<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended JUNE 30, 1999
--------------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ___________________ to ___________________
Commission file number 0-12379
FIRST FINANCIAL BANCORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1042001
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 High Street, Hamilton, Ohio 45011
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 867-4700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 30, 1999
-------------------------- ----------------------------
Common stock, No par value 42,593,864
<PAGE> 2
FIRST FINANCIAL BANCORP.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I-FINANCIAL INFORMATION
<S> <C>
Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 1
Consolidated Statements of Earnings -
Six and Three Months Ended June 30, 1999 and 1998 2
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1999 and 1998 3
Consolidated Statements of Changes in Shareholders' Equity
Six Months Ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II-OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 18
Item 6 Exhibits and Reports on Form 8-K 19
SIGNATURES 20
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 144,856 $ 164,500
Interest-bearing deposits with other banks 3,933 2,598
Federal funds sold and securities purchased
under agreements to resell 18,973 8,654
Investment securities held-to-maturity, at cost
(market value - $39,832 at June 30, 1999 and
$40,159 at December 31, 1998) 38,631 37,782
Investment securities available-for-sale,
at market value 515,593 550,394
Loans
Commercial 739,293 767,684
Real estate-construction 85,341 74,205
Real estate-mortgage 1,387,543 1,227,905
Installment 584,678 537,156
Credit card 26,252 21,306
Lease financing 38,745 29,212
---------- ----------
Total loans 2,861,852 2,657,468
Less
Unearned income 3,830 3,322
Allowance for loan losses 37,505 34,800
---------- ----------
Net loans 2,820,517 2,619,346
Premises and equipment 58,085 57,980
Deferred income taxes 7,447 3,072
Goodwill 30,662 31,416
Other intangibles 10,802 11,164
Accrued interest and other assets 72,468 53,029
---------- ----------
TOTAL ASSETS $3,721,967 $3,539,935
========== ==========
LIABILITIES
Deposits
Noninterest-bearing $ 381,206 $ 392,999
Interest-bearing 2,532,158 2,479,068
---------- ----------
Total deposits 2,913,364 2,872,067
Short-term borrowings
Federal funds purchased and securities sold
under agreements to repurchase 68,357 59,159
Federal Home Loan Bank borrowings 213,450 94,678
Other 3,822 1,227
---------- ----------
Total short-term borrowings 285,629 155,064
Long-term borrowings 131,421 120,777
Accrued interest and other liabilities 30,395 33,762
---------- ----------
TOTAL LIABILITIES 3,360,809 3,181,670
SHAREHOLDERS' EQUITY
Common stock - no par value
Authorized - 160,000,000 shares
Issued - 42,657,988 in 1999 and 36,320,338 in 1998 305,991 306,709
Retained earnings 59,807 50,160
Accumulated comprehensive income (2,470) 4,949
Restricted stock awards (467) (408)
Treasury stock, at cost, 64,224 and 118,638 shares (1,703) (3,145)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 361,158 358,265
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,721,967 $3,539,935
========== ==========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
------------------------ -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 118,967 $ 108,735 $ 60,479 $ 55,311
Investment securities
Taxable 11,760 14,881 5,790 7,811
Tax-exempt 4,654 4,154 2,301 2,075
----------- ----------- ----------- -----------
Total investment interest 16,414 19,035 8,091 9,886
Interest-bearing deposits with
other banks 145 137 89 72
Federal funds sold and securities
purchased under agreements to resell 216 470 145 235
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME 135,742 128,377 68,804 65,504
INTEREST EXPENSE
Deposits 47,767 49,684 23,998 25,513
Short-term borrowings 4,018 2,109 2,467 1,015
Long-term borrowings 3,213 1,723 1,311 877
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE 54,998 53,516 27,776 27,405
----------- ----------- ----------- -----------
NET INTEREST INCOME 80,744 74,861 41,028 38,099
Provision for loan losses 3,910 3,158 1,378 1,528
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 76,834 71,703 39,650 36,571
NONINTEREST INCOME
Service charges on deposit accounts 7,752 6,967 4,037 3,575
Trust income 6,695 5,604 3,258 2,760
Investment securities gains (losses) 47 475 (8) 302
Other 5,593 5,087 2,704 2,457
----------- ----------- ----------- -----------
Total noninterest income 20,087 18,133 9,991 9,094
NONINTEREST EXPENSES
Salaries and employee benefits 30,160 27,882 15,153 14,068
Net occupancy expenses 3,517 3,333 1,688 1,695
Furniture and equipment expenses 3,128 2,809 1,572 1,346
Data processing expenses 3,275 3,123 1,602 1,508
Deposit insurance expense 293 236 151 115
State taxes 990 841 485 363
Amortization of intangibles 1,867 1,988 924 1,041
Merger and restructuring 6,930 0 6,930 0
Other 12,694 12,206 6,682 6,037
----------- ----------- ----------- -----------
Total noninterest expenses 62,854 52,418 35,187 26,173
----------- ----------- ----------- -----------
Income before income taxes 34,067 37,418 14,454 19,492
Income tax expense 12,271 12,413 5,739 6,402
----------- ----------- ----------- -----------
NET EARNINGS $ 21,796 $ 25,005 $ 8,715 $ 13,090
=========== =========== =========== ===========
Net earnings per share - basic $ 0.51 $ 0.58 $ 0.20 $ 0.31
=========== =========== =========== ===========
Net earnings per share - diluted $ 0.51 $ 0.58 $ 0.20 $ 0.30
=========== =========== =========== ===========
Cash dividends declared per share $ 0.30 $ 0.28 $ 0.15 $ 0.14
=========== =========== =========== ===========
Average shares outstanding 42,576,824 42,757,252 42,590,211 42,755,451
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 21,796 $ 25,005
Adjustments to reconcile net earnings to net cash
provided by operating activities
Provision for loan losses 3,910 3,158
Provision for depreciation and amortization 4,645 4,583
Net amortization of investment security
premiums and accretion of discounts 330 186
Realized investment security gains (47) (475)
Originations of mortgage loans held for sale (60,093) (92,671)
Gains from sales of mortgage loans held for sale (1,662) (1,253)
Proceeds from sale of mortgage loans held for sale 61,755 93,924
Deferred income taxes 181 (1,216)
Increase in interest receivable (2,426) (713)
Increase in cash surrender value of life insurance (12,234) (4,764)
Decrease (increase) in prepaid expenses 862 (646)
(Decrease) increase in accrued expenses (375) 765
(Decrease) increase in interest payable (152) 680
Other (6,217) (5,949)
--------- ---------
Net cash provided by operating activities 10,273 20,614
INVESTING ACTIVITIES
Proceeds from sales of investment securities
available-for-sale 9,989 31,179
Proceeds from calls, paydowns and maturities of
investment securities available-for-sale 98,171 132,150
Purchases of investment securities available-for-sale (89,801) (210,282)
Proceeds from calls, paydowns and maturities of
investment securities held-to-maturity 4,180 20,282
Purchases of investment securities held-to-maturity (845) (2,000)
Net increase in interest-bearing deposits
with other banks (1,335) (91)
Net (increase) decrease in federal funds sold and
securities purchased under agreements to resell (10,319) 8,076
Net increase in loans and leases (208,610) (90,122)
Recoveries from loans and leases previously charged off 2,074 711
Proceeds from disposal of other real estate owned 243 1,060
Net cash used in purchase of financial institutions 0 (12,231)
Purchases of premises and equipment (4,601) (2,963)
--------- ---------
Net cash used in investing activities (200,854) (124,231)
FINANCING ACTIVITIES
Net increase in total deposits 41,297 31,001
Net increase in short-term borrowings 130,565 40,721
Net increase in long-term borrowings 10,644 17,733
Cash dividends declared (12,150) (9,932)
Purchase of common stock 0 (1,101)
Proceeds from exercise of stock options, net of shares
purchased 581 469
--------- ---------
Net cash provided by financing activities 170,937 78,891
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (19,644) (24,726)
Cash and cash equivalents at beginning of period 164,500 168,362
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 144,856 $ 143,636
========= =========
</TABLE>
3
<PAGE> 6
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------------------
1999 1998
------- --------
<S> <C> <C>
Supplemental disclosures
Interest paid $54,634 $52,882
======= =======
Income taxes paid $13,335 $13,874
======= =======
Recognition of deferred tax assets
attributable to FASB Statement No. 115 $ 4,556 $ 524
======= =======
Acquisition of other real estate owned through
foreclosure $ 381 $ 509
======= =======
Issuance of restricted stock awards $ 143 $ 220
======= =======
Non-cash transfer from securities available-for-
sale to securities held-to-maturity $ 4,020 $ 0
======= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Balance at December 31, 1997, as previously reported $ 286,259
Adjusted for pooling-of-interests:
Sand Ridge Financial Corporation 39,681
Hebron Bancorp, Inc. 10,326
---------
Balances at January 1, as restated $ 358,265 336,266
Net earnings 21,796 25,005
Other comprehensive income, net of taxes:
Change in unrealized gains on securities,
available for sale (7,419) (715)
--------- ---------
Comprehensive income 14,377 24,290
Cash dividends declared (12,150) (9,932)
Purchase of common stock 0 (2,169)
Exercise of stock options, net shares purchased 582 726
Restricted stock awards 0 (3)
Amortization of restricted stock awards 84 74
--------- ---------
Balance at June 30 $ 361,158 $ 349,252
========= =========
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 8
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The consolidated financial statements for interim periods are unaudited;
however, in the opinion of the management of First Financial Bancorp.
("Bancorp"), all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation have been included.
NOTE 1: BASIS OF PRESENTATION
The consolidated financial statements of Bancorp, a bank and savings and loan
holding company, include the accounts of Bancorp and its wholly-owned
subsidiaries - First National Bank of Southwestern Ohio, Community First Bank &
Trust, Indiana Lawrence Bank, Fidelity Federal Savings Bank, Citizens First
State Bank, Home Federal Bank, A Federal Savings Bank, Union Bank & Trust
Company, The Clyde Savings Bank Company, Peoples Bank and Trust Company, Bright
National Bank, First Finance Mortgage Company of Southwestern Ohio (dba
Community First Finance), Farmers State Bank, National Bank of Hastings, Vevay
Deposit Bank, Sand Ridge Bank, and Hebron Deposit Bank. All significant
intercompany transactions and accounts have been eliminated in consolidation.
Intangible assets arising from the acquisition of subsidiaries are being
amortized over varying periods, none of which exceeds 25 years. Core deposit
balances are being amortized over varying periods, none of which exceeds 10
years.
The accompanying financial statements have been prepared in accordance with the
instructions for Form 10-Q and, therefore, do not include all information and
footnotes necessary to be in conformity with generally accepted accounting
principles.
On April 27, 1999, the shareholders approved an amendment to the Articles of
Incorporation to increase the number of authorized common shares from 60,000,000
to 160,000,000.
NOTE 2: FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, Bancorp offers a variety of financial
instruments with off-balance sheet risk to its customers to aid them in meeting
their requirements for liquidity and credit enhancement and to reduce its own
exposure to fluctuations in interest rates. These financial instruments include
standby letters of credit and commitments outstanding to extend credit.
Generally accepted accounting principles do not require these financial
instruments to be recorded in the consolidated financial statements, and
accordingly, they are not. Bancorp does not use off- balance sheet derivative
financial instruments (such as interest rate swaps) as defined in the Financial
Accounting Standards Board's (FASB) Statement No. 119 "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments".
Bancorp's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for standby letters of credit and commitments
outstanding to extend credit is represented by the contractual amounts of those
instruments. Bancorp uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments. Following
is a discussion of these transactions.
6
<PAGE> 9
Standby letters of credit are conditional commitments issued by Bancorp to
guarantee the performance of a customer to a third party. Bancorp's portfolio of
standby letters of credit consists primarily of performance assurances made on
behalf of customers who have a contractual commitment to produce or deliver
goods or services. The risk to Bancorp arises from its obligation to make
payment in the event of the customers' contractual default. As of June 30, 1999,
Bancorp had issued standby letters of credit aggregating $16,427,000 compared to
$18,022,000 issued as of December 31, 1998. Management conducts regular reviews
of these instruments on an individual customer basis, and the results are
considered in assessing the adequacy of Bancorp's allowance for loan losses.
Management does not anticipate any material losses as a result of these letters
of credit.
Loan commitments are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since many of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. Bancorp evaluates each customer's creditworthiness on an
individual basis. The amount of collateral obtained, if deemed necessary by
Bancorp upon extension of credit, is based on management's credit evaluation of
the counterparty. The collateral held varies, but may include securities, real
estate, inventory, plant, or equipment. Bancorp had commitments outstanding to
extend credit totaling $460,217,000 at June 30, 1999 and $531,433,000 at
December 31, 1998. Management does not anticipate any material losses as a
result of these commitments.
NOTE 3: BUSINESS COMBINATIONS
On June 1, 1999, Bancorp issued 1,222,650 shares of its common stock for all the
outstanding common stock of Hebron Bancorp, Inc. Upon consummation of the
merger, Hebron Bancorp, Inc. was merged out of existence and its only
subsidiary, Hebron Deposit Bank, became a wholly owned subsidiary of Bancorp.
The $110 million bank is Bancorp's first presence in Kentucky. The acquisition
was accounted for as a pooling of interests, and accordingly, the consolidated
financial statements, including earnings per share, have been restated for the
periods prior to the acquisition to include the accounts and operations of
Hebron Bancorp, Inc.
Also on June 1, 1999, Bancorp issued 5,115,000 shares of its common stock for
all the outstanding common stock of Sand Ridge Financial Corporation. Upon
consummation, Sand Ridge Financial Corporation was merged out of existence and
its only subsidiary, Sand Ridge Bank, became a wholly owned subsidiary of
Bancorp. The merger with this $545 million bank was accounted for as a pooling
of interests, and accordingly, the consolidated financial statements, including
earnings per share, have been restated for the periods prior to the acquisition
to include the accounts and operations of Sand Ridge Financial Corporation.
A disclosure of the separate results of operations of the combined entities for
the three months and six months ended June 30, 1999 is not applicable due to the
June 1, 1999 merger date. However, separate results of operations for the three
and six months ended June 30, 1998 were as follows:
7
<PAGE> 10
<TABLE>
<CAPTION>
Six months Three months
Ended Ended
June 30, 1998 June 30, 1998
------------- -------------
<S> <C> <C>
Net interest income
Bancorp $64,226 $32,755
Sand Ridge 8,589 4,341
Hebron 2,046 1,003
------- -------
Combined $74,861 $38,099
======= =======
Net income
Bancorp $21,171 $11,068
Sand Ridge 3,029 1,619
Hebron 805 403
------- -------
Combined $25,005 $13,090
======= =======
</TABLE>
NOTE 4: MERGER AND RESTRUCTURING CHARGES
In December 1998, Bancorp announced plans for a merger and restructuring charge
to coincide with its mergers with Sand Ridge Financial Corporation (Sand Ridge)
and Hebron Bancorp, Inc. (Hebron). As discussed in NOTE 3: BUSINESS
COMBINATIONS, Bancorp completed these mergers on June 1, 1999. In the second
quarter of 1999, Bancorp recorded merger and restructuring charges of
approximately $6.9 million before taxes or $5.5 million after taxes.
This merger and restructuring charge consists of two general components. The
first component was for merger related charges of approximately $2.9 million
before taxes, or $2.8 million after taxes, for investment banking and other
professional services specifically associated with the Sand Ridge and Hebron
mergers. Investment banking fees and other professional services such as legal,
accounting, and consulting represented $2.4 million of the $2.9 million pre-tax
merger charge. The remaining approximately $500,000 was incurred primarily for
system conversions and personnel charges. Of the merger related charges, $2.6
million have been paid.
The second component included in the overall merger and restructuring charges of
$5.5 million after taxes relates to restructuring charges for the planned
consolidation of some operational functions including the sale of four
facilities and more effective use of existing properties. Under its
restructuring plan, Bancorp also discontinued its accounts receivable financing
line of business and has merged two of its affiliates, Union Trust Bank, Union
City, Indiana into Community First Bank & Trust, Celina, Ohio. The restructuring
component totaled approximately $4.0 million before taxes and $2.7 million after
taxes. Of the $4.0 million pre-tax restructuring component, approximately $1.6
million was accrued for disposals of properties, $1.1 million was a provision
for loan losses associated with the discontinuance of the accounts receivable
financing line of business, and $1.3 million was related to the consolidation of
operational functions and affiliate restructuring. The disposals of property are
expected to be completed by year end 1999. The majority of the losses associated
with the discontinuance of accounts receivable financing have been recognized.
Of the $1.3 million related to operational and affiliate restructuring,
approximately $300,000 has been paid. The majority of the remaining portion is
expected to be paid by year end 1999.
8
<PAGE> 11
NOTE 5: COMPREHENSIVE INCOME
In 1998, Bancorp adopted SFAS No. 130, "Reporting Comprehensive Income." The
statement establishes standards for the reporting and display of comprehensive
income. Bancorp elected to present the required disclosures in the "Consolidated
Statements of Changes in Shareholders' Equity". Disclosure of the
reclassification adjustments for the six months ended June 30, 1999 are shown
below.
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
1999 1998
------- -------
<S> <C> <C>
Other comprehensive income, net of tax:
Unrealized holding losses arising during period $(7,378) $ (403)
Less: reclassification adjustment
for gains included in net income 41 312
------- -------
Other comprehensive income (loss) $(7,419) $ (715)
======= =======
</TABLE>
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998
----------------------- ------------------------------------
JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET EARNINGS $ 8,715 $ 13,081 $ 13,825 $ 12,212 $ 13,090
NET EARNINGS--ADJUSTED (a) 14,169 13,081 13,825 12,212 13,090
NET EARNINGS PER SHARE-BASIC 0.20 0.31 0.32 0.29 0.31
NET EARNINGS PER SHARE-DILUTED 0.20 0.31 0.32 0.28 0.30
NET EARNINGS PER SHARE-DILUTED-ADJUSTED (a) 0.33 0.31 0.32 0.28 0.30
AVERAGE CONSOLIDATED BALANCE SHEET ITEMS:
LOANS LESS UNEARNED INCOME 2,796,591 2,657,522 2,579,649 2,491,872 2,397,119
INVESTMENT SECURITIES 558,475 577,436 604,180 618,246 640,964
OTHER EARNING ASSETS 48,240 10,678 25,382 13,828 22,008
---------- ---------- ---------- ---------- ----------
TOTAL EARNING ASSETS 3,403,306 3,245,636 3,209,211 3,123,946 3,060,091
TOTAL ASSETS 3,640,444 3,505,738 3,465,309 3,398,206 3,314,406
DEPOSITS 2,907,268 2,827,604 2,851,581 2,770,731 2,789,183
SHAREHOLDERS' EQUITY 368,271 360,234 357,986 355,647 345,344
KEY RATIOS:
AVERAGE EQUITY TO AVERAGE TOTAL ASSETS 10.12% 10.28% 10.33% 10.47% 10.42%
RETURN ON AVERAGE TOTAL ASSETS 0.96% 1.51% 1.58% 1.43% 1.58%
RETURN ON AVERAGE TOTAL ASSETS--ADJUSTED (a) 1.56% 1.51% 1.58% 1.43% 1.58%
RETURN ON AVERAGE EQUITY 9.49% 14.73% 15.32% 13.62% 15.20%
RETURN ON AVERAGE EQUITY--ADJUSTED (a) 15.36% 14.73% 15.32% 13.62% 15.20%
NET INTEREST MARGIN (FULLY TAX EQUIVALENT) 4.99% 5.13% 5.01% 4.99% 5.15%
(a) Excluding after-tax merger and restructuring charges of $5.5 million in the
second quarter of 1999.
</TABLE>
NET INTEREST INCOME
Net interest income, the principal source of earnings, is the amount by which
interest and fees generated by earning assets exceed the interest costs of
liabilities obtained to fund them. For analytical purposes, interest income
presented in the table below has been adjusted to a tax equivalent basis
assuming a 35% marginal tax rate for interest earned on tax-exempt assets such
as municipal loans, tax-free leases and investments. This is to recognize the
income tax savings which facilitates a comparison between taxable and tax-exempt
assets. As shown below, net interest income on a fully tax equivalent basis has
increased $3,081,000 over the second quarter of 1998 and $1,286,000 over the
first quarter of 1999. Continued loan growth, in all major categories of loans,
contributed to higher net interest income in the second quarter of 1999.
<TABLE>
<CAPTION>
QUARTER ENDED
1999 1998
------------------ -----------------------------
JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME $68,804 $66,938 $67,473 $66,820 $65,504
INTEREST EXPENSE 27,776 27,222 28,229 28,689 27,405
------- ------- ------- ------- ------
NET INTEREST INCOME 41,028 39,716 39,244 38,131 38,099
TAX EQUIVALENT ADJUSTMENT TO INTEREST INCOME 1,312 1,338 1,253 1,189 1,160
------- ------- ------- ------- -------
NET INTEREST INCOME (FULLY TAX EQUIVALENT) $42,340 $41,054 $40,497 $39,320 $39,259
======= ======= ======= ======= =======
</TABLE>
RATE/VOLUME ANALYSIS
The impact of changes in volume and interest rates on net interest income is
illustrated in the table on the following page. As shown, an increase in volume
had a significant impact on both interest income and interest expense for the
six month and three month periods ended June 30, 1999 in
10
<PAGE> 13
comparison to 1998. The increase in volume had more impact on interest income
than interest expense. The change in interest due to the combined effect of both
rate and volume has been allocated to the volume and rate variance on a prorated
basis.
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED CHANGE DUE TO: ENDED CHANGE DUE TO:
JUN. 30, 1999 ------------------- JUN. 30, 1999 -------------------
OVER 1998 RATE VOLUME OVER 1998 RATE VOLUME
-------- --------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME $ 7,365 $ (6,035) $ 13,400 $ 3,300 $ (3,774) $ 7,074
INTEREST EXPENSE 1,482 (4,134) 5,616 371 (2,492) 2,863
-------- --------- ------- -------- -------- --------
NET INTEREST INCOME $ 5,883 $ (1,901) $ 7,784 $ 2,929 $ (1,282) $ 4,211
======== ========= ======= ======== ======== ========
</TABLE>
OPERATING RESULTS
Net operating income represents net earnings before net securities transactions.
Net operating income for the first six months of 1999 was $21,755,000 which was
a decrease of $2,938,000 or 11.9% from that reported in the same period in 1998.
This decrease in net operating income can be attributed to merger and
restructuring charges of $6,930,000 as discussed in Note 4. Net operating
income, excluding the merger and restructuring charges, net of tax, of
$5,454,000, increased $2,516,000 or 10.2% over 1998. The increase in core net
operating income (net operating income excluding the merger and restructuring
charges) can be primarily attributed to an increase in net interest income of
$5,883,000 or 7.86% for the first six months of 1999 compared to the same period
in 1998. The increase in net interest income was driven by loan growth.
Noninterest income excluding securities transactions, for the first six months
of 1999 increased $2,382,000 or 13.5% over the comparable period in 1998.
Continued strong growth in service charges on deposit accounts and trust fees
led to the increased noninterest income. Noninterest expense excluding the
merger and restructuring charge increased $3,506,000 or 6.69% primarily as a
result of increased salary and benefit expenses.
It is anticipated that initiatives taken in relation to the restructuring charge
in the second quarter of 1999 will have a positive financial impact going
forward. The disposal of unnecessary nonearning assets decreases future
operating expenses such as depreciation and maintenance costs. The
discontinuation of unprofitable product lines decreases risk, expenses and
allows for reallocation of people and assets. The consolidation of operations
provides operational synergies and allows for future growth. Reference NOTE 4:
MERGER AND RESTRUCTURING CHARGES for further details.
Net operating income, excluding merger and restructuring charges for the second
quarter of 1999 increased $1,274,000 or 9.88% over the same period in 1998 due
to the same reasons discussed above.
Bancorp's adjusted diluted earnings per share on a "cash basis", which excludes
the effect of amortization of goodwill and core deposits, tax effected when
applicable, and merger and restructuring charges, were $0.67 for the first six
months of 1999 which is a 9.84% increase over the $0.61 for the same period in
1998. Adjusted diluted earnings per share on a "cash basis" for the second
quarter of 1999 were $0.35, a 9.38% increase over the $0.32 figure for the
second quarter of 1998. These calculations were specifically formulated by
Bancorp and may not be comparable to similarly titled measures reported by other
companies.
11
<PAGE> 14
INCOME TAXES
For the first six months of 1999, income tax expense was $12,271,000 compared to
$12,413,000 for the same period in 1998, or a decrease of $142,000. In 1999,
$12,265,000 of the tax expense was related to operating income with a tax
expense of $6,000 related to securities transactions. In the first six months of
1998, income tax expense related to operating income was $12,250,000 and
$163,000 relating to securities transactions. The higher effective tax rate was
primarily attributable to merger expenses not being an allowed taxable
deduction.
Income tax expense for the second quarter of 1999 was $5,739,000 compared to
$6,402,000 for the same period in 1998, which was a decrease of $663,000. Tax
expense relating to operating income totaled $5,752,000 and $6,285,000 for the
quarters ended June 30, 1999 and 1998, respectively, with a tax benefit related
to securities transactions of $13,000 for 1999 and a tax expense related to
securities transactions of $102,000 for 1998. A tax benefit related to
restructuring charges included in taxes on operating income for 1999 was
$1,476,000.
NET EARNINGS
Net earnings for the first six months of 1999 were $3,209,000 or 12.8% below
that recorded during the same period in 1998. Net earnings excluding merger and
restructuring charges were $27,250,000 or 8.98% greater than the prior year for
reasons discussed in the Operating Results section. Net securities gains through
June 30, 1999 were $41,000 compared to $312,000 for the period ending June 30,
1998. Merger and restructuring charges, net of taxes, were $5,454,000 for 1999.
Net earnings for the three months ended June 30, 1999 were $4,375,000 or 33.4%
less than the same period in 1998. Net securities gains for the second quarter
of 1999 and 1998 were $5,000 and $200,000, respectively. Merger and
restructuring charges were $5,454,000 for the second quarter 1999. Net earnings
excluding the merger and restructuring charge for the three months ended June
30, 1999 were $14,169,000, or 8.24% greater than the same period in 1998.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated probable credit losses. Management's periodic
evaluation of the adequacy of the allowance is based on Bancorp's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
At June 30, 1999 and 1998, the recorded investment in loans that are considered
to be impaired under FASB Statement No. 114 was $2,170,000 and $6,198,000,
respectively, all of which were on a nonaccrual basis. The related allowance for
loan losses on these impaired loans was $437,000 at June 30, 1999 and $2,160,000
at June 30, 1998. At June 30, 1999, there were $33,000 in impaired loans that,
as a result of write-downs, did not have an allowance for loan losses. At June
30, 1998, there were no loans in this category. The average recorded investment
in impaired loans for the respective six months and quarters ended June 30, 1999
and 1998, was approximately $3,715,000 and $3,624,000 for 1999 and $3,591,000
and $3,236,000 for 1998. For the six months and quarter ended June 30, 1999,
Bancorp recognized interest income on those impaired loans of $32,000 and
$14,000 compared to $60,000 and $53,000 for the same periods
12
<PAGE> 15
in 1998. Bancorp recognizes income on impaired loans using the cash basis
method. The table on the following page indicates the activity in the allowance
for loan losses for the quarters presented.
<TABLE>
<CAPTION>
QUARTER ENDED
1999 1998
--------------------- ----------------------------------
JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD $ 36,319 $ 34,800 $ 34,169 $ 33,715 $ 32,451
ALLOWANCE ACQUIRED THROUGH MERGER 0 0 0 0 806
PROVISION FOR DISCONTINUED PRODUCT LINE 1,100
PROVISION FOR LOAN LOSSES 1,378 2,532 2,351 2,738 1,528
LOANS CHARGED OFF (2,762) (1,617) (3,148) (2,619) (1,445)
RECOVERIES 1,470 604 1,428 335 375
-------- -------- -------- -------- --------
NET CHARGE OFFS (1,292) (1,013) (1,720) (2,284) (1,070)
-------- -------- -------- -------- --------
BALANCE AT END OF PERIOD $ 37,505 $ 36,319 $ 34,800 $ 34,169 $ 33,715
======== ======== ======== ======== ========
RATIOS:
ALLOWANCE TO PERIOD END LOANS,
NET OF UNEARNED INCOME 1.31% 1.34% 1.31% 1.34% 1.38%
RECOVERIES TO CHARGE OFFS 53.22% 37.35% 45.36% 12.79% 25.95%
ALLOWANCE AS A MULTIPLE OF
NET CHARGE OFFS 29.03X 35.85X 20.23X 14.96X 31.51X
</TABLE>
NONPERFORMING/UNDERPERFORMING ASSETS
The table below shows the categories which are included in nonperforming and
underperforming assets.
Nonperforming assets increased $216,000 or 2.01% in the second quarter of 1999
when compared to the second quarter of 1998, and in that same period, accruing
loans past due 90 days or more increased $2,050,000. Nonperforming assets
increased $2,090,000 or 23.6% in the second quarter of 1999 when compared to the
first quarter of 1999. Nonperforming and underperforming assets as a percent of
loans remained consistent with prior periods. Accruing loans, including loans
impaired under FASB Statement No. 114, which are past due 90 days or more where
there is not a likelihood of becoming current are transferred to nonaccrual
loans. However, those loans, which management feels will become current and,
therefore accruing, are classified as "Accruing loans 90 days or more past due"
until they become current.
<TABLE>
<CAPTION>
QUARTER ENDED
1999 1998
------------------- -------------------------------
JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NONACCRUAL LOANS $ 9,219 $ 7,151 $ 7,481 $ 8,446 $ 7,620
RESTRUCTURED LOANS 1,411 1,566 691 1,280 2,512
OREO/ISF* 332 155 221 1,057 614
------- ------- ------- ------- -------
TOTAL NONPERFORMING ASSETS 10,962 8,872 8,393 10,783 10,746
ACCRUING LOANS PAST DUE
90 DAYS OR MORE 3,796 2,446 1,839 1,993 1,746
------- ------- ------- ------- -------
TOTAL UNDERPERFORMING ASSETS $14,758 $11,318 $10,232 $12,776 $12,492
======= ======= ======= ======= =======
NONPERFORMING ASSETS AS A PERCENT
OF LOANS, NET OF UNEARNED INCOME
PLUS OREO/ISF 0.38% 0.33% 0.32% 0.42% 0.44%
======= ======= ======= ======= =======
UNDERPERFORMING ASSETS AS A PERCENT
OF LOANS, NET OF UNEARNED INCOME
PLUS OREO/ISF 0.52% 0.42% 0.39% 0.50% 0.51%
======= ======= ======= ======= =======
</TABLE>
*OTHER REAL ESTATE OWNED/IN-SUBSTANCE FORECLOSURE
13
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management is the process by which Bancorp provides for the continuing
flow of funds necessary to meet its financial commitments on a timely basis.
These commitments include withdrawals by depositors, funding credit commitments
to borrowers, shareholder dividends, paying expenses of operations, and funding
capital expenditures.
Liquidity is derived primarily from deposit growth, maturing loans, the maturity
of investment securities, access to other funding sources and markets, and a
strong capital position. The most stable source of liability-funded liquidity
for both the long-term and short-term is deposit growth and retention in the
core deposit base. At the end of the second quarter of 1999, Bancorp's deposit
liabilities had increased by 1.44% from December 31, 1998. Another source of
funding is through short-term borrowings. As part of Bancorp's asset/liability
management strategy, Bancorp's short-term borrowings increased to $285,629,000
at June 30, 1999, compared to $155,064,000 at December 31, 1998, as one source
of funding loan growth.
The principal source of asset-funded liquidity is marketable investment
securities, particularly those of shorter maturities. At June 30, 1999,
securities maturing in one year or less amounted to $49,504,000, representing
8.93% of the total of the investment securities portfolio. In addition, other
types of assets, such as cash and due from banks, federal funds sold and
securities purchased under agreements to resell, as well as loans and
interest-bearing deposits with other banks maturing within one year, are sources
of liquidity. Total asset-funded sources of liquidity at June 30, 1999, amounted
to $726,008,000, representing 19.5% of total assets. Sources of long-term asset
funded liquidity are derived from the maturity of investment securities and
maturing loans in excess of one year.
At June 30, 1999, Bancorp had classified $515,593,000 in investment securities
available-for-sale, of which approximately $192,000,000 were pledged to secure
public deposits. Management examines Bancorp's liquidity needs in establishing
this classification in accordance with the Financial Accounting Standards Board
Statement No. 115 on accounting for certain investments in debt and equity
securities.
Liquidity is very important and as such is both monitored and managed closely by
the asset/liability committee at each affiliate. Liquidity may be used to fund
capital expenditures. Capital expenditures were $4,601,000 for the first six
months of 1999. In addition, remodeling is a planned and ongoing process given
the 116 offices of Bancorp and its subsidiaries. Material commitments for
capital expenditures as of June 30, 1999 were approximately $2,321,000.
Management believes that Bancorp has sufficient liquidity to fund its current
commitments.
CAPITAL ADEQUACY
The Federal Reserve established risk-based capital requirements for U.S. banking
organizations which have been adopted by the Office of Thrift Supervision for
savings and loan associations. Risk weights are assigned to on-and off-balance
sheet items in arriving at risk-adjusted total assets. Regulatory capital is
divided by risk-adjusted total assets, with the resulting ratios compared to
minimum standards to determine whether a bank has adequate capital.
Regulatory guidelines require a 4.00% Tier 1 capital ratio, and an 8.00% Total
risk-based capital ratio. A minimum of 3.00% leverage ratio is required for bank
holding companies that either are rated composite "1" under the BOPEC rating
system or have implemented the Board's risk-based
14
<PAGE> 17
capital market risk measure. The minimum leverage ratio for all other bank
holding companies is 4.0%. Tier 1 capital consists primarily of common
shareholders' equity, net of intangibles, and Total risked-based capital is Tier
1 capital plus Tier 2 supplementary capital, which is primarily the allowance
for loan losses subject to certain limits. The Leverage ratio is a result of
Tier 1 capital divided by average total assets less certain intangibles.
Bancorp's Tier I ratio at June 30, 1999, was 12.2%, its Total risked-based
capital was 13.4% and its Leverage ratio was 9.01%. While Bancorp subsidiaries'
ratios are well above regulatory requirements, management will continue to
monitor the asset mix, which affects these ratios due to the risk weights
assigned various assets, and the allowance for loan losses, which influences the
Total risk-based capital ratio.
The table below illustrates the risk-based capital calculations and ratios for
the last two years.
<TABLE>
<CAPTION>
QUARTER ENDED
1999 1998
----------------------- ------------------------------------
JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
TIER I CAPITAL:
SHAREHOLDER'S EQUITY $ 361,158 $ 364,250 $ 358,265 $ 359,542 $ 349,252
LESS: NON-QUALIFYING INTANGIBLE ASSETS 38,992 39,802 40,605 41,382 42,321
LESS: UNREALIZED NET SECURITIES
GAINS (LOSSES) (2,470) 3,041 4,949 6,455 3,924
---------- ---------- ---------- ---------- ----------
TOTAL TIER I CAPITAL $ 324,636 $ 321,407 $ 312,711 $ 311,705 $ 303,007
========== ========== ========== ========== ==========
TOTAL RISK-BASED CAPITAL:
TIER I CAPITAL $ 324,636 $ 321,407 $ 312,711 $ 311,705 $ 303,007
QUALIFYING ALLOWANCE FOR LOAN LOSSES 33,462 31,517 31,742 30,290 29,533
---------- ---------- ---------- ---------- ----------
TOTAL RISK-BASED CAPITAL $ 358,098 $ 352,924 $ 344,453 $ 341,995 $ 332,540
========== ========== ========== ========== ==========
RISK WEIGHTED ASSETS $2,672,881 $2,516,585 $2,536,301 $2,419,170 $2,358,523
========== ========== ========== ========== ==========
RISK-BASED RATIOS:
TIER I 12.15% 12.77% 12.33% 12.88% 12.85%
========== ========== ========== ========== ==========
TOTAL RISK-BASED CAPITAL 13.40% 14.02% 13.58% 14.14% 14.10%
========== ========== ========== ========== ==========
LEVERAGE 9.01% 9.27% 9.13% 9.29% 9.26%
========== ========== ========== ========== ==========
</TABLE>
YEAR 2000
Many computer systems process transactions using two digits for the year of the
transaction, rather than a full four digits. As a result, these systems may not
function properly at the beginning of the year 2000 without some proactive
hardware and software change. Bancorp has devoted significant time and attention
to the Year 2000 issue, and will repair or replace non-compliant hardware and
software prior to the new millennium.
Several regulatory agencies and authorities have issued regulations and
guidelines that financial institutions must use in measuring their progress
toward Year 2000 preparedness. Five commonly recognized phases of Year 2000
remediation are awareness, assessment, renovation, validation and
implementation.
During 1997 and 1998, the awareness and assessment phases was completed for all
systems and service providers. Additionally, renovation was completed for
mission critical systems in 1998 and validation was completed in 1999. As in
1997 and 1998, Bancorp's Year 2000 Operating Committee continued to meet
regularly during 1999 to direct and oversee all
15
<PAGE> 18
significant Year 2000 tasks. The Operating Committee regularly updates senior
management and the Board of Directors, who have pledged their full support to
the Year 2000 project.
Bancorp has inventoried and assessed the many hardware and software programs
that must be remediated. A vendor management program is bringing those
relationships into compliance. Bancorp realized in early 1997 that qualified
personnel were required to guide the organization through the Year 2000 Project.
Some Bancorp associates were reallocated, some new employees were hired and
contract staff have been used.
Our Year 2000 Loan Committee, comprised of affiliate senior lenders, has
assessed the impact of Year 2000 on commercial and retail borrowers and has
taken steps to mitigate the risk that is inherent in those loans. Our
Asset/Liability Committee and Operating Committee have assessed and estimated
the impact of liquidity and currency demands that may occur during the latter
part of 1999, and the impact into the year 2000. Management of each subsidiary
is taking steps to insure that they have appropriate funding resources and
currency on hand to meet anticipated customer demands.
As Bancorp grows and as Year 2000 approaches, Bancorp, as well as many other
financial institutions, is developing plans to rely on alternative sources of
funding, if needed. Many of Bancorp's affiliates have executed agreements with
the Federal Home Loan Bank for their "Year 2000 Liquidity Line of Credit" with
guaranteed lines of $160 million. As of June 30, 1999, three affiliates have
completed the necessary legal documentation and pre-pledged collateral through
eligible investment securities or loan assets to the Federal Reserve Discount
Window. Other Bancorp affiliates are in the process of completing the necessary
requirements respective to the Federal Reserve Discount Window. Management is
also reviewing strategies to fund asset growth and provide liquidity with other
alternative sources including brokered deposits and loans on life insurance
policies. Management is of the opinion that its liquidity plans are adequate to
fund future growth and provide liquidity on an as needed basis.
Bancorp's computer systems fall into three broad categories: those processed
through a service bureau relationship, those processed in-house, and those
processed on a personal computer or client/server platform. The service bureau
systems were renovated, validated, and implemented in 1998. The mission critical
in-house systems were renovated in 1998 and validation was completed in first
quarter, 1999. The mission critical personal computer and client/server systems
were renovated in 1998 and have been validated. Bancorp's Year 2000 Team
continues to renovate and validate those systems that are less critical in
nature. Implementation follows successful validation testing and this phase was
completed by mid-year, 1999.
Bancorp has spent a great deal of time ensuring that it has an effective program
in place to address and resolve the Year 2000 issue in a timely manner. Should
Bancorp successfully complete its Year 2000 program, however, it will not be
isolated from potential impact. General disruptions in the economy or at other
significant service providers such as telecommunication and utility companies
could adversely affect Bancorp. The amount of potential liability and lost
revenue cannot be reasonably estimated at this time.
16
<PAGE> 19
To mitigate both controlled and uncontrolled risks, Bancorp has developed
contingency plans in the event any particular system may not function properly.
The contingency plans for information technology systems primarily call for
manual intervention where required. Management has also developed contingency
plans to support our reliance on transportation, communication, outside vendors,
etc. where possible.
During second quarter 1999, Bancorp incurred approximately $308,000 in
noninterest expense for costs related to Year 2000 issues, bringing the total
amount charged to operations since 1997 to $2,439,000. An additional $432,000
was capitalized, bringing the total amount capitalized to $779,000. Based on
management's current assessment and anticipated reprogramming costs, Bancorp
expects to spend an additional $972,000, of which about $448,000 will be
capitalized. However, there can be no assurance as to the accuracy of these
estimates.
This Year 2000 information is designated as a "Year 2000 Readiness Disclosure"
falling under the provision of the "Year 2000 Information and Readiness
Disclosure Act."
FORWARD-LOOKING INFORMATION
The Form 10-Q should be read in conjunction with the consolidated financial
statements, notes and tables included elsewhere in this report and in the First
Financial Bancorp. Annual Report on Form 10-K for the year ended December 31,
1998 (1998 Form 10-K).
Management's analysis may contain forward-looking statements that are provided
to assist in the understanding of anticipated future financial performance.
However, such performance involves risks and uncertainties which may cause
actual results to differ materially. For a discussion of certain factors that
may cause such forward-looking statements to differ materially from actual
results, refer to the 1998 Form 10-K.
ACCOUNTING AND REGULATORY MATTERS
Management is not aware of any events or regulatory recommendations which, if
implemented, are likely to have a material effect on Bancorp's liquidity,
capital resources, or operations.
17
<PAGE> 20
PART II-OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On April 27, 1999, Bancorp held its annual meeting of
shareholders, the results of which follow:
1) Election of four directors:
<TABLE>
<CAPTION>
% of Total Votes
Name Term Votes For Shares Voted Withheld
---- ---- --------- ------------ --------
<S> <C> <C> <C> <C>
Martin J. Bidwell 3 years 29,374,348 99.23% 227,332
Carl R. Fiora 3 years 29,458,822 99.52% 142,858
Barry J. Levey 3 years 29,421,822 99.39% 179,858
Stephen S. Marcum 3 years 29,428,650 99.42% 173,030
Steven C. Posey 3 years 29,423,947 99.40% 177,733
</TABLE>
Directors whose terms continue beyond the Annual Meeting in 1999:
Class II Term expiring in 2000:
Richard L. Alderson
James C. Garland
Murph Knapke
Stanley N. Pontius
Barry S. Porter
Perry D. Thatcher
Class III Term expiring in 2000:
Donald M. Cisle
Corinne R. Finnerty
F. Elden Houts
The following proposals were approved by the shareholders:
2) Amend Corporation's Articles of Incorporation to increase the
total number of shares the corporation is authorized to issue
to 160,000,000 common shares, without par value.
27,557,701 shares, or 76.05% of the total shares outstanding,
voted to adopt the amended Articles of Incorporation. Of the
total shares voted, 1,740,059 shares voted against the
amendment of the regulations, there were 303,920 abstentions
and no broker non-votes.
3) Approval of the Corporation's 1999 Stock Incentive Plan for
Officers and Employees.
18
<PAGE> 21
23,970,468 shares, or 80.98% of the total shares voted, voted
to adopt the amended Articles of Incorporation. Of the total
shares voted, 2,296,956 shares voted against the amendment of
the regulations, there were 270,822 abstentions and 3,063,434
broker non-votes.
4) Approval of the Corporation's 1999 Stock Option Plan for Non-
Employee Directors.
23,704,854 shares, or 80.08% of the total shares voted, voted
to adopt the amended Articles of Incorporation. Of the total
shares voted, 2,497,554 shares voted against the amendment of
the regulations and there were 308,877 abstentions, and
3,090,395 broker non-votes.
No other matters were brought before the meeting for a vote.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
3 Articles of Incorporation, revised April 27, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended June 30, 1999, the registrant filed
a Form 8-K dated June 16, 1999, reporting the merger of Sand
Ridge Financial Corporation for 5,115,000 shares of the
Corporation's common stock.
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST FINANCIAL BANCORP.
------------------------
(Registrant)
/s/ Michael R. O'Dell /s/ C. Douglas Lefferson
- ---------------------------------- --------------------------------
Michael R. O'Dell, Senior Vice C. Douglas Lefferson,
President, Chief Financial Comptroller
Officer and Secretary (Principal Accounting Officer)
Date August 5, 1999 Date August 5, 1999
----------------------------- ----------------------------
20
<PAGE> 1
Exhibit 3
Revised April 30, 1987
Revised April 30, 1990
Revised May 7, 1991
Revised April 27, 1993
Revised April 26, 1994
Revised April 22, 1997
Revised April 28, 1998
Revised April 27, 1999
ARTICLES OF INCORPORATION
OF
FIRST FINANCIAL BANCORP.
The undersigned, a majority of whom are citizens of the United
States, desiring to form a corporation, for profit, under Sections 1701.01 et
seq. of the Revised Code of Ohio, do hereby certify:
FIRST. The name of said corporation shall be First Financial
Bancorp.
SECOND. The place in Ohio where its principal office is to be
located is Hamilton, Butler County.
THIRD. The purposes for which it is formed are: to organize,
purchase, acquire, own, invest in, or control banks and other companies, and the
shares and securities of the same, in accordance with, and to the full extent
permitted by, the Bank Holding Company Act of 1956 and other applicable laws of
the United States, or of this State, as now or hereafter amended, and to carry
on the business of a bank holding company in accordance with such laws; and to
engage in any lawful act or activity for which corporations may be formed under
Sections 1701.01 to 1701.98, inclusive, of the Ohio Revised Code.
FOURTH. The total number of shares of stock which the
corporation shall have authority to issue is One Hundred Sixty Million
(160,000,000) shares of common stock, without par value.
(a) Dividends. The holders of shares of common stock shall be
entitled to receive dividends, if and when declared payable from time to time by
the Board of Directors, from any funds legally available therefor.
(b) Voting. Each outstanding share of the common stock of the
corporation shall entitle the holder thereof to one vote and the exclusive
voting power for all purposes shall be vested in the holders of common stock.
(c) Preemptive Rights. No holder of shares of the common stock
of the corporation shall have preemptive rights to subscribe for or to purchase
any shares of the common stock of the corporation or any other securities of the
corporation, whether such share or shares are now or hereafter authorized.
<PAGE> 2
-2-
(d) Purchase of Own Securities. The corporation shall be
authorized to purchase or otherwise acquire, and to hold, own, pledge, transfer
or otherwise dispose of, shares of its own common stock and other securities,
subject, however, to the laws of the State of Ohio and to federal statutes, and
without limitation to the Bank Holding Company Act of 1956 as amended and as
hereinafter may be amended or supplemented.
(e) The shareholders shall not have the right to vote
cumulatively in the election of directors effective for the Annual Meeting
occurring in 1988 and thereafter.
FIFTH. The number and qualification of directors of the
corporation shall be fixed from time to time by its Code of Regulations. The
number of directors may be increased or decreased as therein provided but the
number thereof shall in no event be less than nine. The Board of Directors shall
be divided into three classes as nearly equal in number as the then total number
of directors constituting the whole board permits, with the term of office of
one class expiring each year. At the first annual meeting of stockholders,
directors of Class I shall be elected to hold office for a term expiring at the
next succeeding annual meeting, directors of Class II shall be elected to hold
office for a term expiring at the second succeeding annual meeting, and
directors of Class III shall be elected to hold office for a term expiring at
the third succeeding annual meeting. In no event shall there be less than three
directors per class. Subject to the foregoing, at each annual meeting of
stockholders the successors to the class of directors whose terms shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting. In the event of any increase in the number of
directors of the corporation, the additional directors shall be so classified
that all classes of directors shall be increased equally as nearly as may be
possible. In the event of any decrease in the number of directors of the
corporation, all classes of directors shall be decreased as equal as possible.
No reduction in number of directors shall of itself have the effect of
shortening the term of an incumbent director.
SIXTH. Each person who is or was a director, officer, employee
or agent of the corporation shall be indemnified by the corporation to the full
extent permitted by the Revised Code of Ohio against any liability, cost or
expense incurred by him in his capacity as a director, officer, employee or
agent, or arising out of his status as a director, officer, employee or agent.
The corporation may, but shall not be obligated to, maintain insurance, at its
expense, to protect itself and any such person against any such liability, cost
or expense.
SEVENTH. The corporation reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation in
the manner now or hereafter prescribed by the laws of Ohio, and all rights and
powers conferred herein upon stockholders and directors are granted subject to
this reservation.
<PAGE> 3
-3-
EIGHTH. The amount of capital with which the corporation shall
begin business is Five Hundred ($500.00) Dollars.
IN WITNESS WHEREOF, we have hereunto subscribed our names,
this 20th day of July, 1982.
FIRST FINANCIAL BANCORP
/s/ Robert Q. Millan
------------------------------
Robert Q. Millan
/s/ Richard J. Fitton
------------------------------
Richard J. Fitton
/s/ Elliott D. Levey
------------------------------
Elliott D. Levey
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000708955
<NAME> FIRST FINANCIAL BANCORP.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 DEC-31-1998
<CASH> 144,856 164,500
<INT-BEARING-DEPOSITS> 3,933 2,598
<FED-FUNDS-SOLD> 18,973 8,654
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 515,593 550,394
<INVESTMENTS-CARRYING> 38,631 37,782
<INVESTMENTS-MARKET> 0 0
<LOANS> 2,858,022 2,654,146
<ALLOWANCE> 37,505 34,800
<TOTAL-ASSETS> 3,721,967 3,539,935
<DEPOSITS> 2,913,364 2,872,067
<SHORT-TERM> 285,629 155,064
<LIABILITIES-OTHER> 161,816 33,762
<LONG-TERM> 0 0
0 0
0 0
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<OTHER-SE> 361,158 51,556
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<INTEREST-LOAN> 118,967 224,563
<INTEREST-INVEST> 16,414 37,110
<INTEREST-OTHER> 361 1,093
<INTEREST-TOTAL> 135,742 262,766
<INTEREST-DEPOSIT> 47,767 100,590
<INTEREST-EXPENSE> 54,998 110,434
<INTEREST-INCOME-NET> 80,744 152,332
<LOAN-LOSSES> 3,910 6,247
<SECURITIES-GAINS> 47 1,060
<EXPENSE-OTHER> 62,854 107,851
<INCOME-PRETAX> 0 75,653
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 21,796 50,973
<EPS-BASIC> 0.51 1.19
<EPS-DILUTED> 0.51 1.19
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<LOANS-TROUBLED> 1,411 691
<LOANS-PROBLEM> 332 221
<ALLOWANCE-OPEN> 34,800 31,660
<CHARGE-OFFS> 2,762 3,148
<RECOVERIES> 1,470 1,428
<ALLOWANCE-CLOSE> 37,505 34,800
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<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
