EXHIBIT
99.1
First
Financial Bancorp Reports Third Quarter 2009
Earnings
& Financial Results
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§
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Net
income of $225.2 million or $4.38 per common share for the third quarter
of 2009
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§
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First
Financial, through Federal Deposit Insurance Corporation (FDIC) assisted
acquisitions, made significant advancement in its strategic operating
markets with the addition of 36 banking centers and over $3.8 billion in
assets from the acquisitions of the banking operations of Peoples
Community Bank, Irwin Union Bank and Trust Company and Irwin Union Bank,
F.S.B.
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§
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Purchase
accounting contributed approximately $241.0 million of capital, created
through the recognition of a bargain purchase gain on
acquisition
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§
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Tangible
book value per common share increased by 58.5%, without dilution to
shareholders, to $10.48 from $6.61 at June 30, 2009, with a tangible
common equity ratio of 7.48% and a total risk-based capital ratio of
17.46%
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§
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Increased
allowance for loan and lease losses to 1.94% from 1.34%, excluding loans
covered by FDIC loss share
agreements
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Cincinnati,
Ohio – November 5, 2009 – First Financial Bancorp (Nasdaq: FFBC) today reported
third quarter and year-to-date results for the period ended September 30,
2009.
Claude
Davis, First Financial Bancorp’s president and chief executive officer, said,
“We are very excited about the growth and expansion of the company, particularly
the retail banking network in the greater Cincinnati market, the state of
Indiana, Louisville, Kentucky and our re-entry into Michigan. The banking
centers we acquired complement our existing locations and provide entry into
markets where we did not have a presence.
“The
financial and capital strength of the company has positioned us to be
opportunistic in these difficult times, and we believe that our ability to
execute these transactions is evidence of that strength. We expect the capital
generated as a result of these acquisitions will support the acquired assets and
also support future growth and expansion opportunities.
“First
Financial associates, both existing and new, have worked relentlessly to ensure
the efficient integration of these banking operations. We are grateful to all of
our associates for their hard work and the professional manner in which they
helped to execute these transactions. We welcome our new associates to First
Financial and look forward to helping them further build their careers with a
strong and growing company. We also welcome our new clients. We are very excited
to forge long term relationships with them and the communities where they live
and work.
“Our
organic growth strategy also remains on track. Construction is nearly complete
on banking centers in St. Marys, Ohio and Edgewood, Kentucky,” added Mr. Davis.
“Both locations are expected to open in the fourth quarter and are being built
with the company’s new prototype design, which we expect will further enhance
access and service to our clients in those markets. First Financial clients now
have the convenience of banking at 118 First Financial Bank locations and ATMs
within the four state regions of Ohio, Indiana, Kentucky and
Michigan.”
-1-
Mr. Davis
continued, “Our results this quarter were impacted by higher credit costs
resulting from our expectation of loan portfolio stress, primarily within our
commercial and commercial construction real estate portfolios. Credit quality
and the resolution of problem loans are top priorities and we continue to work
closely with clients on resolution strategies for problem credits. However,
until we begin to see consistent economic growth over several quarters,
including increased consumer spending and lower unemployment rates, we believe
that certain credit metrics, including charge-offs and nonperforming assets, may
remain at elevated levels.”
EARNINGS
& FINANCIAL RESULTS
Third
quarter 2009 net income was $226.2 million, net income available to common
shareholders was $225.2 million and earnings per diluted common share were
$4.38. This compares with net income of $5.7 million and earnings per diluted
common share of $0.15 for the third quarter of 2008, and net income of $1.5
million, net income available to common shareholders of $0.5 million and
earnings per diluted common share of $0.01 for the second quarter of
2009.
Year-to-date
2009 net income was $233.4 million, net income available to common shareholders
was $230.8 million, and earnings per diluted common share were $5.31. This
compares with year-to-date 2008 net income of $20.9 million and earnings per
diluted common share of $0.56.
Third
quarter 2009 results, when compared with the third quarter of 2008, and the
second quarter of 2009, were impacted by the following significant
items:
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§
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Gain
related to the accounting for a Federal Deposit Insurance Corporation
(FDIC) assisted transaction.
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On
September 18, 2009, the company assumed the banking operations of Irwin
Union Bank and Trust Company and Irwin Union Bank. F.S.B. (collectively,
“Irwin”), which included 27 banking centers. The estimated fair value of
assets acquired exceeded the estimated fair value of liabilities assumed,
resulting in the recognition of a $241.0 million after-tax
gain.
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§
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On
July 31, 2009, the company assumed the banking operations of Peoples
Community Bank (Peoples), which included 19 banking centers. The estimated
fair value of liabilities assumed exceeded the estimated fair value of
assets acquired, resulting in the recognition of goodwill in the amount of
approximately $18.7 million.
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§
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On
August 28, 2009, in a separate and unrelated transaction, the company
purchased 3 banking centers located in Indiana from Irwin. Associated
loans were acquired at par value and there was no premium paid on assumed
liabilities.
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§
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Each
transaction is considered a business combination and accounted for under
Financial Accounting Standards Board (“FASB”) Codification Topic 805:
Business Combinations (“Topic 805”), FASB Codification Topic 820: Fair
Value Measurements and FASB Codification Topic 310-30: Loans and Debt
Securities Acquired with Deteriorated Credit Quality. All acquired assets
and liabilities were recorded at their estimated fair market values as of
the date of acquisition, and identifiable intangible assets were recorded
at their estimated fair value. These estimated fair market values are
considered preliminary, and are subject to change for up to one year after
the acquisition date as additional information relative to closing date
fair values becomes available.
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-2-
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§
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Increased
credit costs, including higher provision expense and elevated
net-charge-offs.
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Increased
the provision expense from the second quarter of 2009 by $16.3 million to
$26.7 million, or 280% of total net charge-offs, further strengthening the
allowance for loan and lease losses (excludes covered assets) to
1.94%.
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Included
in total net charge-offs was a $2.2 million loss on the sale of the entire
$34.5 million shared national credit
portfolio.
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ACQUISITIONS
All
references to acquired balances reflect the fair value unless stated
otherwise.
During
the third quarter of 2009, through FDIC-assisted transactions, First Financial
acquired the banking operations of Peoples and Irwin. The company also acquired
3 Indiana banking centers from Irwin in a separate and unrelated transaction.
The acquisitions of the Peoples and Irwin franchises significantly expands the
First Financial footprint, opens new markets and strengthens the company through
the generation of additional capital. Through these three transactions, the
company added a total of 49 banking centers, including 39 banking centers within
the company’s primary markets.
In
connection with the Peoples and Irwin FDIC-assisted transactions, First
Financial entered into loss sharing agreements with the FDIC. Under the terms of
these agreements the FDIC will reimburse First Financial for losses with respect
to certain loans and other real estate owned (OREO) (collectively, “covered
assets”), which now represent nearly half of First Financial’s loans, beginning
with the first dollar of loss. These agreements provide for loss protection on
single-family, residential loans for a period of ten years and First Financial
is required to share any recoveries of previously charged-off amounts for the
same time period, on the same pro-rata basis with the FDIC. All other loans are
provided loss protection for a period of five years and recoveries of previously
charged-off loans must be shared with the FDIC for a period of eight years,
again on the same pro-rata basis.
First
Financial must follow specific servicing and resolution procedures, as outlined
in the loss share agreements, in order to receive reimbursement from the FDIC
for losses on covered assets. The company has established separate and dedicated
teams of legal, finance, credit and technology staff to execute and monitor all
activity related to each agreement, including the required periodic reporting to
the FDIC. First Financial intends to service all covered assets with the same
resolution practices and diligence as it does for the assets that are not
subject to a loss share agreement.
An
overview of the transactions and their respective loss share agreements are
discussed below.
Peoples
Community Bank
Including
cash received from the FDIC, First Financial acquired $566.0 million in assets,
including $336.1 million in loans and other real estate, and assumed $584.7
million in liabilities, including $520.8 million in deposits, recorded at their
estimated fair market value.
Covered
assets totaling $324.4 million in fair value are subject to a stated loss
threshold of $190.0 million whereby the FDIC will reimburse First Financial for
80% of covered asset losses up to $190.0 million, and 95% of losses beyond
$190.0 million.
-3-
First
Financial holds a purchase option from the FDIC for each of Peoples bank
properties and their associated contents. The company’s review of the
former Peoples locations is still in progress.
In late
October, First Financial successfully completed the technology conversion and
operational integration of Peoples. In conjunction with these efforts, two
former Peoples banking centers were consolidated into First Financial locations
and one First Financial banking center was consolidated into a former Peoples
location. In addition, of the approximately 115 associates who were employed at
Peoples on the acquisition date, 96 have accepted full-time positions at First
Financial. The positions are primarily located within the banking center
network.
Irwin
Including
cash received from the FDIC, First Financial acquired $3.3 billion in assets,
including $1.8 billion in loans, and assumed $2.9 billion in liabilities,
including $2.5 billion in deposits, recorded at their estimated fair market
value.
The loans
were acquired under a modified transaction structure with the FDIC whereby
certain non-performing loans, foreclosed real estate, acquisition, development
and construction loans, and residential and commercial land loans were excluded
from the acquired portfolio. The estimated fair value for loans acquired was
based upon the FDIC’s estimated data for excluded loans. The company anticipates
the final determination of the excluded loans will be completed in the fourth
quarter of 2009.
Covered
assets acquired from Irwin Union Bank and Trust Company totaling $1.5 billion in
fair value are subject to a stated loss threshold of $526.0 million whereby the
FDIC will reimburse First Financial for 80% of covered asset losses up to $526.0
million, and 95% of losses beyond $526.0 million.
Covered
assets acquired from Irwin Union Bank, F.S.B. totaling $259.4 million in fair
value are subject to a stated loss threshold of $110.0 million whereby the FDIC
will reimburse First Financial for 80% of covered asset losses up to $110.0
million, and 95% of losses beyond $110.0 million.
As the
estimated fair value of assets acquired exceeded the estimated fair value of
liabilities assumed, First Financial recognized an after-tax bargain purchase
gain of $241.0 million, as required by FASB Codification Topic 805.
Integration
planning is underway for the conversion of Irwin’s technology and operational
systems; however, a specific timeline has not yet been established for these
conversions.
Irwin
Banking Centers
In a
separate and unrelated transaction, the company purchased 3 banking centers
located in Indiana from Irwin, including $84.6 million in deposits and $41.1
million in performing loans. Assets acquired in this transaction are not subject
to a loss share agreement. Loans were acquired at par value and there was no
premium paid on assumed liabilities.
-4-
Strategic
Decisions
Management
has concluded that the markets previously operated by Irwin in the western
United States do not align with the long-term strategic plans for the company.
Though profitable, each of these markets will pursue an exit strategy whereby
the market presidents will work with an institution of their choosing to refer
existing client relationships. If a suitable financial institution is not
identified, an exit date will be selected for each market and the office will
close in compliance with the applicable regulatory requirements. The western
offices combined had an estimated $730.1 million in loans and $494.9 million in
deposits on the acquisition date, based on the seller’s book value. First
Financial will continue to service the loans in these markets in compliance with
the terms of the FDIC Purchase and Assumption Agreements.
First
Financial also acquired, as part of the Irwin transaction, a franchise finance
business. This business is a specialty lender in the quick service and casual
dining segments of the restaurant industry. It has been consistently profitable
and is led by a seasoned management team with strong underwriting, credit
management and loss mitigation experience. There are principal balances of
approximately $656.9 million in franchise finance loans outstanding, all of
which are covered under a loss share agreement with the FDIC.
This
niche business offers First Financial the ability to diversify its earning
assets and will be supported as part of the company’s ongoing strategy. The
overall portfolio size will be managed to a risk-appropriate level so as not to
create an industry concentration.
For
additional information on First Financial’s comparable financial results, please
refer to the discussions that follow detailing revenue and expense
fluctuations.
DETAILS
OF RESULTS
Unless otherwise noted, all amounts
discussed in this earnings release are pre-tax except net income and per-share
data which are presented after-tax. Percentage changes are not annualized unless
specifically noted. In some instances, financial data may not add up due to
rounding.
-5-
CREDIT
QUALITY (excluding covered assets)
The
following table presents First Financial’s key credit quality
metrics.
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Table
I
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($
in thousands)
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Three
Months Ended
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Year-to-Date
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September
30,
2009
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June
30,
2009
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March
31,
2009
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December
31,
2008
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September
30,
2008
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September
30,
2009
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September
30,
2008
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||||||||||||||||||||||
| Total Nonperforming Loans | $ | 63,608 | $ | 37,790 | $ | 24,892 | $ | 18,185 | $ | 14,038 | $ | 63,608 | $ | 14,038 | ||||||||||||||
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Total
Nonperforming Assets
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$ | 67,909 | $ | 42,956 | $ | 28,405 | $ | 22,213 | $ | 18,648 | $ | 67,909 | $ | 18,648 | ||||||||||||||
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Nonperforming
Assets as a % of:
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Period-End
Loans, plus OREO
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2.36 | % | 1.48 | % | 1.04 | % | 0.83 | % | 0.70 | % | 2.36 | % | 0.70 | % | ||||||||||||||
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Total
Assets
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0.94 | % | 1.14 | % | 0.75 | % | 0.60 | % | 0.53 | % | 0.94 | % | 0.53 | % | ||||||||||||||
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Nonperforming
Loans as a % of Total Loans
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2.21 | % | 1.31 | % | 0.91 | % | 0.68 | % | 0.53 | % | 2.21 | % | 0.53 | % | ||||||||||||||
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Provision
for Loan & Lease Losses
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$ | 26,655 | $ | 10,358 | $ | 4,259 | $ | 10,475 | $ | 3,219 | $ | 41,272 | $ | 8,935 | ||||||||||||||
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Allowance
for Loan & Lease Losses
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$ | 55,770 | $ | 38,649 | $ | 36,437 | $ | 35,873 | $ | 30,353 | $ | 55,770 | $ | 30,353 | ||||||||||||||
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Allowance
for Loan & Lease Losses as a % of:
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Period-End
Loans
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1.94 | % | 1.34 | % | 1.33 | % | 1.34 | % | 1.14 | % | 1.94 | % | 1.14 | % | ||||||||||||||
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Nonaccrual
Loans
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92.2 | % | 102.8 | % | 147.6 | % | 199.5 | % | 219.5 | % | 92.2 | % | 219.5 | % | ||||||||||||||
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Nonperforming
Loans
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87.7 | % | 102.3 | % | 146.4 | % | 197.3 | % | 216.2 | % | 87.7 | % | 216.2 | % | ||||||||||||||
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Total
Net Charge-Offs
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$ | 9,534 | $ | 8,146 | $ | 3,695 | $ | 4,955 | $ | 2,446 | $ | 21,375 | $ | 7,639 | ||||||||||||||
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Annualized
Net Charge-Offs as a % of Average
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Loans
& Leases
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1.31 | % | 1.19 | % | 0.55 | % | 0.73 | % | 0.36 | % | 1.03 | % | 0.39 | % | ||||||||||||||
The
elevated net charge-offs and higher level of nonperforming assets reflects the
continued adverse impact of the prolonged economic downturn and its effect on
the loan portfolio. The elevated provision expense in the quarter is due largely
to the company’s expectation of the risk inherent in the commercial real estate
portfolio. While not necessarily credit specific for First Financial, generally
the outlook for this sector has continued to deteriorate and is not likely to
recover over the next 12 months, according to most industry data. Therefore, the
company has increased reserves for this category. Approximately $10.2 million of
the $17.1 million net increase to the allowance is due to the company’s estimate
of sector risk in the commercial real estate portfolio. Although there have been
some signs of economic stabilization and emerging optimism, unemployment rates
remain at near-record levels, consumer spending is stagnant, and operating
conditions continue to be challenging for many commercial
borrowers.
Net
Charge-offs
The
commercial and commercial real estate construction lending portfolios continued
to experience elevated levels of stress during the third quarter of 2009. The
quarter’s increase in total net charge-offs compared with last quarter and a
year ago was driven primarily by deterioration within these segments. Late in
2008 and continuing into 2009, pressure from the prolonged recession began to
adversely impact clients who up until that time, had not been severely
affected.
Third
quarter 2009 total net charge-offs were $9.5 million, or 131 basis points of
average loans and leases, compared with $8.1 million or 119 basis points of
average loans and leases in the second quarter of 2009, and $2.4 million or 36
basis points of average loans and leases in the third quarter of 2008.
Year-to-date 2009, total net charge-offs were $21.4 million or 103 basis points
of average loans and leases, compared with $7.6 million or 39 basis points of
average loans and leases year-to-date 2008.
-6-
During
the third quarter of 2009, primarily due to a rebound in market values and the
desire to eliminate portfolio risk from the shared national credit segment, the
entire $34.5 million portfolio of shared national credits was sold, resulting in
a net charge-off of $2.2 million or 30 basis points of average loans and leases.
Included in this loan sale was a $1.4 million relationship, in bankruptcy, which
represented approximately 20% of the loss on the portfolio sale.
Nonperforming
Assets
Third
quarter 2009 nonperforming loans were $63.6 million compared with $37.8 million
in the second quarter of 2009 and $14.0 million in the third quarter of 2008.
Both the linked-quarter and year-over-year increases were primarily attributable
to continued deterioration within the commercial lending portfolios,
specifically, commercial real estate construction. During the quarter, the
company placed a single relationship totaling $13.6 million of commercial land
development loans on nonaccrual.
Similar
to the past several quarters, the higher level of nonperforming loans, which are
accounted for under FASB Codification Topic 310-10-35: Subsequent Measurement of
Receivables, continues to adversely impact the company’s nonperforming loan
coverage ratios. The third quarter 2009 allowance for loan and lease losses as a
percent of nonaccrual loans was 92.2% compared with 102.8% in the second quarter
of 2009, and 219.5% in the third quarter of 2008, and the allowance for loan and
lease losses as a percent of nonperforming loans was 87.7% compared with 102.3%
in the second quarter of 2009, and 216.2% in the third quarter of
2008.
Restructured
Loans
During
the third quarter of 2009, the company restructured approximately $2.9 million
of residential mortgage loans for borrowers. The terms of the modifications
included a combination of temporary interest rate reductions, term extensions
and re-amortizations. These actions did not have a significant financial impact
on the company. There can be no assurance these actions will be successful in
improving the long-term performance of the borrowers.
Delinquent
Loans
Total
loans 30 to 89 days past due at September 30, 2009 were $20.8 million, or 0.72%
of period end loans, compared with $20.5 million, or 0.71% at June 30, 2009, and
$22.3 million, or 0.84% at September 30, 2008. Management closely monitors
these trends and ratios and considers the level of delinquent loans consistent
with its expectation of the total loan portfolio’s behavior.
Allowance
for Loan & Lease Losses
At
September 30, 2009, the allowance for loan and lease losses increased to $55.8
million from $38.6 million at June 30, 2009, and $30.4 million at September 30,
2008. The higher reserve reflects the company’s expectation that certain
credit metrics may remain volatile and at these historically higher levels over
the next several quarters as a result of the current economic conditions,
including the high unemployment rates, declining real estate values and
expectations for a slow recovery.
Other
Real Estate Owned
At
September 30, 2009, OREO was $4.3 million, compared with $5.2 million at June
30, 2009, and $4.6 million at September 30, 2008.
For
further details on the quarter-over-quarter and year-to-date changes in credit
quality, excluding covered assets, please see the attached Credit Quality
schedule.
-7-
CAPITAL
MANAGEMENT
The Irwin
FDIC-assisted transaction, which was accounted for as a business combination
with a bargain purchase gain, generated approximately $241.0 million of
additional capital. The acquired covered assets and the FDIC Indemnification
Asset, which represents the fair value of estimated future payments by the FDIC
to First Financial, are both risk-weighted at 20% for regulatory capital
requirement purposes.
Associated
with the sale of the company’s perpetual preferred securities to the U.S.
Treasury under its Capital Purchase Plan (CPP) in December of 2008, the U.S.
Treasury received one warrant to purchase 930,233 shares of First Financial
common stock at an exercise price of $12.90 per share. As a result of the common
equity raised during the second quarter of 2009, the number of common shares
eligible for purchase under the warrant agreement was reduced by 50% to 465,116
shares.
At
September 30, 2009, total regulatory capital exceeded the “minimum” requirement
by $380.5 million, on a consolidated basis.
The
following table presents regulatory capital ratios at September 30,
2009.
|
Table
II
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FFBC
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Regulatory
"well-capitalized"
minimum
|
||||||
|
Leverage
Ratio
|
14.60 | % | 5 | % | ||||
|
Tier
1 Capital Ratio
|
16.21 | % | 6 | % | ||||
|
Total
Risk-Based Capital Ratio
|
17.46 | % | 10 | % | ||||
|
EOP
Tangible Equity /EOP Tangible Assets
|
8.57 | % | N/A | |||||
|
EOP
Tangible Common Equity / EOP Tangible Assets
|
7.48 | % | N/A | |||||
| N/A = not applicable | ||||||||
NET
INTEREST INCOME & NET INTEREST MARGIN
|
Table
III
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($
in thousands)
|
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|
Quarter
|
Year-to-Date
|
|||||||||||||||||||
| 3Q-09 | 2Q-09 | 3Q-08 |
September
30, 2009
|
September
30, 2008
|
||||||||||||||||
|
Net
Interest Income
|
$ | 37,455 | $ | 31,209 | $ | 29,410 | $ | 99,592 | $ | 86,073 | ||||||||||
|
Net
Interest Margin
|
3.59 | % | 3.60 | % | 3.68 | % | 3.59 | % | 3.72 | % | ||||||||||
|
Net
Interest Margin
|
||||||||||||||||||||
|
(fully
tax equivalent)
|
3.61 | % | 3.64 | % | 3.73 | % | 3.63 | % | 3.79 | % | ||||||||||
Third quarter 2009 net interest income increased $8.0 million from the third quarter of 2008 and $6.2 million from the second quarter of 2009. The third quarter 2009 net interest margin declined 9 basis points from the third quarter of 2008 and 1 basis point from the second quarter of 2009. Year-to-date 2009 net interest income increased $13.5 million from 2008’s comparable period, and the net interest margin declined 13 basis points.
-8-
The
year-over-year quarter, linked quarter and year-to-date increases in net
interest income were due to higher average loan balances largely driven by the
purchase of $145.1 million in performing loans from Irwin at the end of the
second quarter of 2009 and the Peoples and Irwin FDIC-assisted transactions in
the third quarter. This increase was partially offset by the sales of securities
at the end of the second quarter and the cash flows from the investment
portfolio that were not reinvested into securities.
The
year-over-year quarter, linked quarter and year-to-date net interest margin
declines were primarily related to the impact from the cash received from the
FDIC-assisted transactions in the third quarter. These funds, held at the
Federal Reserve, earn a federal funds rate and are being utilized to fund
anticipated runoff from deposit repricing. This impacted the net interest margin
by 11 basis points in the third quarter of 2009. The year-to-date net interest
margin declines were also impacted by the lower overall market interest rate
environment. The net interest margin, however, continues to benefit from the
growth in average total loans and the continued mix shifts in the loan portfolio
from consumer to commercial and in the deposit portfolio from time to
transaction deposits.
For
further details on the quarter-over-quarter and year-to-date changes in the net
interest margin, please see the attached Net Interest Margin Rate / Volume
Analysis.
NONINTEREST
INCOME
The
following table presents a summary of items impacting noninterest
income.
|
Table
IV
|
($
in thousands)
|
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|
Quarter
|
Year-to-Date
|
|||||||||||||||||||
| 3Q-09 | 2Q-09 | 3Q-08 |
September
30, 2009
|
September
30, 2008
|
||||||||||||||||
|
Gain
(Loss) on FHLMC shares
|
$ | 154 | $ | 112 | $ | (3,400 | ) | $ | 277 | $ | (3,601 | ) | ||||||||
|
Gain
on Acquisition
|
383,330 | - | - | 383,330 | - | |||||||||||||||
|
Gain
on Sale of Property & Casualty Portion of Insurance
Business
|
- | - | - | 574 | - | |||||||||||||||
|
Gain
on Sales of Investment Securities (CPP 2Q-09; VISA 1Q-08)
|
- | 3,349 | - | 3,349 | 1,585 | |||||||||||||||
|
Impact
to Noninterest Income
|
$ | 383,484 | $ | 3,461 | $ | (3,400 | ) | $ | 387,530 | $ | (2,016 | ) | ||||||||
Third
quarter 2009 noninterest income was $394.9 million, an increase of $384.4
million from the third quarter of 2008, and an increase of $380.8 million from
the second quarter of 2009. Excluding the items disclosed in the table, third
quarter 2009 noninterest income declined $2.5 million from the third quarter of
2008 and increased $0.8 million from the second quarter of 2009. The
year-over-year decline was primarily a result of lower net gains from loan
sales, trust and wealth management fees and other noninterest income. The
decline in other noninterest income was related to lower revenue from bank-owned
life insurance and the sale of the company’s property and casualty liability
portion of the insurance business that was sold in the first quarter of 2009.
Market-based revenues such as bank-owned life insurance and trust fees are
reflective of the overall market conditions from which these revenues are
derived. The linked quarter benefited from increases in service charges on
deposit accounts and trust and wealth management fees, but was also negatively
impacted by lower net gains from loan sales.
-9-
Year-to-date
2009 noninterest income was $421.0 million, an increase of $381.9 million from
$39.1 million in 2008’s comparable period. Excluding the items disclosed in the
table, year-to-date 2009 noninterest income declined $7.6 million from 2008’s
comparable period. This decline was primarily due to lower service charges on
deposit accounts, decreases in bankcard income and lower trust and wealth
management fees as well as declines in income from bank-owned life insurance and
brokerage income.
Over the
past year, most fee income components of noninterest income have been negatively
impacted by the declining economic conditions and their impact on consumer
spending, while trust and wealth management fees were negatively impacted by
volatility in the investment and equity markets. In the second and third
quarters of 2009, a number of deposit and consumer-based fee income categories
began to show improvement over prior quarters. Third quarter 2009 total service
charges on deposit accounts increased $1.1 million from the second quarter of
2009 reflecting higher fee income on the company’s legacy deposit accounts as
well as additional income resulting from acquired deposit accounts during the
quarter. Bankcard income declined slightly from the second quarter of 2009 but
showed improvement from the first quarter of 2009.
The
following table presents overdraft/non-sufficient funds fees and trust and
wealth management fees.
|
Table
V
|
($
in thousands)
|
|||||||||||||||||||
|
Quarter
|
Year-to-Date
|
|||||||||||||||||||
| 3Q-09 | 2Q-09 | 3Q-08 |
September
30, 2009
|
September
30, 2008
|
||||||||||||||||
|
Overdraft/Non-Sufficient
Fund Fees
|
$ | 3,735 | $ | 3,003 | $ | 3,789 | $ | 9,529 | $ | 10,757 | ||||||||||
|
Other
|
1,673 | 1,286 | 1,559 | 4,247 | 4,149 | |||||||||||||||
|
Total
Service Charges on Deposit Accounts
|
$ | 5,408 | $ | 4,289 | $ | 5,348 | $ | 13,776 | $ | 14,906 | ||||||||||
|
Trust
Fees
|
3,132 | 2,944 | 3,811 | 9,022 | 11,691 | |||||||||||||||
|
Investment
Advisory Fees
|
207 | 309 | 579 | 859 | 1,975 | |||||||||||||||
|
Total
Trust & Wealth Management Fees
|
$ | 3,339 | $ | 3,253 | $ | 4,390 | $ | 9,881 | $ | 13,666 | ||||||||||
Between
June 30, 2008 and March 31, 2009, assets under management by the company’s
wealth management division declined by over $470 million from $2.0 billion to
$1.6 billion, primarily as a result of equity market declines. A rebound in the
equity markets over the past several months have positively impacted market
values, and assets under management increased by over $230 million to $1.8
billion at September 30, 2009 from $1.6 billon at March 31,
2009.
NONINTEREST
EXPENSE
Core
operating expenses were primarily unchanged although there were some higher
expenses related to general growth, market expansion and incentive compensation.
Acquisition-related costs were primarily comprised of legal, professional,
technology and other integration costs. Staffing and occupancy expenses also
increased as a result of the additional associates and banking centers that were
added during the quarter.
-10-
INCOME
TAXES
Income
tax expense was $133.7 million and the effective tax rate was 37.1% for the
third quarter of 2009, compared with income tax expense of $2.6 million and an
effective tax rate of 31.2% for the third quarter of 2008, and income tax
expense of $0.7 million and an effective tax rate of 32.6% for the second
quarter of 2009. Year-to-date 2009 income tax expense was $137.4 million with an
effective tax rate of 37.1% compared with income tax expense of $10.0 million
and an effective tax rate of 32.5% for 2008’s comparable period. The increase in
the overall tax rate for both the third quarter and year-to-date 2009 was driven
by the tax impact from the bargain purchase gain and other changes resulting
from the Irwin acquisition.
LOANS
(excluding covered loans)
Third
Quarter 2009 versus Third Quarter 2008
|
§
|
Average
total loans increased $179.1 million or
6.6%.
|
|
§
|
Average
commercial, commercial real estate and construction loans increased $311.7
million, or 17.2%.
|
Third
Quarter 2009 versus Second Quarter 2009
|
§
|
Average
total loans increased $148.5 million, or 21.7% on an annualized
basis.
|
|
§
|
Average
commercial, commercial real estate and construction loans increased $150.1
million, or 30.5% on an annualized
basis.
|
Year-to-Date
2009 versus Year-to-Date 2008
|
§
|
Average
total loans increased $130.6 million, or
4.9%.
|
|
§
|
Average
commercial, commercial real estate and construction loans increased $275.6
million, or 15.9%.
|
Loan
balances include $41.1 million in loans purchased on August 28, 2009 from Irwin,
but exclude covered loans acquired under loss share agreements.
INVESTMENTS
Securities
available-for-sale at September 30, 2009, totaled $523.4 million, compared with
$492.6 million at September 30, 2008, and $528.2 million at June 30, 2009. The
total investment portfolio represented 8.7% and 15.2% of total assets at
September 30, 2009 and 2008, respectively, and 14.8% of total assets at June 30,
2009.
At
September 30, 2009, the company held 71.8% of its available-for-sale securities
in residential mortgage-related investments, substantially all of which are held
in highly-rated, agency-backed pass-through instruments, including
collateralized mortgage obligations (CMOs). All CMOs held by the company are AAA
rated by Standard & Poor’s Corporation or similar rating agencies. First
Financial does not own any interest-only, principal-only, or other high-risk
securities.
The
company has recorded, as a component of equity in accumulated other
comprehensive income, an unrealized after-tax gain on the investment portfolio
of approximately $12.5 million at September 30, 2009, compared with an
unrealized after-tax gain of $0.5 million at September 30, 2008, and an
unrealized after-tax gain of $7.5 million at June 30, 2009.
-11-
The
following table presents a summary of the total investment portfolio at
September 30, 2009.
|
Table
VI
|
|
($
in thousands, excluding book price and market
value)
|
|
%
of
|
Book
|
Book
|
Book
|
September
30, 2009
|
Pre-Tax
|
|||||||||||||||||||
|
Total
|
Value
|
Yield
|
Price
|
Market
Value
|
Gain/(Loss)
|
|||||||||||||||||||
|
UST
Notes & Agencies
|
8.7 | % | $ | 54,502 | 4.65 | 99.76 | 101.92 | $ | 1,160 | |||||||||||||||
|
CMOs
(Agency)
|
9.9 | % | 62,342 | 4.62 | 100.47 | 104.30 | 2,294 | |||||||||||||||||
|
CMOs
(Private)
|
0.0 | % | 68 | 1.12 | 100.00 | 97.97 | (1 | ) | ||||||||||||||||
|
MBSs
(Agency)
|
61.8 | % | 389,469 | 4.64 | 100.94 | 104.92 | 14,753 | |||||||||||||||||
|
Agency
Preferred
|
0.1 | % | 338 | - | 1.69 | 1.69 | - | |||||||||||||||||
|
Subtotal
|
80.5 | % | $ | 506,719 | 4.64 | 100.69 | 103.46 | $ | 18,206 | |||||||||||||||
|
Municipal
|
4.1 | % | $ | 25,512 | 7.15 | 99.01 | 101.43 | $ | 616 | |||||||||||||||
|
Other
*
|
15.4 | % | 97,083 | 3.70 | 101.50 | 101.91 | 388 | |||||||||||||||||
|
Subtotal
|
19.5 | % | $ | 122,595 | 4.42 | 100.98 | 101.81 | $ | 1,004 | |||||||||||||||
|
Total
Investment Portfolio
|
100.0 | % | $ | 629,314 | 4.60 | 100.75 | 103.17 | $ | 19,210 |
|
Net
Unrealized Gain/(Loss)
|
$ | 19,210 | |||
|
Aggregate
Gains
|
$ | 19,488 | |||
|
Aggregate
Losses
|
$ | (278 | ) | ||
|
Net
Unrealized Gain/(Loss) % of Book Value
|
3.05 | % |
* Other
includes $88 million of regulatory stock
First Financial has not purchased any securities in the investment portfolio since the first quarter of 2009 due to higher pricing on bonds, which has persisted since the beginning of the year. The increase in portfolio balances during the third quarter of 2009 was the result of acquired securities from the Peoples and Irwin transactions. All securities acquired through these FDIC-assisted transactions are conforming investments as outlined in First Financial’s investment policy.
The
acquired Peoples and Irwin investment securities, excluding regulatory stock,
were acquired from the FDIC at their fair market values as of the date of the
acquisitions.
The
following table presents the quarterly progression of the investment portfolio
incorporating these acquisitions.
|
Table
VII
|
Change
|
|||||||||||||||||||
|
($
in thousands)
|
06/30/09
|
09/30/09
|
||||||||||||||||||
|
Beginning
|
Maturities/
|
Ending
|
||||||||||||||||||
|
Book
Value
|
Peoples
|
Irwin
|
Additions
|
Book
Value
|
||||||||||||||||
|
UST
Notes & Agencies
|
$ | 41,145 | $ | - | $ | 13,609 | $ | (252 | ) | $ | 54,502 | |||||||||
|
CMOs
(Agency)
|
65,879 | - | - | (3,537 | ) | 62,342 | ||||||||||||||
|
CMOs
(Private)
|
77 | - | - | (9 | ) | 68 | ||||||||||||||
|
MBSs
(Agency)
|
391,667 | 21,465 | 1,330 | (24,994 | ) | 389,468 | ||||||||||||||
|
Agency
Preferred
|
184 | - | - | 154 | 338 | |||||||||||||||
|
Subtotal
|
$ | 498,952 | $ | 21,465 | $ | 14,939 | $ | (28,638 | ) | $ | 506,718 | |||||||||
|
Municipals
|
$ | 30,085 | $ | 349 | $ | 627 | $ | (5,549 | ) | $ | 25,512 | |||||||||
|
Other
*
|
31,839 | 15,867 | 50,021 | (643 | ) | 97,084 | ||||||||||||||
|
Subtotal
|
$ | 61,924 | $ | 16,216 | $ | 50,648 | $ | (6,192 | ) | $ | 122,596 | |||||||||
|
Total
Investment Portfolio
|
$ | 560,876 | $ | 37,681 | $ | 65,587 | $ | (34,830 | ) | $ | 629,314 | |||||||||
|
*
Includes Regulatory Stock
|
||||||||||||||||||||
|
Net
Unrealized Gain/(Loss)
|
$ | 12,108 | $ | 19,210 | ||||||||||||||||
|
Aggregate
Gains
|
$ | 13,072 | $ | 19,488 | ||||||||||||||||
|
Aggregate
Losses
|
$ | (964 | ) | $ | (278 | ) | ||||||||||||||
|
Net
Unrealized Gain/(Loss) % of Book Value
|
2.16 | % | 3.05 | % | ||||||||||||||||
-12-
DEPOSITS
& FUNDING
Deposits
balances were elevated by the $3.0 billion in deposits assumed as part of the
Peoples and Irwin transactions, and by $84.6 million in deposits assumed on
August 28, 2009 directly from Irwin.
The table
below presents the progression of deposits, including the deposits acquired,
during the third quarter of 2009.
|
Table
VIII
|
Deposits,
including Acquired Deposits
|
|||||||||||||||
|
($
in thousands)
|
First
Financial
|
First
Financial
|
||||||||||||||
|
at
|
Acquired
|
Organic
|
at
|
|||||||||||||
|
06/30/09
|
Deposits
|
Growth
|
09/30/09
|
|||||||||||||
|
End
of Period
|
||||||||||||||||
|
Transaction
& Savings Deposits
|
$ | 1,680,446 | $ | 1,401,965 | $ | 50,181 | $ | 3,132,592 | ||||||||
|
Time
Deposits
|
1,032,890 | 950,945 | 44,677 | 2,028,512 | ||||||||||||
|
Broker
Deposits
|
78,509 | 601,332 | (4,961 | ) | 674,880 | |||||||||||
|
Total
|
$ | 2,791,845 | $ | 2,954,242 | $ | 89,897 | $ | 5,835,984 | ||||||||
As
permitted by the FDIC, First Financial had the option to reprice the acquired
deposit portfolios to current market rates within seven days of the acquisition
dates. In addition, depositors had the option to withdraw funds without penalty.
The company chose to reprice approximately $1.0 billion in deposits. The
repriced deposits were comprised of all assumed brokered deposits, all time
deposits from Peoples, as well as related time deposits of Irwin Union Bank,
F.S.B. First Financial received approximately $948.3 million from the FDIC
associated with the transactions and believes that this provides sufficient
liquidity to fund the potential at-risk deposit outflows. Through the end of
October, 2009, approximately 36% of the repriced deposit accounts were redeemed
without penalty.
First
Financial assumed additional Federal Home Loan Bank debt in the Peoples and
Irwin acquisitions. Approximately $83.7 million in short-term advances from
Irwin matured prior to the end of the third quarter of 2009.
The table
below presents the quarterly progression of First Financial’s borrowed funds
position.
|
Table
IX
|
||||||||||||||||||||
|
($
in thousands)
|
Change
|
|||||||||||||||||||
|
06/30/09
|
07/31/09
|
09/18/09
|
3Q-09 |
09/30/09
|
||||||||||||||||
|
Beginning
|
Peoples
|
Irwin
|
Maturities/
|
Ending
|
||||||||||||||||
|
Borrowed
Funds
|
Balance
|
Additions
|
Additions
|
Additions
|
Balance
|
|||||||||||||||
|
|
||||||||||||||||||||
|
Short
Term Borrowings:
|
||||||||||||||||||||
|
Federal
Funds Purchased and Securities Sold Under Agreements to
Repurchase
|
206,777
|
-
|
-
|
(171,014
|
)
|
35,763
|
||||||||||||||
|
Federal
Home Loan Bank Advances
|
125,000
|
-
|
138,700
|
(198,700
|
)
|
65,000
|
||||||||||||||
|
Other
|
25,000
|
-
|
-
|
(25,000
|
)
|
-
|
||||||||||||||
|
Total
Short Term Borrowings
|
$
|
356,777
|
$
|
-
|
$
|
138,700
|
$
|
(394,714
|
)
|
$
|
100,763
|
|||||||||
|
Long
Term Borrowings:
|
||||||||||||||||||||
|
Federal
Home Loan Bank Advances
|
$
|
70,908
|
$
|
63,477
|
$
|
216,304
|
$
|
(5,334
|
)
|
345,356
|
||||||||||
|
Securities
Sold Under Agreements to Repurchase
|
65,000
|
-
|
-
|
-
|
65,000
|
|||||||||||||||
|
Other
|
20,620
|
-
|
-
|
-
|
20,620
|
|||||||||||||||
|
Total
Long Term Borrowings
|
$
|
156,528
|
$
|
63,477
|
$
|
216,304
|
$
|
(5,334
|
)
|
$
|
430,976
|
|||||||||
|
Total
Short & Long Term Borrowings
|
$
|
513,305
|
$
|
63,477
|
$
|
355,004
|
$
|
(400,048
|
)
|
$
|
531,739
|
At
September 30, 2009, First Financial had unused and available overnight wholesale
funding of approximately $2.5 billion.
-13-
Conference
Call & Webcast
As
previously announced, a conference call and webcast to discuss First Financial’s
third quarter 2009 financial results will be held on Friday, November 6, 2009,
at 9:00 a.m. ET with Claude E. Davis, president and chief executive officer, and
J. Franklin Hall, executive vice president and chief financial officer. To
access the conference call, dial 800-860-2442 (passcode not required). The
webcast will be available at First Financial’s website (www.bankatfirst.com/Investor).
Participants should join the live conference call and webcast 5 to 10 minutes
before its scheduled start. A replay of the call and webcast will be available
approximately one hour after the live call has ended. To access the replay, dial
877-344-7529 (passcode 435439).
Forward-Looking
Statements
This news
release should be read in conjunction with the consolidated financial
statements, notes and tables in First Financial Bancorp’s most recent Annual
Report on Form 10-K for the year ended December 31, 2008. Management’s analysis
contains forward-looking statements that are provided to assist in the
understanding of anticipated future financial performance. However, such
performance involves risk and uncertainties that may cause actual results to
differ materially. Factors that could cause actual results to differ from those
discussed in the forward-looking statements include, but are not limited to,
management’s ability to effectively execute its business plan; the risk that the
strength of the United States economy in general and the strength of the local
economies in which First Financial conducts operations continue to deteriorate,
resulting in, among other things, a further deterioration in credit quality or a
reduced demand for credit, including the resultant effect on First Financial’s
loan portfolio, allowance for loan and lease losses and overall financial
purpose; the ability of financial institutions to access sources of liquidity at
a reasonable cost; the impact of recent upheaval in the financial markets and
the effectiveness of domestic and international governmental actions taken in
response, such as the U.S. Treasury’s TARP and the FDIC’s Temporary Liquidity
Guarantee Program, and the effect of such governmental actions on First
Financial, its competitors and counterparties, financial markets generally and
availability of credit specifically, and the U.S. and international economies,
including potentially higher FDIC premiums arising from participation in the
Temporary Liquidity Guarantee Program or from increased payments from FDIC
insurance funds as a result of depository institution failures; the effects of
and changes in policies and laws of regulatory agencies, inflation, and interest
rates; technology changes; mergers and acquisitions, including costs or
difficulties related to the integration of acquired companies; expected cost
savings in connection with the consolidation of recent acquisitions may not be
fully realized or realized within the expected time frames; and deposit
attrition, customer loss and for revenue loss following completed acquisitions
may be greater than expected; the effect of changes in accounting policies and
practices; adverse changes in the securities and debt markets; First Financial’s
success in recruiting and retaining the necessary personnel to support business
growth and expansion and maintain sufficient expertise to support increasingly
complex products and services; the cost and effects of litigation and of
unexpected or adverse outcomes in such litigation; uncertainties arising from
First Financial’s participation in the TARP, including impacts on employee
recruitment and retention and other business practices, and uncertainties
concerning the potential redemption of the U.S. Treasury’s preferred stock
investment under the program, including the timing of, regulatory approvals for,
and conditions placed upon, any such redemption; and First Financial’s success
at managing the risks involved in the foregoing. For further discussion of
certain factors that may cause such forward-looking statements to differ
materially from actual results, refer to the 2008 Form 10-K and other public
documents filed with the Securities and Exchange Commission (SEC), as well as
the most recent Form 10-Q filing for the quarter ended June 30,
2009. These documents are available at no cost within the investor
relations section of First Financial’s website at www.bankatfirst.com/Investor and on the SEC's website
at www.sec.gov.
Additional information will also be set forth in our quarterly report on Form
10-Q for the quarter ended September 30, 2009, which is due to be filed with the
SEC no later than November 9, 2009.
About
First Financial Bancorp
First
Financial Bancorp is a Cincinnati, Ohio based bank holding company. At September
30, 2009, the company had $7.3 billion in assets, including $4.9 billion in
total loans and $5.8 billion in deposits. Its banking subsidiary, First
Financial Bank, N.A., founded in 1863, provides consumer and commercial banking
products and services, and investment and insurance products through its retail
banking center network. Currently First Financial Bank, N.A. operates 128
banking centers. Its strategic operating markets are located within the four
state regions of Ohio, Indiana, Kentucky and Michigan where it operates 118
banking centers. The bank’s wealth management division, First
Financial Wealth Resource Group, provides investment management, traditional
trust, brokerage, private banking, and insurance services, and had approximately
$2.0 billion in assets under management at September 30, 2009. Additional
information about the company, including its products, services, and banking
locations, is available at www.bankatfirst.com/investor.
Additional
Information
|
Investors/Analysts
Patti
Forsythe
Vice
President, Investor Relations
513-979-5837
patti.forsythe@bankatfirst.com
|
Media
Cheryl
Lipp
First
Vice President, Marketing Director
513-979-5797
cheryl.lipp@bankatfirst.com
|
-14-