<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 SEPTEMBER 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 October 29, 1999
- -------------------------- ----------------------------------
Common stock, No par value 42,605,280
<PAGE> 2
FIRST FINANCIAL BANCORP.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I-Financial Information
Consolidated Balance Sheets -
September 30, 1999 and December 31, 1998 1
Consolidated Statements of Earnings -
Nine and Three Months Ended September 30, 1999 and 1998 2
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 3
Consolidated Statements of Changes in Shareholders' Equity
Nine Months Ended September 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 6 Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, dollars in thousands)
September 30, December 31,
ASSETS 1999 1998
------------ -----------
<S> <C> <C>
Cash and due from banks $ 168,256 $ 164,500
Interest-bearing deposits with other banks 12,659 2,598
Federal funds sold and securities purchased
under agreements to resell 895 8,654
Investment securities held-to-maturity, at cost
(market value - $37,487 at September 30, 1999 and
$40,159 at December 31, 1998) 36,843 37,782
Investment securities available-for-sale,
at market value 511,906 550,394
Loans
Commercial 781,977 689,524
Real estate-construction 110,939 74,205
Real estate-mortgage 1,417,329 1,306,065
Installment 616,277 537,156
Credit card 20,552 21,306
Lease financing 45,881 29,212
----------- -----------
Total loans 2,992,955 2,657,468
Less
Unearned income 4,119 3,322
Allowance for loan losses 38,729 34,800
----------- -----------
Net loans 2,950,107 2,619,346
Premises and equipment 57,534 57,980
Deferred income taxes 6,666 3,072
Goodwill 30,454 31,416
Other intangibles 10,558 11,164
Accrued interest and other assets 74,504 51,113
----------- -----------
TOTAL ASSETS $3,860,382 $3,538,019
=========== ===========
LIABILITIES
Deposits
Noninterest-bearing $ 391,578 $ 392,999
Interest-bearing 2,529,568 2,479,068
----------- -----------
Total deposits 2,921,146 2,872,067
Short-term borrowings
Federal funds purchased and securities sold
under agreements to repurchase 79,369 59,159
Federal Home Loan Bank borrowings 302,750 94,678
Other 4,709 1,227
----------- -----------
Total short-term borrowings 386,828 155,064
Long-term borrowings 152,345 120,777
Accrued interest and other liabilities 32,123 31,846
----------- -----------
TOTAL LIABILITIES 3,492,442 3,179,754
SHAREHOLDERS' EQUITY
Common stock - no par value
Authorized - 160,000,000 shares
Issued - 42,657,988 in 1999 and 36,320,338 in 1998 305,812 306,709
Retained earnings 67,952 50,160
Accumulated comprehensive income (3,987) 4,949
Restricted stock awards (427) (408)
Treasury stock, at cost, 53,161 and 118,638 shares (1,410) (3,145)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 367,940 358,265
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,860,382 $3,538,019
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share data)
Nine months ended Three months ended
September 30, September 30,
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 182,946 $ 166,041 $ 63,979 $ 57,306
Investment securities
Taxable 17,614 22,069 5,854 7,188
Tax-exempt 6,958 6,277 2,304 2,123
--------- --------- --------- ---------
Total investment interest 24,572 28,346 8,158 9,311
Interest-bearing deposits with
other banks 204 220 59 83
Federal funds sold and securities
purchased under agreements to resell 294 590 78 120
--------- --------- --------- ---------
TOTAL INTEREST INCOME 208,016 195,197 72,274 66,820
INTEREST EXPENSE
Deposits 71,988 75,213 24,221 25,529
Short-term borrowings 8,413 3,829 4,395 1,901
Long-term borrowings 4,866 3,163 1,653 1,259
--------- --------- --------- ---------
TOTAL INTEREST EXPENSE 85,267 82,205 30,269 28,689
--------- --------- --------- ---------
NET INTEREST INCOME 122,749 112,992 42,005 38,131
Provision for loan losses 6,027 5,896 2,117 2,738
--------- --------- --------- ---------
Net interest income after
provision for loan losses 116,722 107,069 39,888 35,393
NONINTEREST INCOME
Service charges on deposit accounts 12,027 10,725 4,275 3,758
Trust income 9,950 8,552 3,255 2,948
Investment securities gains 56 722 9 247
Other 8,547 8,026 2,954 2,939
--------- --------- --------- ---------
Total noninterest income 30,580 28,025 10,493 9,892
NONINTEREST EXPENSES
Salaries and employee benefits 45,714 42,055 15,554 14,173
Net occupancy expenses 5,323 4,829 1,806 1,661
Furniture and equipment expenses 4,703 4,468 1,575 1,494
Data processing expenses 4,842 4,758 1,567 1,635
Deposit insurance expense 418 394 125 164
State taxes 1,567 1,321 577 480
Amortization of intangibles 2,784 3,020 917 1,032
Merger and restructuring 6,930 0 0 0
Other 19,487 18,432 6,793 6,220
--------- --------- --------- ---------
Total noninterest expenses 91,768 79,277 28,914 26,859
--------- --------- --------- ---------
Income before income taxes 55,534 55,844 21,467 18,426
Income tax expense 19,203 18,627 6,932 6,214
--------- --------- --------- ---------
NET EARNINGS $ 36,331 $ 37,217 $ 14,535 $ 12,212
========= ========= ========= =========
Net earnings per share - basic $ 0.85 $ 0.87 $ 0.34 $ 0.29
========= ========= ========= =========
Net earnings per share - diluted $ 0.85 $ 0.87 $ 0.34 $ 0.28
========= ========= ========= =========
Cash dividends declared per share $ 0.45 $ 0.42 $ 0.15 $ 0.14
========= ========= ========= =========
Average shares outstanding 42,584,029 42,756,200 42,598,204 42,754,132
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
Nine months ended
September 30,
----------------------
1999 1998
---------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 36,331 $ 37,217
Adjustments to reconcile net earnings to net cash
provided by operating activities
Provision for loan losses 6,027 5,896
Provision for depreciation and amortization 6,930 6,890
Net amortization of investment security
premiums and accretion of discounts 166 382
Realized investment security gains (56) (722)
Originations of mortgage loans held for sale (171,273) (117,161)
Gains from sales of mortgage loans held for sale (2,374) (1,609)
Proceeds from sale of mortgage loans held for sale 173,647 118,770
Deferred income taxes 1,914 94
Increase in interest receivable (4,106) (2,458)
Increase in cash surrender value of life insurance (16,609) (5,250)
Decrease in prepaid expenses 1,233 92
Increase in accrued expenses 1,363 2,291
(Decrease) increase in interest payable (576) 614
Other (2,629) (6,671)
---------- ---------
Net cash provided by operating activities 29,988 38,375
INVESTING ACTIVITIES
Proceeds from sales of investment securities
available-for-sale 14,482 49,776
Proceeds from calls, paydowns and maturities of
investment securities available-for-sale 119,866 178,656
Purchases of investment securities available-for-sale (114,679) (262,546)
Proceeds from calls, paydowns and maturities of
investment securities held-to-maturity 6,110 24,467
Purchases of investment securities held-to-maturity (906) (2,100)
Net (increase) decrease in interest-bearing deposits
with other banks (10,061) 810
Net decrease in federal funds sold and
securities purchased under agreements to resell 7,759 9,862
Net increase in loans and leases (341,441) (200,937)
Recoveries from loans and leases previously charged off 3,050 1,046
Proceeds from disposal of other real estate owned 369 1,139
Purchase of financial institutions, net of cash aquired 0 (12,231)
Purchases of premises and equipment (5,345) (4,840)
---------- ----------
Net cash used in investing activities (320,796) (216,898)
FINANCING ACTIVITIES
Net increase in total deposits 49,079 32,206
Net increase in short-term borrowings 231,764 87,420
Net increase in long-term borrowings 31,568 56,520
Cash dividends declared (18,540) (14,899)
Purchase of common stock 0 (2,828)
Proceeds from exercise of stock options, net of shares
purchased 693 788
---------- ----------
Net cash provided by financing activities 294,564 159,207
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,756 (19,316)
Cash and cash equivalents at beginning of period 164,500 168,362
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 168,256 $ 149,046
========== ==========
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine months ended
September 30,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Supplemental disclosures
Interest paid $ 85,842 $ 81,433
========== ==========
Income taxes paid $ 16,955 $ 18,580
========== ==========
Recognition of deferred tax assets
attributable to FASB Statement No. 115 $ 3,039 $ 812
========== ==========
Acquisition of other real estate owned through
foreclosure $ 529 $ 1,225
========== ==========
Issuance of restricted stock awards $ 146 $ 215
========== ==========
Non-cash transfer from securities available-for-
sale to securities held-to-maturity $ 4,020 $ 0
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
<TABLE>
<CAPTION>
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands)
Nine months ended
September 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. 10,316
----------
Balances at January 1, as restated $ 358,265 336,256
Net earnings 36,331 37,217
Other comprehensive income, net of taxes:
Change in unrealized gains on securities,
available for sale (8,936) 1,820
---------- -----------
Comprehensive income 27,395 39,037
Cash dividends declared (18,540) (14,899)
Purchase of common stock 0 (2,828)
Exercise of stock options, net shares purchased 693 788
Restricted stock awards 0 (8)
Amortization of restricted stock awards 127 112
---------- -----------
Balance at September 30 $ 367,940 $ 358,458
========== ===========
</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.
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
6
<PAGE> 9
commitment to produce or deliver goods or services. The risk to Bancorp arises
from its obligation to make payment in the event of the customers' contractual
default. As of September 30, 1999, Bancorp had issued standby letters of credit
aggregating $18,084,000 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 $514,973,000 at September 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 nine months ended September 30, 1999 is not applicable due
to the June 1, 1999 merger date. However, separate results of operations for the
three and nine months ended September 30, 1998 were as follows:
7
<PAGE> 10
<TABLE>
<CAPTION>
Nine months Three months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Net interest income
Bancorp $ 97,183 $ 32,957
Sand Ridge 12,816 4,227
Hebron 2,993 947
---------- ----------
Combined $ 112,992 $ 38,131
========== ==========
Net income
Bancorp $ 32,347 $ 11,176
Sand Ridge 3,702 673
Hebron 1,168 363
---------- ----------
Combined $ 37,217 $ 12,212
========== ==========
</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, $2.7
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. At September 30, 1999, approximately
$1.3 million of the original $1.6 million accrued for disposals of property
remained. 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 $440,000 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 FASB 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 nine months ended September 30, 1999 and
1998 are shown below.
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------
1999 1998
-------- --------
<S> <C> <C>
Other comprehensive income, net of tax:
Unrealized holding losses arising during period $(8,867) $ 2,292
Less: reclassification adjustment
for gains included in net income 69 472
-------- --------
Other comprehensive income (loss) $(8,936) $ 1,820
======== ========
</TABLE>
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FIRST FINANCIAL BANCORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SELECTED QUARTERLY FINANCIAL DATA
1999 1998
-------------------------------------- -----------------------
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net earnings $ 14,535 $ 8,715 $ 13,825 $ 13,825 $ 12,212
Net earnings--adjusted (a) 14,169
Net earnings per share-basic 0.34 0.20 0.31 0.32 0.29
Net earnings per share-diluted 0.34 0.20 0.31 0.32 0.28
Net earnings per share-diluted-adjusted (a) 0.33
Average consolidated balance sheet items:
Loans less unearned income 2,933,882 2,796,591 2,657,522 2,579,649 2,491,872
Investment securities 549,441 558,475 577,436 604,180 618,246
Other earning assets 12,787 18,576 10,678 25,382 13,828
---------- ---------- ---------- ---------- ----------
Total earning assets 3,496,110 3,373,642 3,245,636 3,209,211 3,123,946
Total assets 3,757,969 3,610,779 3,505,738 3,465,309 3,398,206
Deposits 2,892,952 2,907,268 2,827,604 2,851,581 2,770,731
Shareholders' equity 366,022 368,271 360,234 357,986 355,647
Key Ratios:
Average equity to average total assets 9.74% 10.20% 10.28% 10.33% 10.47%
Return on average total assets 1.53% 0.97% 1.51% 1.57% 1.43%
Return on average total assets--adjusted (a) 1.57%
Return on average equity 15.75% 9.49% 14.73% 15.24% 13.62%
Return on average equity--adjusted (a) 15.36%
Net interest margin (fully tax equivalent) 4.92% 5.03% 5.13% 5.01% 4.99%
(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 $4,003,000, or 10.2%, over the third quarter of 1998 and $983,000 over
the second quarter of 1999. Continued loan growth, in all major categories of
loans, contributed to higher net interest income in the third quarter of 1999.
<TABLE>
<CAPTION>
Quarter Ended
1999 1998
----------------------------- ------------------
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest income $72,274 $68,804 $66,938 $67,473 $66,820
Interest expense 30,269 27,776 27,222 28,229 28,689
------- ------- ------- ------- -------
Net interest income 42,005 41,028 39,716 39,244 38,131
Tax equivalent adjustment to interest income 1,318 1,312 1,338 1,253 1,189
------- ------- ------- ------- -------
Net interest income (fully tax equivalent) $43,323 $42,340 $41,054 $40,497 $39,320
======= ======= ======= ======= =======
</TABLE>
10
<PAGE> 13
RATE/VOLUME ANALYSIS
The impact of changes in volume and interest rates on net interest income is
illustrated in the table below. As shown, an increase in volume had a
significant impact on both interest income and interest expense for the nine
month and three month periods ended September 30, 1999 in 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>
Nine Months Three Months
Ended Change Due To: Ended Change Due To:
Sep. 30, 1999 ------------------- Sep. 30, 1999 -------------------
Over 1998 Rate Volume Over 1998 Rate Volume
------------- --------- -------- ------------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income $ 12,819 $ (7,756) $20,575 $ 5,454 $ (2,298) $ 7,752
Interest expense 3,062 (5,608) 8,670 1,580 (1,833) 3,413
-------- --------- ------- -------- --------- --------
Net interest income $ 9,757 $ (2,148) $11,905 $ 3,874 $ (465) $ 4,339
======== ========= ======= ======== ========= ========
</TABLE>
OPERATING RESULTS
Net operating income represents net earnings before net securities transactions.
Net operating income for the first nine months of 1999 was $36,262,000 which was
a decrease of $483,000 or 1.31% 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 $4,971,000 or 13.5% 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
$9,757,000 or 8.64% for the first nine 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 nine months
of 1999 increased $3,221,000 or 11.8% 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 $5,561,000 or 7.01% 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 and expenses, as
well as 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 for the third quarter of 1999 increased $2,455,000 or 20.4%
over the same period in 1998 due to increased net interest income, lower
provision for loan losses, and higher noninterest income, partially offset by
increased noninterest expense. The increased net interest income was driven by
loan growth.
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 $1.02 for the first nine
months of 1999 which is a 10.9% increase over the $0.92 for the same period in
1998. Adjusted diluted earnings per share on a "cash basis" for the third
quarter of 1999 were $0.36, a 20.0% increase over the $0.30 figure for the third
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 nine months of 1999, income tax expense was $19,203,000 compared
to $18,627,000 for the same period in 1998, or an increase of $576,000. In 1999,
$19,216,000 of the tax expense was related to operating income with a tax
benefit of $13,000 related to securities transactions. In the first nine months
of 1998, income tax expense related to operating income and securities
transactions was $18,377,000 and $250,000, respectively. The higher effective
tax rate was primarily attributable to merger expenses not being an allowed
taxable deduction.
Income tax expense for the third quarter of 1999 was $6,932,000 compared to
$6,214,000 for the same period in 1998, which was an increase of $718,000. Tax
expense relating to operating income totaled $6,951,000 and $6,127,000 for the
quarters ended September 30, 1999 and 1998, respectively, with a tax benefit
related to securities transactions of $19,000 for 1999 and a tax expense related
to securities transactions of $87,000 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 nine months of 1999 were $36,331,000 or 2.38% below
that recorded during the same period in 1998. Net earnings excluding merger and
restructuring charges were $41,785,000 or 12.3% greater than the prior year for
reasons discussed in the Operating Results section. Net securities gains through
September 30, 1999 were $69,000 compared to $472,000 for the period ending
September 30, 1998. Merger and restructuring charges, net of taxes, were
$5,454,000 for 1999.
Net earnings for the three months ended September 30, 1999 were $14,535,000 or
19.0% more than the same period in 1998. Net securities gains for the third
quarter of 1999 and 1998 were $28,000 and $160,000, respectively.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated probable credit losses. Management's periodic
evaluation of the adequacy of the allowance is based on Bancorp's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material estimates including
the amounts and timing of future cash flows expected to be received on impaired
loans that may be susceptible to significant change.
At September 30, 1999 and 1998, the recorded investment in loans that are
considered to be impaired under FASB Statement No. 114 was $1,761,000 and
$5,687,000, respectively, all of which were on a nonaccrual basis. The related
allowance for loan losses on these impaired loans was $492,000 at September 30,
1999 and $1,999,000 at September 30, 1998. At September 30, 1999, there were
$31,000 in impaired loans that, as a result of write-downs, did not have an
allowance for loan losses. At September 30, 1998, there were no loans in this
category. The average recorded investment in impaired loans for the respective
nine months and quarters ended September 30, 1999 and 1998, was approximately
$3,299,000 and $2,479,000 for 1999 and $4,521,000 and $6,351,000 for 1998. For
the nine months and quarter ended September 30, 1999, Bancorp recognized
interest income on those impaired loans of $40,000 and $8,000 compared to
$94,000 and $34,000 for the same periods 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.
12
<PAGE> 15
<TABLE>
<CAPTION>
Quarter Ended
1999 1998
---------------------------------- ---------------------
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 37,505 $ 36,319 $ 34,800 $ 34,169 $ 33,715
Provision for discontinued product line 0 1,100 0 0 0
Provision for loan losses 2,117 1,378 2,532 2,351 2,738
Loans charged off (1,869) (2,762) (1,617) (3,148) (2,619)
Recoveries 976 1,470 604 1,428 335
--------- --------- --------- --------- ---------
Net charge offs (893) (1,292) (1,013) (1,720) (2,284)
-------- --------- --------- --------- ---------
Balance at end of period $ 38,729 $ 37,505 $ 36,319 $ 34,800 $ 34,169
========= ========= ========= ========= =========
Ratios:
Allowance to period end loans,
net of unearned income 1.30% 1.31% 1.34% 1.31% 1.34%
Recoveries to charge offs 52.22% 53.22% 37.35% 45.36% 12.79%
Allowance as a multiple of
net charge offs 43.37X 29.03X 35.85X 20.23X 14.96X
</TABLE>
NONPERFORMING/UNDERPERFORMING ASSETS
The table below shows the categories which are included in nonperforming and
underperforming assets.
Nonperforming assets increased $1,355,000 or 12.6% in the third quarter of 1999
when compared to the third quarter of 1998, and in that same period, accruing
loans past due 90 days or more increased $1,325,000. Nonperforming assets
increased $1,176,000 or 10.7% in the third quarter of 1999 when compared to the
second quarter of 1999. While the dollar amount of nonperforming assets
increased, when viewed relative to Bancorp's loan growth, 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
------------------------------- -------------------
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $10,430 $ 9,219 $ 7,151 $ 7,481 $ 8,446
Restructured loans 1,354 1,411 1,566 691 1,280
OREO/ISF* 354 332 155 221 1,057
------- ------- ------- ------- -------
Total nonperforming assets 12,138 10,962 8,872 8,393 10,783
Accruing loans past due
90 days or more 3,318 3,796 2,446 1,839 1,993
------- ------- ------- ------- -------
Total underperforming assets $15,456 $14,758 $11,318 $10,232 $12,776
======= ======= ======= ======= =======
Nonperforming assets as a percent
of loans, net of unearned income
plus OREO/ISF 0.41% 0.38% 0.33% 0.32% 0.42%
======= ======= ======= ======= =======
Underperforming assets as a percent
of loans, net of unearned income
plus OREO/ISF 0.52% 0.52% 0.42% 0.39% 0.50%
======= ======= ======= ======= =======
</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 third quarter of 1999, Bancorp's deposit
liabilities had increased by 1.71% 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 $386,828,000
at September 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 September 30, 1999,
securities maturing in one year or less amounted to $44,628,000, representing
8.13% of the total of the investment securities portfolio. In addition, other
types of assets, such as cash and due from banks, federal funds sold and
securities purchased under agreements to resell, as well as loans and
interest-bearing deposits with other banks maturing within one year, are sources
of liquidity. Total asset-funded sources of liquidity at September 30, 1999,
amounted to $756,821,000, representing 19.6% of total assets. Sources of
long-term asset funded liquidity are derived from the maturity of investment
securities and maturing loans in excess of one year.
At September 30, 1999, Bancorp had classified $511,906,000 in investment
securities available-for-sale, of which approximately $212,984,000 were pledged
to secure public deposits. Management examines Bancorp's liquidity needs in
establishing this classification in accordance with the FASB Statement No. 115
on accounting for certain investments in debt and equity securities.
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 $5,434,000 for the first nine
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 September 30, 1999 were approximately $3,066,000.
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 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
14
<PAGE> 17
risked-based capital is Tier 1 capital plus Tier 2 supplementary capital, which
is primarily the allowance for loan losses subject to certain limits. The
Leverage ratio is a result of Tier 1 capital divided by average total assets
less certain intangibles.
Bancorp's Tier I ratio at September 30, 1999, was 13.1%, its Total risk-based
capital was 14.4% and its Leverage ratio was 9.04%. 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
----------------------------------- -----------------------
Sep. 30 Jun. 30 Mar. 31 Dec. 31 Sep. 30
---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Tier I Capital:
Shareholder's equity $ 367,940 $ 361,158 $ 364,250 $ 358,265 $ 358,458
Less: Non-qualifying intangible assets 38,364 38,992 39,802 40,605 41,382
Less: Unrealized net securities
gains (losses) (3,987) (2,470) 3,041 4,949 6,455
---------- ---------- ---------- ---------- ----------
Total Tier I Capital $ 333,563 $ 324,636 $ 321,407 $ 312,711 $ 310,621
========== ========== ========== ========== ==========
Total Risk-Based Capital:
Tier I Capital $ 333,563 $ 324,636 $ 321,407 $ 312,711 $ 310,621
Qualifying Allowance for Loan Losses 31,873 33,462 31,517 31,742 30,290
---------- ---------- ---------- ---------- ----------
Total Risk-Based Capital $ 365,436 $ 358,098 $ 352,924 $ 344,453 $ 340,911
========== ========== ========== ========== =========
Risk Weighted Assets $2,543,019 $2,672,881 $2,516,585 $2,536,301 $2,419,170
========== ========== ========== ========== ==========
Risk-Based Ratios:
Tier I 13.12% 12.15% 12.77% 12.33% 12.84%
========== ========== ========== ========== ==========
Total Risk-Based Capital 14.37% 13.40% 14.02% 13.58% 14.09%
========== ========== ========== ========== ==========
Leverage 9.04% 9.01% 9.27% 9.13% 9.25%
========== ========== ========== ========== ==========
</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 is now Year 2000 ready regarding checking accounts,
savings accounts, certificates of deposit, Individual Retirement Accounts, loan
and lease accounts, automated teller machines, physical facilities, etc. Bancorp
continues testing and validating against undetected problems and communicating
with key business partners regarding Year 2000 preparedness.
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. 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. All
mission critical computer systems in these categories have been renovated and
validated and implementation has occurred.
15
<PAGE> 18
As in 1997 and 1998, Bancorp's Year 2000 Operating Committee continued to meet
regularly during 1999 to direct and oversee all significant Year 2000 tasks. The
Operating Committee regularly updates senior management and the Board of
Directors, who have given their full support to the Year 2000 project.
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" making
guaranteed lines of $201,000,000 available to them. Eleven affiliates have
completed the necessary legal documentation and pre-pledged collateral
consisting of 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. Management
is of the opinion that its liquidity plans are adequate to fund future growth
and provide liquidity on an as needed basis.
Bancorp has spent a great deal of time ensuring that it has an effective program
in place that addresses and resolves the Year 2000 issue. However, Bancorp may
not be isolated from the potential impact of events beyond its control. 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.
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 third quarter 1999, Bancorp incurred approximately $231,000 in
noninterest expense for costs related to Year 2000 issues, bringing the total
amount charged to operations since 1997 to $2,670,000. An additional $377,000
was capitalized, bringing the total amount capitalized to $1,156,000. Based on
management's current assessment and anticipated reprogramming costs, Bancorp
expects to spend an additional $398,000, of which about $82,000 will be
capitalized. However, there can be no assurance as to the accuracy of these
estimates.
16
<PAGE> 19
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
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended September 30, 1999, the registrant
did not file any reports on Form 8-K.
18
<PAGE> 21
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 November 10, 1999 Date November 10, 1999
------------------------ -------------------------
19
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000708955
<NAME> FIRST FINANCIAL BANCORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 168,256
<INT-BEARING-DEPOSITS> 12,659
<FED-FUNDS-SOLD> 895
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 511,906
<INVESTMENTS-CARRYING> 36,843
<INVESTMENTS-MARKET> 37,487
<LOANS> 2,988,836
<ALLOWANCE> 38,729
<TOTAL-ASSETS> 3,860,382
<DEPOSITS> 2,921,146
<SHORT-TERM> 386,828
<LIABILITIES-OTHER> 32,123
<LONG-TERM> 152,345
0
0
<COMMON> 305,812
<OTHER-SE> 62,128
<TOTAL-LIABILITIES-AND-EQUITY> 3,860,382
<INTEREST-LOAN> 182,946
<INTEREST-INVEST> 24,572
<INTEREST-OTHER> 498
<INTEREST-TOTAL> 208,016
<INTEREST-DEPOSIT> 71,988
<INTEREST-EXPENSE> 85,267
<INTEREST-INCOME-NET> 122,749
<LOAN-LOSSES> 6,027
<SECURITIES-GAINS> 56
<EXPENSE-OTHER> 91,768
<INCOME-PRETAX> 55,534
<INCOME-PRE-EXTRAORDINARY> 36,331
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,331
<EPS-BASIC> .85
<EPS-DILUTED> .85
<YIELD-ACTUAL> 8.40
<LOANS-NON> 10,430
<LOANS-PAST> 3,318
<LOANS-TROUBLED> 1,354
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 34,800
<CHARGE-OFFS> 6,248
<RECOVERIES> 3,050
<ALLOWANCE-CLOSE> 38,729
<ALLOWANCE-DOMESTIC> 38,729
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<CIK> 0000708955
<NAME> FIRST FINANCIAL BANCORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 164,500
<INT-BEARING-DEPOSITS> 2,598
<FED-FUNDS-SOLD> 8,654
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 550,394
<INVESTMENTS-CARRYING> 37,782
<INVESTMENTS-MARKET> 40,159
<LOANS> 2,654,146
<ALLOWANCE> 34,800
<TOTAL-ASSETS> 3,538,019
<DEPOSITS> 2,672,067
<SHORT-TERM> 155,064
<LIABILITIES-OTHER> 31,846
<LONG-TERM> 120,777
0
0
<COMMON> 306,709
<OTHER-SE> 51,556
<TOTAL-LIABILITIES-AND-EQUITY> 3,538,019
<INTEREST-LOAN> 224,563
<INTEREST-INVEST> 37,110
<INTEREST-OTHER> 1,093
<INTEREST-TOTAL> 262,766
<INTEREST-DEPOSIT> 100,590
<INTEREST-EXPENSE> 110,434
<INTEREST-INCOME-NET> 152,332
<LOAN-LOSSES> 8,247
<SECURITIES-GAINS> 1,060
<EXPENSE-OTHER> 107,851
<INCOME-PRETAX> 75,653
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,973
<EPS-BASIC> 1.19
<EPS-DILUTED> 1.19
<YIELD-ACTUAL> 8.67
<LOANS-NON> 7,481
<LOANS-PAST> 1,839
<LOANS-TROUBLED> 691
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 31,660
<CHARGE-OFFS> 8,388
<RECOVERIES> 2,474
<ALLOWANCE-CLOSE> 34,800
<ALLOWANCE-DOMESTIC> 34,800
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
