indemnification impairment	0			22,417			0			0			0			22,417
Other	5,416			5,754			5,859			7,097			6,469			25,179
Total noninterest expenses	47,842			70,285			48,801			53,283			53,106			225,475
Income before income taxes	22,185			2,568			22,556			22,284			20,175			67,583
Income tax expense	7,081			(1,217		)	7,645			6,455			6,351			19,234
Net income	$	15,104		$	3,785		$	14,911		$	15,829		$	13,824		$	48,349

ADDITIONAL DATA
Net earnings per share - basic	$	0.26		$	0.07		$	0.26		$	0.28		$	0.24		$	0.84
Net earnings per share - diluted	$	0.26		$	0.07		$	0.26		$	0.27		$	0.24		$	0.83
Dividends declared per share	$	0.15		$	0.15		$	0.27		$	0.24		$	0.28		$	0.94

Return on average assets	0.96		%	0.24		%	0.96		%	1.01		%	0.88		%	0.77		%
Return on average shareholders' equity	8.95		%	2.15		%	8.53		%	9.02		%	7.91		%	6.89		%

Interest income	$	58,988		$	59,847		$	59,531		$	62,321		$	63,509		$	245,208
Tax equivalent adjustment	702			635			516			514			477			2,142
Interest income - tax equivalent	59,690			60,482			60,047			62,835			63,986			247,350
Interest expense	4,169			4,043			3,759			4,243			4,843			16,888
Net interest income - tax equivalent	$	55,521		$	56,439		$	56,288		$	58,592		$	59,143		$	230,462

Net interest margin	3.82		%	3.90		%	3.91		%	4.02		%	4.04		%	3.97		%
Net interest margin (fully tax equivalent)⁽¹⁾	3.87		%	3.94		%	3.95		%	4.06		%	4.07		%	4.01		%

Full-time equivalent employees	1,286			1,306			1,292			1,338			1,385

(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.



FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)

	Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,			% Change		% Change
	2014			2013			2013			2013			2013			Linked Qtr.		Comparable Qtr.
ASSETS
Cash and due from banks	$	161,515		$	117,620		$	177,698		$	114,745		$	106,249		37.3	%	52.0	%
Interest-bearing deposits with other banks	9,681			25,830			10,414			2,671			1,170			(62.5	)%	727.4	%
Investment securities available-for-sale	862,526			913,601			854,747			884,694			952,039			(5.6	)%	(9.4	)%
Investment securities held-to-maturity	890,806			837,272			669,093			670,246			716,214			6.4	%	24.4	%
Other investments	47,659			47,427			75,945			75,645			75,375			0.5	%	(36.8	)%
Loans held for sale	6,171			8,114			10,704			18,650			28,126			(23.9	)%	(78.1	)%
Loans
Commercial	1,118,057			1,035,668			960,016			940,420			892,381			8.0	%	25.3	%
Real estate - construction	87,996			80,741			90,089			97,246			87,542			9.0	%	0.5	%
Real estate - commercial	1,513,891			1,496,987			1,493,969			1,477,226			1,433,182			1.1	%	5.6	%
Real estate - residential	360,671			352,931			352,830			343,016			330,260			2.2	%	9.2	%
Installment	44,911			47,133			49,273			50,781			53,509			(4.7	)%	(16.1	)%
Home equity	374,427			376,454			373,839			370,206			365,943			(0.5	)%	2.3	%
Credit card	34,458			35,592			34,285			33,222			32,465			(3.2	)%	6.1	%
Lease financing	79,792			80,135			76,615			70,011			53,556			(0.4	)%	49.0	%
Total loans, excluding covered loans	3,614,203			3,505,641			3,430,916			3,382,128			3,248,838			3.1	%	11.2	%
Less
Allowance for loan and lease losses	43,023			43,829			45,514			47,047			48,306			(1.8	)%	(10.9	)%
Net loans - uncovered	3,571,180			3,461,812			3,385,402			3,335,081			3,200,532			3.2	%	11.6	%
Covered loans	409,405			457,873			518,524			622,265			687,798			(10.6	)%	(40.5	)%
Less
Allowance for loan and lease losses	10,573			18,901			23,259			32,961			45,496			(44.1	)%	(76.8	)%
Net loans - covered	398,832			438,972			495,265			589,304			642,302			(9.1	)%	(37.9	)%
Net loans	3,970,012			3,900,784			3,880,667			3,924,385			3,842,834			1.8	%	3.3	%
Premises and equipment	135,105			137,110			139,125			142,675			146,889			(1.5	)%	(8.0	)%
Goodwill	95,050			95,050			95,050			95,050			95,050			0.0	%	0.0	%
Other intangibles	5,566			5,924			6,249			6,620			7,078			(6.0	)%	(21.4	)%
FDIC indemnification asset	39,003			45,091			78,132			88,966			112,428			(13.5	)%	(65.3	)%
Accrued interest and other assets	275,995			283,390			255,617			250,228			265,565			(2.6	)%	3.9	%
Total Assets	$	6,499,089		$	6,417,213		$	6,253,441		$	6,274,575		$	6,349,017		1.3	%	2.4	%

LIABILITIES
Deposits
Interest-bearing demand	$	1,102,029		$	1,125,723		$	1,068,067		$	1,131,466		$	1,113,940		(2.1	)%	(1.1	)%
Savings	1,639,495			1,612,005			1,593,895			1,601,122			1,620,874			1.7	%	1.1	%
Time	956,049			952,327			926,029			978,680			1,030,124			0.4	%	(7.2	)%
Total interest-bearing deposits	3,697,573			3,690,055			3,587,991			3,711,268			3,764,938			0.2	%	(1.8	)%
Noninterest-bearing	1,122,816			1,147,452			1,141,016			1,059,368			1,056,409			(2.1	)%	6.3	%
Total deposits	4,820,389			4,837,507			4,729,007			4,770,636			4,821,347			(0.4	)%	0.0	%
Short-term borrowings
Federal funds purchased and securities sold
under agreements to repurchase	112,293			94,749			105,472			114,030			130,863			18.5	%	(14.2	)%
FHLB short-term borrowings	722,800			654,000			518,200			505,900			502,200			10.5	%	43.9	%
Total short-term borrowings	835,093			748,749			623,672			619,930			633,063			11.5	%	31.9	%
Long-term debt	60,163			60,780			61,088			73,957			74,498			(1.0	)%	(19.2	)%
Total borrowed funds	895,256			809,529			684,760			693,887			707,561			10.6	%	26.5	%
Accrued interest and other liabilities	92,097			88,016			147,635			114,600			118,495			4.6	%	(22.3	)%
Total Liabilities	5,807,742			5,735,052			5,561,402			5,579,123			5,647,403			1.3	%	2.8	%

SHAREHOLDERS' EQUITY
Common stock	573,243			577,076			577,429			576,641			575,514			(0.7	)%	(0.4	)%
Retained earnings	330,672			324,192			328,993			329,633			327,635			2.0	%	0.9	%
Accumulated other comprehensive loss	(27,648		)	(31,281		)	(29,294		)	(25,645		)	(21,475		)	(11.6	)%	28.7	%
Treasury stock, at cost	(184,920		)	(187,826		)	(185,089		)	(185,177		)	(180,060		)	(1.5	)%	2.7	%
Total Shareholders' Equity	691,347			682,161			692,039			695,452			701,614			1.3	%	(1.5	)%
Total Liabilities and Shareholders' Equity	$	6,499,089		$	6,417,213		$	6,253,441		$	6,274,575		$	6,349,017		1.3	%	2.4	%



FIRST FINANCIAL BANCORP.
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)

	Quarterly Averages
	Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
	2014			2013			2013			2013			2013
ASSETS
Cash and due from banks	$	123,583		$	110,246		$	120,154		$	119,909		$	111,599
Interest-bearing deposits with other banks	2,922			4,906			4,010			13,890			3,056
Investment securities	1,807,571			1,654,374			1,589,666			1,705,219			1,838,783
Loans held for sale	4,924			7,990			13,349			19,722			21,096
Loans
Commercial	1,062,225			986,438			937,939			904,029			863,427
Real estate - construction	83,095			79,194			93,103			93,813			81,171
Real estate - commercial	1,491,569			1,489,858			1,488,047			1,445,626			1,411,769
Real estate - residential	355,593			351,929			347,110			334,652			323,768
Installment	45,642			47,733			50,130			52,313			54,684
Home equity	374,503			374,919			371,072			367,408			365,568
Credit card	34,663			35,673			34,176			33,785			33,300
Lease financing	80,097			76,335			75,176			62,383			50,998
Total loans, excluding covered loans	3,527,387			3,442,079			3,396,753			3,294,009			3,184,685
Less
Allowance for loan and lease losses	44,273			46,531			49,451			50,172			49,408
Net loans - uncovered	3,483,114			3,395,548			3,347,302			3,243,837			3,135,277
Covered loans	434,527			490,072			573,243			653,892			724,846
Less
Allowance for loan and lease losses	17,629			21,733			31,208			41,861			46,104
Net loans - covered	416,898			468,339			542,035			612,031			678,742
Net loans	3,900,012			3,863,887			3,889,337			3,855,868			3,814,019
Premises and equipment	136,624			138,644			141,498			144,759			147,355
Goodwill	95,050			95,050			95,050			95,050			95,050
Other intangibles	5,723			6,075			6,428			6,831			7,346
FDIC indemnification asset	43,799			78,313			82,411			104,983			115,344
Accrued interest and other assets	279,027			273,486			251,819			244,371			237,401
Total Assets	$	6,399,235		$	6,232,971		$	6,193,722		$	6,310,602		$	6,391,049

LIABILITIES
Deposits
Interest-bearing demand	$	1,107,844		$	1,150,275		$	1,098,524		$	1,141,767		$	1,112,664
Savings	1,633,910			1,637,657			1,608,351			1,639,834			1,618,239
Time	953,423			932,877			947,436			1,011,290			1,054,499
Total interest-bearing deposits	3,695,177			3,720,809			3,654,311			3,792,891			3,785,402
Noninterest-bearing	1,096,509			1,129,097			1,072,259			1,063,102			1,049,943
Total deposits	4,791,686			4,849,906			4,726,570			4,855,993			4,835,345
Short-term borrowings
Federal funds purchased and securities sold
under agreements to repurchase	110,533			107,738			114,505			105,299			134,709
Federal Home Loan Bank short-term borrowings	671,579			414,892			483,937			464,630			525,878
Total short-term borrowings	782,112			522,630			598,442			569,929			660,587
Long-term debt	60,367			60,892			69,264			74,129			74,740
Total borrowed funds	842,479			583,522			667,706			644,058			735,327
Accrued interest and other liabilities	80,738			99,480			106,288			106,747			111,515
Total Liabilities	5,714,903			5,532,908			5,500,564			5,606,798			5,682,187

SHAREHOLDERS' EQUITY
Common stock	575,828			577,851			576,953			576,391			578,452
Retained earnings	324,875			337,034			329,518			329,795			330,879
Accumulated other comprehensive loss	(29,251		)	(28,380		)	(28,232		)	(19,204		)	(19,576		)
Treasury stock, at cost	(187,120		)	(186,442		)	(185,081		)	(183,178		)	(180,893		)
Total Shareholders' Equity	684,332			700,063			693,158			703,804			708,862
Total Liabilities and Shareholders' Equity	$	6,399,235		$	6,232,971		$	6,193,722		$	6,310,602		$	6,391,049



FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS ⁽¹⁾
(Dollars in thousands)
(Unaudited)

	Quarterly Averages
	Mar. 31, 2014					Dec. 31, 2013					Mar. 31, 2013					Linked Qtr. Income Variance									Comparable Qtr. Income Variance
	Balance			Yield		Balance			Yield		Balance			Yield		Rate			Volume			Total			Rate			Volume			Total
Earning assets
Investment securities	$	1,807,571		2.52	%	$	1,654,374		2.38	%	$	1,838,783		1.98	%	$	595		$	724		$	1,319		$	2,485		$	(194	)	$	2,291
Interest-bearing deposits with other banks	2,922			1.39	%	4,906			0.57	%	3,056			0.53	%	10			(7		)	3			6			0			6
Gross loans, including covered loans
and indemnification asset ⁽²⁾	4,010,637			4.83	%	4,018,454			4.93	%	4,045,971			5.47	%	(1,025		)	(1,156		)	(2,181		)	(6,397		)	(421		)	(6,818		)
Total earning assets	5,821,130			4.11	%	5,677,734			4.18	%	5,887,810			4.37	%	(420		)	(439		)	(859		)	(3,906		)	(615		)	(4,521		)

Nonearning assets
Allowance for loan and lease losses	(61,902		)			(68,264		)			(95,512		)
Cash and due from banks	123,583					110,246					111,599
Accrued interest and other assets	516,424					513,255					487,152
Total assets	$	6,399,235				$	6,232,971				$	6,391,049

Interest-bearing liabilities
Deposits:
Interest-bearing demand	$	1,107,844		0.12	%	$	1,150,275		0.19	%	$	1,112,664		0.12	%
Savings	$	1,633,910		0.20	%	1,637,657			0.15	%	1,618,239			0.10	%
Time	$	953,423		0.94	%	932,877			0.90	%	1,054,499			1.20	%
Total interest-bearing deposits	$	3,695,177		0.36	%	3,720,809			0.35	%	3,785,402			0.41	%	166			(97		)	69			(463		)	(81		)	(544		)
Borrowed funds
Short-term borrowings	782,112			0.17	%	522,630			0.20	%	660,587			0.20	%	(32		)	104			72			(51		)	51			0
Long-term debt	60,367			3.52	%	60,892			3.51	%	74,740			3.55	%	1			(16		)	(15		)	(5		)	(125		)	(130		)
Total borrowed funds	842,479			0.41	%	583,522			0.54	%	735,327			0.54	%	(31		)	88			57			(56		)	(74		)	(130		)
Total interest-bearing liabilities	4,537,656			0.37	%	4,304,331			0.37	%	4,520,729			0.43	%	$	135		$	(9	)	$	126		$	(519	)	$	(155	)	$	(674	)

Noninterest-bearing liabilities
Noninterest-bearing demand deposits	1,096,509					1,129,097					1,049,943
Other liabilities	80,738					99,480					111,515
Shareholders' equity	684,332					700,063					708,862
Total liabilities & shareholders' equity	$	6,399,235				$	6,232,971				$	6,391,049

Net interest income ⁽¹⁾	$	54,819				$	55,804				$	58,666				$	(555	)	$	(430	)	$	(985	)	$	(3,387	)	$	(460	)	$	(3,847	)
Net interest spread ⁽¹⁾				3.74	%				3.81	%				3.94	%
Net interest margin ⁽¹⁾				3.82	%				3.90	%				4.04	%

⁽¹⁾ Not tax equivalent.

⁽²⁾ Loans held for sale and nonaccrual loans are both included in gross loans.



FIRST FINANCIAL BANCORP.
CREDIT QUALITY
(excluding covered assets)
(Dollars in thousands)
(Unaudited)

	Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
	2014			2013			2013			2013			2013

ALLOWANCE FOR LOAN AND LEASE LOSS ACTIVITY
Balance at beginning of period	$	43,829		$	45,514		$	47,047		$	48,306		$	47,777
Provision for uncovered loan and lease losses	1,159			1,851			1,413			2,409			3,041
Gross charge-offs
Commercial	656			293			1,482			859			781
Real estate - construction	0			1			0			0			0
Real estate - commercial	543			3,113			2,174			2,044			995
Real estate - residential	257			218			249			326			223
Installment	128			39			99			97			100
Home equity	544			706			411			591			701
Other	296			398			696			277			410
Total gross charge-offs	2,424			4,768			5,111			4,194			3,210
Recoveries
Commercial	39			194			92			67			319
Real estate - construction	0			46			490			0			136
Real estate - commercial	114			634			1,264			57			39
Real estate - residential	27			96			98			5			4
Installment	77			66			57			110			77
Home equity	103			136			95			225			52
Other	99			60			69			62			71
Total recoveries	459			1,232			2,165			526			698
Total net charge-offs	1,965			3,536			2,946			3,668			2,512
Ending allowance for uncovered loan and lease losses	$	43,023		$	43,829		$	45,514		$	47,047		$	48,306

NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES (ANNUALIZED)
Commercial	0.24		%	0.04		%	0.59		%	0.35		%	0.22		%
Real estate - construction	0.00		%	(0.23		)%	(2.09		)%	0.00		%	(0.68		)%
Real estate - commercial	0.12		%	0.66		%	0.24		%	0.55		%	0.27		%
Real estate - residential	0.26		%	0.14		%	0.17		%	0.38		%	0.27		%
Installment	0.45		%	(0.22		)%	0.33		%	(0.10		)%	0.17		%
Home equity	0.48		%	0.60		%	0.34		%	0.40		%	0.72		%
Other	0.70		%	1.20		%	2.27		%	0.90		%	1.63		%
Total net charge-offs	0.23		%	0.41		%	0.34		%	0.45		%	0.32		%

COMPONENTS OF NONPERFORMING LOANS, NONPERFORMING ASSETS, AND UNDERPERFORMING ASSETS
Nonaccrual loans ⁽¹⁾
Commercial	$	7,097		$	7,934		$	8,554		$	12,925		$	16,296
Real estate - construction	223			223			1,099			1,104			2,094
Real estate - commercial	16,758			17,286			35,549			35,055			33,871
Real estate - residential	8,157			8,606			9,346			9,369			8,295
Installment	399			574			421			249			341
Home equity	2,700			2,982			2,871			2,813			3,059
Lease financing	0			0			86			496			496
Nonaccrual loans	35,334			37,605			57,926			62,011			64,452
Accruing troubled debt restructurings (TDRs)	13,400			15,094			16,278			12,924			12,757
Total nonperforming loans	48,734			52,699			74,204			74,935			77,209
Other real estate owned (OREO)	12,743			19,806			11,804			11,798			11,993
Total nonperforming assets	61,477			72,505			86,008			86,733			89,202
Accruing loans past due 90 days or more	208			218			265			158			157
Total underperforming assets	$	61,685		$	72,723		$	86,273		$	86,891		$	89,359
Total classified assets	$	103,471		$	110,509		$	120,423		$	129,832		$	130,436

CREDIT QUALITY RATIOS (excluding covered assets)
Allowance for loan and lease losses to
Nonaccrual loans	121.76		%	116.55		%	78.57		%	75.87		%	74.95		%
Nonperforming loans	88.28		%	83.17		%	61.34		%	62.78		%	62.57		%
Total ending loans	1.19		%	1.25		%	1.33		%	1.39		%	1.49		%
Nonperforming loans to total loans	1.35		%	1.50		%	2.16		%	2.22		%	2.38		%
Nonperforming assets to
Ending loans, plus OREO	1.70		%	2.06		%	2.50		%	2.56		%	2.74		%
Total assets	0.95		%	1.13		%	1.38		%	1.38		%	1.40		%
Nonperforming assets, excluding accruing TDRs to
Ending loans, plus OREO	1.33		%	1.63		%	2.03		%	2.17		%	2.34		%
Total assets	0.74		%	0.89		%	1.12		%	1.18		%	1.20		%

(1) Nonaccrual loans include nonaccrual TDRs of $14.6 million, $13.0 million, $13.0 million, $19.9 million, and $22.3 million, as of March 31, 2014, December 31, 2013, September 30, 2013, June 30, 2013, and March 31, 2013, respectively.



FIRST FINANCIAL BANCORP.
CAPITAL ADEQUACY
(Dollars in thousands, except per share data)
(Unaudited)

	Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,			Mar. 31,
	2014			2013			2013			2013			2013
PER COMMON SHARE
Market Price
High	$	18.20		$	17.59		$	16.47		$	16.05		$	16.07
Low	$	15.98		$	14.56		$	14.89		$	14.52		$	14.46
Close	$	17.98		$	17.43		$	15.17		$	14.90		$	16.05

Average shares outstanding - basic	57,091,604			57,152,425			57,201,390			57,291,994			57,439,029
Average shares outstanding - diluted	57,828,179			57,863,433			58,012,588			58,128,349			58,283,467
Ending shares outstanding	57,709,937			57,533,046			57,702,444			57,698,344			58,028,923

REGULATORY CAPITAL	Preliminary
Tier 1 Capital	$	631,099		$	624,850		$	631,846		$	630,819		$	632,020
Tier 1 Ratio	14.42		%	14.61		%	15.26		%	15.41		%	15.87		%
Total Capital	$	685,926		$	679,074		$	684,363		$	682,927		$	682,974
Total Capital Ratio	15.67		%	15.88		%	16.53		%	16.68		%	17.15		%
Total Capital in excess of minimum
requirement	$	335,806		$	336,982		$	353,118		$	355,435		$	364,376
Total Risk-Weighted Assets	$	4,376,505		$	4,276,152		$	4,140,561		$	4,093,644		$	3,982,479
Leverage Ratio	9.94		%	10.11		%	10.29		%	10.12		%	10.00		%

OTHER CAPITAL RATIOS
Ending shareholders' equity to ending assets	10.64		%	10.63		%	11.07		%	11.08		%	11.05		%
Ending tangible shareholders' equity
to ending tangible assets	9.23		%	9.20		%	9.60		%	9.62		%	9.60		%
Average shareholders' equity to
average assets	10.69		%	11.23		%	11.19		%	11.15		%	11.09		%
Average tangible shareholders' equity
to average tangible assets	9.27		%	9.77		%	9.71		%	9.70		%	9.65		%

REPURCHASE PROGRAM⁽¹⁾
Shares repurchased	40,255			209,745			0			291,400			249,000
Average share repurchase price	$	17.32		$	16.39		N/A			$	15.47		$	15.39
Total cost of shares repurchased	$	697		$	3,438		N/A			$	4,508		$	3,831

(1) Represents share repurchases as part of publicly announced plans.
N/A=Not applicable

SUPPLEMENTAL INFORMATION ON COVERED ASSETS

ACCELERATED DISCOUNT ON LOAN PREPAYMENTS AND DISPOSITIONS

During the first quarter, First Financial recognized approximately $1.0 million in accelerated discount on covered loans, net of the related adjustment on the FDIC indemnification asset. Accelerated discount is recognized when covered loans, which are recorded on the Company’s balance sheet at an amount less than the unpaid principal balance, prepay at an amount greater than their recorded book value. Prepayments can occur through either customer driven payments before the maturity date or loan sales. The amount of discount attributable to the credit loss component of each loan varies and the recognized amount is offset by a related reduction in the FDIC indemnification asset.

NET INTEREST MARGIN IMPACT

Net interest margin is affected by certain activity related to the covered loan portfolio. The majority of these loans are accounted for under FASB ASC Topic 310-30 and, as such, the Company is required to periodically update its forecast of expected cash flows from these loans. Impairment, as a result of a decrease in expected cash flows, is recognized as provision expense in the period it is measured and has no impact on net interest margin. Improvements in expected cash flows, in excess of any prior impairment, are recognized on a prospective basis through an upward adjustment to the yield earned on the portfolio. Impairment and improvement are both partially offset by the impact of changes in the value of the FDIC indemnification asset. Impairment is partially offset by an increase to the FDIC indemnification asset as a result of FDIC loss sharing income. Improvement, which is reflected as a higher yield, is partially offset by a lower yield earned on the FDIC indemnification asset until the next periodic valuation of the loans and the indemnification asset. The weighted average yield of the acquired loan portfolio may also be subject to change as loans with higher yields pay down more quickly or slowly than loans with lower yields.

The following table shows the estimated yield earned by the Company on its covered and uncovered loan portfolios and the FDIC indemnification asset for the three months ended March 31, 2014.




Table VII	For the Three Months Ended
	March 31, 2014
	Average
(Dollars in thousands)	Balance		Yield
Loans, excluding covered loans¹	$	3,532,311	4.34%
Covered loan portfolio accounted for under ASC Topic 310-30²	378,321		10.21%
Covered loan portfolio accounted for under ASC Topic 310-20 ³	56,206		13.48%
FDIC indemnification asset ²	43,799		(13.11)%
Total	$	4,010,637	4.83%

Yield earned on total covered loans			10.63%
Yield earned on total covered loans and FDIC indemnification asset			8.46%

¹ Includes loans with loss share coverage removed
² Future yield adjustments subject to change based on required, periodic valuation procedures
³ Includes loans with revolving privileges which are scoped out of ASC Topic 310-30 and certain loans
which the Company elected to treat under the cost recovery method of accounting

COVERED ASSETS

The following table presents the covered loan portfolio as of March 31, 2014, December 31, 2013 and March 31, 2013.




Table VIII
	As of
	March 31, 2014				December 31, 2013				March 31, 2013
			Percent				Percent				Percent
(Dollars in thousands)	Balance		of Total		Balance		of Total		Balance		of Total
Commercial	$	34,385	8.4	%	$	42,316	9.2	%	$	90,424	13.1	%
Real estate - construction	8,480		2.1	%	8,556		1.9	%	9,866		1.4	%
Real estate - commercial	234,797		57.4	%	268,633		58.7	%	425,950		61.9	%
Real estate - residential	77,768		19.0	%	80,733		17.6	%	95,991		14.0	%
Installment	5,106		1.2	%	5,641		1.2	%	7,640		1.1	%
Home equity	46,319		11.3	%	49,624		10.8	%	55,021		8.0	%
Other	2,550		0.6	%	2,370		0.5	%	2,906		0.4	%
Total	$	409,405	100.0	%	$	457,873	100.0	%	$	687,798	100.0	%

As of March 31, 2014, 10.2% of the Company’s total loans were covered loans. During the first quarter, the total balance of covered loans decreased $48.5 million, or 10.6%, compared to the prior quarter. Of this decline, $27.4 million consisted of covered loans classified as likely to exit and resulted from the continued successful execution of resolution strategies. As required under the loss sharing agreements, First Financial must file quarterly certifications with the FDIC on all covered loans. The payment of claims is subject to the FDIC’s review for compliance with the loss sharing agreements and to date, all certifications have been filed in a timely manner and without significant issues. The Company’s loss sharing agreements with the FDIC related to non-single-family loans expire during the third quarter 2014 and the agreements related to single-family loans expire in the third quarter 2019.

Covered OREO decreased $4.1 million, or 15.0%, during the first quarter to $23.0 million as of March 31, 2014, driven primarily by $4.8 million of resolutions and valuation adjustments. The Company recognized an immaterial net loss on sales of covered OREO during the quarter, which was offset by a corresponding increase in FDIC loss sharing income of approximately 80% of the net loss recognized.

ALLOWANCE FOR LOAN AND LEASE LOSSES - COVERED

Under the applicable accounting guidance, the allowance for loan losses related to covered loans is a result of impairment identified in ongoing valuation procedures and is generally recognized in the current period as provision expense. However, if improvement is noted in a loan pool that had previously experienced impairment, the amount of improvement is recognized as a reduction to the applicable period’s provision expense. Additional improvement beyond previously recorded impairment is reflected as a yield adjustment on a prospective basis. The timing inherent in this accounting treatment may result in earnings volatility in future periods.

The following table presents activity in the allowance for loan losses related to covered loans for the three months ended March 31, 2014 and for the trailing three quarters.




Table IX

	As of or for the Three Months Ended
	March 31,			December 31,			September 30,			June 30,
(Dollars in thousands)	2014			2013			2013			2013
Balance at beginning of period	$	18,901		$	23,259		$	32,961		$	45,496
Provision for loan and lease losses - covered	(2,192		)	(5,857		)	5,293			(8,283		)
Total gross charge-offs	(7,240		)	(3,850		)	(21,009		)	(4,681		)
Total recoveries	1,104			5,349			6,014			429
Total net (charge-offs)/recoveries	(6,136		)	1,499			(14,995		)	(4,252		)
Ending allowance for loan and lease losses - covered	$	10,573		$	18,901		$	23,259		$	32,961

As a percentage of total covered loans, the allowance for loan losses totaled 2.58% as of March 31, 2014 compared to 4.13% as of December 31, 2013.

Net charge-offs on covered loans during the first quarter were $6.1 million compared to net recoveries of $1.5 million for the fourth quarter 2014. During the first quarter, the Company recognized a negative provision expense of $2.2 million compared to a negative provision expense of $5.9 million for the linked quarter. The difference between provision expense and net charge-offs / recoveries primarily relates to the quarterly re-estimation of cash flow expectations required under FASB ASC Topic 310-30.

In addition to the provision expense, the Company incurred loss sharing and covered asset expenses of $1.6 million, consisting primarily of credit expenses, and an immaterial amount of net losses related to covered OREO. The negative FDIC loss sharing income of $0.5 million for the quarter reflects the quarterly re-estimation of expected cash flows and the corresponding offset related to the loss sharing and covered asset expenses and the net losses on sales of covered OREO.

FIRST FINANCIAL BANCORP /OH/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - April 29, 2014

Attached files

FIRST FINANCIAL BANCORP /OH/ Reports