First Financial Bancorp Reports Third Quarter 2013 Financial Results
CINCINNATI, Oct. 24, 2013 /PRNewswire/ -- First Financial Bancorp (Nasdaq: FFBC) ("First Financial" or the "Company") announced today financial and operational results for the third quarter 2013.
Third quarter net income was $14.9 million and earnings per diluted common share were $0.26. This compares with second quarter net income of $15.8 million and earnings per diluted common share of $0.27 and third quarter 2012 net income of $16.2 million and earnings per diluted common share of $0.28.
- Quarterly adjusted pre-tax, pre-provision income of $26.4 million, or 1.69% of average assets
- Continued solid quarterly performance
- Quarterly results included several items which reduced earnings per diluted share by approximately $0.02
- Return on average assets of 0.96%; 1.05% as adjusted for the items noted below
- Return on average tangible common equity of 10.00%; 11.02% as adjusted for the items noted below
- Capital ratios remain strong
- Tangible common equity to tangible assets of 9.60%
- Tier 1 capital ratio of 15.26%
- Total risk-based capital ratio of 16.53%
- Total uncovered loan growth of 5.7% on an annualized basis
- Strong performance in traditional C&I / owner-occupied CRE and franchise lending
- Solid contributions from specialty finance and residential mortgage
- Quarterly net interest margin of 3.91%
- Decline of 11 bps compared to the linked quarter
- Resolution activity in the covered loans managed to exit portfolio drove a significant decline in covered loans and the FDIC indemnification asset, both of which negatively impacted the margin
- Net charge-offs declined $0.7 million, or 19.7%, compared to the linked quarter and totaled 34 bps of average uncovered loans for the quarter on an annualized basis
During the quarter, the Company incurred certain pre-tax expenses of $1.1 million resulting from its efficiency initiatives. Approximately $0.7 million was related to employee benefit expenses associated with staffing reductions and $0.3 million was related to expenses associated with real estate consolidation and closure plans. Additionally, the Company incurred pre-tax pension settlement charges of $1.4 million resulting from employee-driven activity during the quarter. In the aggregate, these items reduced pre-tax earnings by $2.4 million, or approximately $0.02 per diluted share after taxes.
The board of directors has authorized a dividend of $0.15 per common share for the next regularly scheduled dividend, payable on January 2, 2014 to shareholders of record as of November 29, 2013. The Company did not repurchase any shares of common stock during the third quarter as its one million share annual repurchase target was achieved as of June 30, 2013. The Company expects to resume execution of the share repurchase plan in the fourth quarter 2013.
The Company continued to make solid progress on its efficiency initiative during the quarter. Adjusting for expenses covered under loss sharing agreements, noninterest expense items discussed above and OREO costs, noninterest expense declined $3.6 million during the quarter. The Company estimates that it has achieved annualized run rate savings exceeding its annual target of $17.1 million as all initiatives have been implemented, and it remains on track to realize 85% of the annual target in 2013 results. In connection with execution of the current plan, the Company has identified additional initiatives that it is implementing in the fourth quarter 2013. These initiatives are expected to produce $5.0 million of added cost savings that will be realized in 2014 full year results across multiple expense categories.
Claude Davis, President and Chief Executive Officer, commented, "Our reported results for the quarter were impacted by declines in net interest income and net interest margin, driven primarily by increased resolution activity and payoffs in the covered loan portfolio, as well as a decline in fee revenue. However, strong expense management helped to offset these declines as adjusted pre-tax, pre-provision income was essentially flat compared to the prior quarter.
"We are very pleased with the progress we have made on our efficiency initiative. Our efforts to date have produced annualized run rate savings in excess of our original target, as demonstrated by our adjusted noninterest expense for the quarter. However, we know that is not enough given the competitive operating environment and continued low interest rates. We remain committed to delivering our products and services through an efficient operating model, balanced appropriately with investments in strategic growth initiatives, and are implementing newly identified efficiencies.
"We continued to generate loan growth as average uncovered loan balances increased $102.7 million, or 12.4% on an annualized basis, during the quarter and end of period balances were up $48.8 million, or 5.7% on an annualized basis. Similar to prior quarters, multiple product groups contributed to the growth, led by strong performance in our C&I / owner-occupied CRE and franchise finance portfolios, which increased $32.1 million and $14.0 million, respectively, compared to the linked quarter. We experienced a higher level of payoffs, as well as some anticipated late quarter production that slid into October, impacting the quarter end balances. However, when combined with the strong pipeline we had at the end of the third quarter, we feel optimistic that we will finish the year on a positive note."
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the third quarter was $55.8 million as compared to $58.1 million for the second quarter and $59.8 million for the third quarter 2012. Compared to the linked quarter, total interest income declined $2.8 million, or 4.5%, and total interest expense declined $0.5 million, or 11.4%. Net interest margin was 3.91% for the third quarter as compared to 4.02% for the second quarter and 4.21% for the third quarter 2012.
Interest income earned on loans decreased $2.1 million, or 3.8%, compared to the prior quarter. The lower interest income earned on loans and decline in net interest margin was driven primarily by an average balance decrease of $80.6 million, or 12.3%, on covered loans outstanding as well as a 37 bp decline in the yield earned on the portfolio. Additionally, the average balance of the FDIC indemnification asset declined $22.6 million, or 21.5%, during the quarter due to increased resolution activity, resulting in a 455 bp increase to the negative yield earned on the indemnification asset which further negatively impacted net interest income and margin.
Growth in average uncovered loan balances of $102.7 million, or 3.1% on a linked quarter basis, helped to partially offset the impact on net interest income from covered loans and FDIC indemnification asset activity during the quarter, although the impact on net interest margin was muted as the yield earned on the uncovered portfolio declined 13 bps during the quarter.
Interest income earned from investment securities declined only slightly during the quarter despite a decrease of $115.6 million, or 6.8%, in average balances as the yield earned on the portfolio increased 12 bps to 2.20%, helping to mitigate the impact of lower yields earned on loans.
Interest expense and net interest margin continued to benefit from declining deposit costs as well as a decrease in the average balance of interest-bearing deposits, which declined $138.6 million, or 3.7%, during the quarter. The cost of funds related to interest-bearing deposits decreased 4 bps to 31 bps compared to 35 bps for the linked quarter.
NONINTEREST INCOME
The following table presents noninterest income for the three months ended September 30, 2013 and for the trailing four quarters, adjusted to exclude the impact of covered loan activity and other select items on the Company's reported balance.
| Table I |
|||||||||
| For the Three Months Ended |
|||||||||
| September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
|||||
| (Dollars in thousands) |
2013 |
2013 |
2013 |
2012 |
2012 |
||||
| Total noninterest income |
$ 22,291 |
$ 11,615 |
$ 26,698 |
$ 26,121 |
$ 30,830 |
||||
| Selected components of noninterest income |
|||||||||
| Accelerated discount on covered loans 1 |
1,711 |
1,935 |
1,935 |
2,455 |
3,798 |
||||
| FDIC loss sharing income |
5,555 |
(7,384) |
8,934 |
5,754 |
8,496 |
||||
| Gain on sale of investment securities |
- |
188 |
1,536 |
1,011 |
2,617 |
||||
| Other items not expected to recur |
- |
442 |
- |
- |
- |
||||
| Total noninterest income excluding items noted above |
$ 15,025 |
$ 16,434 |
$ 14,293 |
$ 16,901 |
$ 15,919 |
||||
| 1 Net of the corresponding valuation adjustment on the FDIC indemnification asset |
|||||||||
Excluding the items highlighted in Table I, noninterest income earned in the third quarter was $15.0 million compared to $16.4 million in the second quarter and $15.9 million in the third quarter 2012. The decrease of $1.4 million compared to the linked quarter was driven by lower bankcard income, net gains on sales of residential mortgages, client derivative fees and a credit valuation adjustment related to client derivatives, partially offset by higher service charges on deposits.
NONINTEREST EXPENSE
The following table presents noninterest expense for the three months ended September 30, 2013 and for the trailing four quarters, adjusted to exclude the impact of covered asset activity and other select items on the Company's reported balance.
| Table II |
||||||||||
| For the Three Months Ended |
||||||||||
| September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
||||||
| (Dollars in thousands) |
2013 |
2013 |
2013 |
2012 |
2012 |
|||||
| Total noninterest expense |
$ 48,801 |
$ 53,283 |
$ 53,106 |
$ 53,474 |
$ 55,286 |
|||||
| Selected components of noninterest expense |
||||||||||
| Loss (gain) - covered real estate owned |
204 |
(2,212) |
(157) |
(54) |
(25) |
|||||
| Loss sharing expense |
1,724 |
1,578 |
2,286 |
2,305 |
3,584 |
|||||
| Pension settlement charges |
1,396 |
4,316 |
- |
- |
- |
|||||
| Expenses associated with efficiency initiative |
1,051 |
1,518 |
2,878 |
952 |
351 |
|||||
| Other items not expected to recur |
- |
- |
390 |
- |
- |
|||||
| Total noninterest expense excluding items noted above |
$ 44,426 |
$ 48,083 |
$ 47,709 |
$ 50,271 |
$ 51,376 |
|||||
| FDIC loss share support 1 |
$ 841 |
$ 795 |
$ 776 |
$ 798 |
$ 951 |
|||||
| 1 Represents direct expenses associated with credit management and loan administration related to covered assets as well as compliance |
||||||||||
| with FDIC loss sharing agreements; included in total noninterest expense excluding the items noted above and comprised of several noninterest |
||||||||||
| expense line items; expected to recur but decline over time as assets covered under loss sharing agreements decrease |
||||||||||
Excluding the items highlighted in Table II, noninterest expense in the third quarter was $44.4 million as compared to $48.1 million in the second quarter and $51.4 million in the third quarter 2012. The decrease of $3.7 million compared to the linked quarter was due primarily to lower salaries and employee benefits, occupancy costs, professional services expenses and other miscellaneous expenses. Expenses associated with the efficiency initiative and other staffing-related changes include $0.7 million of employee benefit expenses related to staffing reductions and $0.3 million of expenses associated with real estate consolidation and closure plans.
During the quarter, the Company recognized $1.4 million of pension settlement charges associated with recent employee-driven actions and the resulting lump-sum distributions from its pension plan. Pension settlement charges are an acceleration of previously deferred costs that would have been recognized in future periods and are determined in accordance with FASB ASC Topic 715, Compensation - Retirement Benefits. As First Financial has exceeded the annual accounting threshold for lump-sum distributions, it will recognize a proportionate share of any further lump-sum distributions from its pension plan as additional pension settlement charges through the remainder of 2013.
INCOME TAXES
For the third quarter, income tax expense was $7.6 million, resulting in an effective tax rate of 33.9%, compared with income tax expense of $6.5 million and an effective tax rate of 29.0% during the second quarter and $8.9 million and an effective tax rate of 35.4% during the third quarter 2012. The lower second quarter tax rate resulted from a favorable tax reversal related to an intercompany tax obligation associated with an unconsolidated former Irwin subsidiary as well as other nonrecurring items associated with favorable tax changes and recent tax planning strategies. In the aggregate, these items reduced the Company's second quarter income tax expense by $1.1 million.
CREDIT QUALITY – EXCLUDING COVERED ASSETS
The following table presents certain credit quality metrics related to the Company's uncovered loan portfolio as of September 30, 2013 and the trailing four quarters.
| Table III |
|||||||||||
| As of or for the Three Months Ended |
|||||||||||
| September 30, |
June 30, |
March 31, |
December 31, |
September 30, |
|||||||
| (Dollars in thousands) |
2013 |
2013 |
2013 |
2012 |
2012 |
||||||
| Total nonaccrual loans 1 |
$ 57,926 |
$ 62,011 |
$ 64,452 |
$ 65,041 |
$ 62,421 |
||||||
| Troubled debt restructurings - accruing |
16,278 |
12,924 |
12,757 |
10,856 |
11,604 |
||||||
| Total nonperforming loans |
74,204 |
74,935 |
77,209 |
75,897 |
74,025 |
||||||
| Total nonperforming assets |
86,008 |
86,733 |
89,202 |
88,423 |
87,937 |
||||||
| Nonperforming assets as a % of: |
|||||||||||
| Period-end loans plus OREO |
2.50% |
2.56% |
2.74% |
2.77% |
2.86% |
||||||
| Total assets |
1.38% |
1.38% |
1.40% |
1.36% |
1.41% |
||||||
| Nonperforming assets ex. accruing TDRs as a % of: |
|||||||||||
| Period-end loans plus OREO |
2.03% |
2.17% |
2.34% |
2.43% |
2.48% |
||||||
| Total assets |
1.12% |
1.18% |
1.20% |
1.19% |
1.22% |
||||||
| Nonperforming loans as a % of total loans |
2.16% |
2.22% |
2.38% |
2.39% |
2.41% |
||||||
| Provision for loan and lease losses - uncovered |
$ 1,413 |
$ 2,409 |
$ 3,041 |
$ 3,882 |
$ 3,613 |
||||||
| Allowance for uncovered loan & lease losses |
$ 45,514 |
$ 47,047 |
$ 48,306 |
$ 47,777 |
$ 49,192 |
||||||
| Allowance for loan & lease losses as a % of: |
|||||||||||
| Total loans |
1.33% |
1.39% |
1.49% |
1.50% |
1.60% |
||||||
| Nonaccrual loans |
78.6% |
75.9% |
75.0% |
73.5% |
78.8% |
||||||
| Nonperforming loans |
61.3% |
62.8% |
62.6% |
63.0% |
66.5% |
||||||
| Total net charge-offs |
$ 2,946 |
$ 3,668 |
$ 2,512 |
$ 5,297 |
$ 5,373 |
||||||
| Annualized net-charge-offs as a % of average |
|||||||||||
| loans & leases |
0.34% |
0.45% |
0.32% |
0.68% |
0.71% |
||||||
| 1 Includes nonaccrual troubled debt restructurings |
|||||||||||
Net Charge-offs
For the third quarter, net charge-offs declined $0.7 million, or 19.7%, to $2.9 million compared to the linked quarter. Significant charge-offs during the quarter included $1.7 million related to a commercial real estate credit and $1.1 million related to a valuation adjustment associated with a commercial loan, partially offset by a $1.2 million recovery associated with the payoff of a nonaccrual commercial loan.
Nonperforming Assets
Nonaccrual loans, including nonaccrual troubled debt restructurings, decreased $4.1 million, or 6.6%, to $57.9 million as of September 30, 2013 from $62.0 million as of June 30, 2013. The decline was primarily driven by resolution strategies related to two credits in the commercial and commercial real estate portfolios, totaling $3.1 million in the aggregate, as well as $5.9 million of payoffs related to four credits in the commercial and commercial real estate portfolios. This activity was partially offset by two commercial real estate credits, totaling $6.8 million in the aggregate, that were placed on nonaccrual status during the quarter.
Accruing troubled debt restructurings increased $3.4 million during the third quarter, driven by the addition of three commercial real estate credits totaling $2.0 million in the aggregate, primarily as a result of renewals and term extensions of performing loans that are experiencing operating cash flow stress but have strong underlying collateral and guarantor support.
OREO totaled $11.8 million as of September 30, 2013 and was unchanged compared to the linked quarter as resolutions and valuation adjustments of $0.9 million were offset by an equal amount of additions during the quarter.
Classified assets as of September 30, 2013 declined $9.4 million, or 7.2%, to $120.4 million from $129.8 million for the linked quarter and decreased $13.0 million, or 9.7%, from $133.4 million as of September 30, 2012. Classified assets are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse.
Delinquent Loans
As of September 30, 2013, loans 30-to-89 days past due totaled $10.4 million, or 0.30% of period-end loans, as compared to $13.4 million, or 0.40%, as of June 30, 2013 and $17.0 million, or 0.55%, as of September 30, 2012. The decline of $3.0 million, or 22.5%, during the third quarter was driven primarily by a $1.8 million commercial real estate credit that was brought current by the borrower.
Provision for Loan & Lease Losses
Third quarter provision expense related to uncovered loans and leases was $1.4 million as compared to $2.4 million for the linked quarter and $3.6 million for the comparable year-over-year quarter. Provision expense is a result of the Company's modeling efforts to estimate the period-end allowance for loan and lease losses.
LOANS (EXCLUDING COVERED LOANS)
The following table presents the loan portfolio, excluding covered loans, as of September 30, 2013, June 30, 2013 and September 30, 2012.
| Table IV |
|||||||||||||
| As of |
|||||||||||||
| September 30, 2013 |
June 30, 2013 |
September 30, 2012 |
|||||||||||
| Percent |
Percent |
Percent |
|||||||||||
| (Dollars in thousands) |
Balance |
of Total |
Balance |
of Total |
Balance |
of Total |
|||||||
| Commercial |
$ 960,016 |
28.0% |
$ 940,420 |
27.8% |
$ 834,858 |
27.2% |
|||||||
| Real estate - construction |
90,089 |
2.6% |
97,246 |
2.9% |
91,897 |
3.0% |
|||||||
| Real estate - commercial |
1,493,969 |
43.5% |
1,477,226 |
43.7% |
1,338,636 |
43.7% |
|||||||
| Real estate - residential |
352,830 |
10.3% |
343,016 |
10.1% |
299,654 |
9.8% |
|||||||
| Installment |
49,273 |
1.4% |
50,781 |
1.5% |
59,191 |
1.9% |
|||||||
| Home equity |
373,839 |
10.9% |
370,206 |
10.9% |
368,876 |
12.0% |
|||||||
| Credit card |
34,285 |
1.0% |
33,222 |
1.0% |
31,604 |
1.0% |
|||||||
| Lease financing |
76,615 |
2.2% |
70,011 |
2.1% |
41,343 |
1.3% |
|||||||
| Total |
$ 3,430,916 |
100.0% |
$ 3,382,128 |
100.0% |
$ 3,066,059 |
100.0% |
|||||||
Loans, excluding covered loans, totaled $3.4 billion as of September 30, 2013, increasing $48.8 million, or 5.7% on an annualized basis, compared to the linked quarter and $364.9 million, or 11.9%, compared to September 30, 2012. The increase relative to the linked quarter was driven by growth in traditional C&I and owner-occupied commercial real estate lending and franchise finance with additional contributions from specialty finance and residential mortgage lending.
INVESTMENTS
The following table presents a summary of the total investment portfolio at September 30, 2013.
| Table V |
||||||||||||||||
| As of September 30, 2013 |
||||||||||||||||
| Held-to- |
Available-for- |
% of |
||||||||||||||
| (Dollars in thousands) |
Maturity |
Sale |
Other |
Total |
Portfolio |
|||||||||||
| Debt obligations of the U.S. Government |
$ - |
$ 21,923 |
$ - |
$ 21,923 |
1.4% |
|||||||||||
| Debt obligations of U.S. Government Agency |
19,462 |
10,120 |
- |
29,582 |
1.8% |
|||||||||||
| Residential Mortgage Backed Securities |
||||||||||||||||
| Pass-through securities: |
||||||||||||||||
| Agency fixed rate |
89,807 |
130,819 |
- |
220,626 |
13.8% |
|||||||||||
| Agency adjustable rate |
136,872 |
33,219 |
- |
170,091 |
10.6% |
|||||||||||
| Collateralized mortgage obligations: |
||||||||||||||||
| Agency fixed rate |
355,004 |
230,945 |
- |
585,949 |
36.6% |
|||||||||||
| Agency variable rate |
- |
85,071 |
- |
85,071 |
5.3% |
|||||||||||
| Agency collateralized and insured municipal securities |
20,647 |
109,970 |
- |
130,617 |
8.2% |
|||||||||||
| Commercial mortgage backed securities |
45,956 |
106,477 |
- |
152,433 |
9.5% |
|||||||||||
| Municipal bond securities |
1,345 |
3,698 |
- |
5,043 |
0.3% |
|||||||||||
| Corporate securities |
- |
62,554 |
- |
62,554 |
3.9% |
|||||||||||
| Asset-backed securities |
- |
51,956 |
- |
51,956 |
3.2% |
|||||||||||
| Regulatory stock |
- |
- |
71,492 |
71,492 |
4.5% |
|||||||||||
| Other |
- |
7,995 |
4,453 |
12,448 |
0.8% |
|||||||||||
| $ 669,093 |
$ 854,747 |
$ 75,945 |
$ 1,599,785 |
100.0% |
||||||||||||
The investment portfolio decreased $30.8 million, or 1.9%, during the third quarter as $48.5 million of purchases was offset by amortizations and paydowns. As of September 30, 2013, the overall duration of the investment portfolio was essentially flat at 4.1 years compared to 4.0 years as of June 30, 2013. The yield earned on the portfolio during the quarter increased 12 bps to 2.20% from 2.08% for the linked quarter, driven by the increase in interest rates and continued stabilization in premium amortization. Due to the increase in interest rates and a widening of spreads for fixed income securities during the quarter, the net unrealized loss included in accumulated other comprehensive loss related to the investment portfolio increased $4.0 million to $9.8 million as of September 30, 2013.
DEPOSITS
Non-time deposit balances totaled $3.8 billion as of September 30, 2013, increasing $11.0 million, or 0.3%, compared to the linked quarter. Increases in commercial balances of $83.4 million, driven by strong growth in noninterest-bearing deposits, were offset by declines of $60.9 million in consumer balances and $11.5 million in public fund balances.
Time deposit balances decreased $52.7 million, or 5.4%, compared to the linked quarter due primarily to a decline in consumer balances of $53.7 million driven by the continued low interest rate environment and seasonality.
The low interest rate environment continued to have a positive impact on the Company's deposit costs as the total cost of deposit funding declined to 24 bps for the quarter, a decrease of 3 bps compared to the prior quarter and 21 bps compared to the third quarter 2012.
CAPITAL MANAGEMENT
The following table presents First Financial's regulatory and other capital ratios as of September 30, 2013, June 30, 2013 and September 30, 2012.
| Table VI |
|||||||
| As of |
|||||||
| September 30, |
June 30, |
September 30, |
|||||
| 2013 |
2013 |
2012 |
|||||
| Leverage Ratio |
10.29% |
10.12% |
10.54% |
||||
| Tier 1 Capital Ratio |
15.26% |
15.41% |
16.93% |
||||
| Total Risk-Based Capital Ratio |
16.53% |
16.68% |
18.21% |
||||
| Ending tangible shareholders' equity |
|||||||
| to ending tangible assets |
9.60% |
9.62% |
9.99% |
||||
| Ending tangible common shareholders' |
|||||||
| equity to ending tangible assets |
9.60% |
9.62% |
9.99% |
||||
| Tangible book value per share |
$10.24 |
$10.29 |
$10.47 |
||||
Shareholders' equity decreased $3.4 million during the quarter due primarily to the change in the unrealized gain/loss related to the investment portfolio, which was also the primary driver in the modest decline in the Company's tangible common equity ratio. The tier 1 capital and total risk-based capital ratios declined during the quarter due primarily to an increase in risk-weighted assets. Regulatory capital ratios as of September 30, 2013 are considered preliminary pending the filing of the Company's regulatory reports.
Teleconference / Webcast Information
First Financial's executive management will host a conference call to discuss the Company's financial and operating results on Friday, October 25, 2013 at 8:30 a.m. Eastern Time. Members of the public who would like to listen to the conference call should dial (888) 317-6016 (U.S. toll free), (855) 669-9657 (Canada toll free) or +1 (412) 317-6016 (International) (no passcode required). The number should be dialed five to ten minutes prior to the start of the conference call. The conference call will also be accessible as an audio webcast via the Investor Relations section of the Company's website at www.bankatfirst.com. A replay of the conference call will be available beginning one hour after the completion of the live call through November 11, 2013 at (877) 344-7529 (U.S. toll free), (855) 669-9658 (Canada toll free) and +1 (412) 317-0088 (International); conference number 10035811. The webcast will be archived on the Investor Relations section of the Company's website through October 25, 2014.
Press Release and Additional Information on Website
This press release as well as supplemental information and any non-GAAP reconciliations related to this release is available to the public through the Investor Relations section of First Financial's website at www.bankatfirst.com/investor.
Forward-Looking Statement
Certain statements contained in this release which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the ''Act''). In addition, certain statements in future filings by First Financial with the SEC, in press releases, and in oral and written statements made by or with the approval of First Financial which are not statements of historical fact constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to, projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure and other financial items, statements of plans and objectives of First Financial or its management or board of directors and statements of future economic performances and statements of assumptions underlying such statements. Words such as ''believes,'' ''anticipates,'' "likely," "expected," ''intends,'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Management's analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance. However, such performance involves risks and uncertainties that may cause actual results to differ materially. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
- management's ability to effectively execute its business plan;
- the risk that the strength of the United States economy in general and the strength of the local economies in which we conduct operations may continue to deteriorate resulting in, among other things, a further deterioration in credit quality or a reduced demand for credit, including the resultant effect on our loan portfolio, allowance for loan and lease losses and overall financial performance;
- U.S. fiscal debt and budget matters;
- the ability of financial institutions to access sources of liquidity at a reasonable cost;
- the impact of recent upheaval in the financial markets and the effectiveness of domestic and international governmental actions taken in response, and the effect of such governmental actions on us, our competitors and counterparties, financial markets generally and availability of credit specifically, and the U.S. and international economies, including potentially higher FDIC premiums arising from increased payments from FDIC insurance funds as a result of depository institution failures;
- the effect of and changes in policies and laws or regulatory agencies (notably the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act);
- the effect of the current low interest rate environment or changes in interest rates on our net interest margin and our loan originations and securities holdings;
- our ability to keep up with technological changes;
- failure or breach of our operational or security systems or infrastructure, or those of our third party vendors and other service providers;
- our ability to comply with the terms of loss sharing agreements with the FDIC;
- mergers and acquisitions, including costs or difficulties related to the integration of acquired companies and the wind-down of non-strategic operations that may be greater than expected, such as the risks and uncertainties associated with the Irwin Mortgage Corporation bankruptcy proceedings and other acquired subsidiaries;
- the risk that exploring merger and acquisition opportunities may detract from management's time and ability to successfully manage our Company;
- expected cost savings in connection with the consolidation of recent acquisitions may not be fully realized or realized within the expected time frames, and deposit attrition, customer loss and revenue loss following completed acquisitions may be greater than expected;
- our ability to increase market share and control expenses;
- the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board and the SEC;
- adverse changes in the creditworthiness of our borrowers and lessees, collateral values, the value of investment securities and asset recovery values, including the value of the FDIC indemnification asset and related assets covered by FDIC loss sharing agreements;
- adverse changes in the securities, debt and/or derivatives markets;
- our success in recruiting and retaining the necessary personnel to support business growth and expansion and maintain sufficient expertise to support increasingly complex products and services;
- monetary and fiscal policies of the Board of Governors of the Federal Reserve System (Federal Reserve) and the U.S. government and other governmental initiatives affecting the financial services industry;
- unpredictable natural or other disasters could have an adverse effect on us in that such events could materially disrupt our operations or our vendors' operations or willingness of our customers to access the financial services we offer;
- our ability to manage loan delinquency and charge-off rates and changes in estimation of the adequacy of the allowance for loan losses; and
- the costs and effects of litigation and of unexpected or adverse outcomes in such litigation.
In addition, please refer to our Annual Report on Form 10-K for the year ended December 31, 2012, as well as our other filings with the SEC, for a more detailed discussion of these risks and uncertainties and other factors. Such forward-looking statements are meaningful only on the date when such statements are made, and First Financial undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such a statement is made to reflect the occurrence of unanticipated events.
About First Financial Bancorp
First Financial Bancorp is a Cincinnati, Ohio based bank holding company. As of September 30, 2013, the Company had $6.3 billion in assets, $3.9 billion in loans, $4.7 billion in deposits and $692 million in shareholders' equity. The Company's subsidiary, First Financial Bank, N.A., founded in 1863, provides banking and financial services products through its four lines of business: commercial, consumer, wealth management and mortgage. The commercial, consumer and mortgage units provide traditional banking services to business and retail clients. First Financial Wealth Management provides wealth planning, portfolio management, trust and estate, brokerage and retirement plan services and had approximately $2.6 billion in assets under management as of September 30, 2013. The Company's strategic operating markets are located in Ohio, Indiana and Kentucky where it operates 110 banking centers. Additional information about the Company, including its products, services and banking locations is available at www.bankatfirst.com.
| FIRST FINANCIAL BANCORP. |
|||||||||||||
| (Dollars in thousands, except per share) |
|||||||||||||
| Three months ended, |
Nine months ended, |
||||||||||||
| Sep. 30, |
Jun. 30, |
Mar. 31, |
Dec. 31, |
Sep. 30, |
Sep. 30, |
||||||||
| 2013 |
2013 |
2013 |
2012 |
2012 |
2013 |
2012 |
|||||||
| RESULTS OF OPERATIONS |
|||||||||||||
| Net income |
$14,911 |
$15,829 |
$13,824 |
$16,265 |
$16,242 |
$44,564 |
$51,038 |
||||||
| Net earnings per share - basic |
$0.26 |
$0.28 |
$0.24 |
$0.28 |
$0.28 |
$0.78 |
$0.88 |
||||||
| Net earnings per share - diluted |
$0.26 |
$0.27 |
$0.24 |
$0.28 |
$0.28 |
$0.77 |
$0.87 |
||||||
| Dividends declared per share |
$0.27 |
$0.24 |
$0.28 |
$0.28 |
$0.30 |
$0.79 |
$0.90 |
||||||
| KEY FINANCIAL RATIOS |
|||||||||||||
| Return on average assets |
0.96% |
1.01% |
0.88% |
1.03% |
1.05% |
0.95% |
1.08% |
||||||
| Return on average shareholders' equity |
8.53% |
9.02% |
7.91% |
9.06% |
9.01% |
8.49% |
9.56% |
||||||
| Return on average tangible shareholders' equity |
10.00% |
10.54% |
9.24% |
10.58% |
10.53% |
9.92% |
11.17% |
||||||
| Net interest margin |
3.91% |
4.02% |
4.04% |
4.27% |
4.21% |
3.99% |
4.40% |
||||||
| Net interest margin (fully tax equivalent) (1) |
3.95% |
4.06% |
4.07% |
4.29% |
4.23% |
4.03% |
4.42% |
||||||
| Ending shareholders' equity as a percent of ending assets |
11.07% |
11.08% |
11.05% |
10.93% |
11.48% |
11.07% |
11.48% |
||||||
| Ending tangible shareholders' equity as a percent of: |
|||||||||||||
| Ending tangible assets |
9.60% |
9.62% |
9.60% |
9.50% |
9.99% |
9.60% |
9.99% |
||||||
| Risk-weighted assets |
14.27% |
14.50% |
15.05% |
15.57% |
16.16% |
14.27% |
16.16% |
||||||
| Average shareholders' equity as a percent of average assets |
11.19% |
11.15% |
11.09% |
11.35% |
11.62% |
11.15% |
11.28% |
||||||
| Average tangible shareholders' equity as a percent of |
|||||||||||||
| average tangible assets |
9.71% |
9.70% |
9.65% |
9.88% |
10.12% |
9.69% |
9.80% |
||||||
| Book value per share |
$11.99 |
$12.05 |
$12.09 |
$12.24 |
$12.24 |
$11.99 |
$12.24 |
||||||
| Tangible book value per share |
$10.24 |
$10.29 |
$10.33 |
$10.47 |
$10.47 |
$10.24 |
$10.47 |
||||||
| Tier 1 Ratio(2) |
15.26% |
15.41% |
15.87% |
16.32% |
16.93% |
15.26% |
16.93% |
||||||
| Total Capital Ratio(2) |
16.53% |
16.68% |
17.15% |
17.60% |
18.21% |
16.53% |
18.21% |
||||||
| Leverage Ratio(2) |
10.29% |
10.12% |
10.00% |
10.25% |
10.54% |
10.29% |
10.54% |
||||||
| AVERAGE BALANCE SHEET ITEMS |
|||||||||||||
| Loans (3) |
$3,410,102 |
$3,313,731 |
$3,205,781 |
$3,107,760 |
$3,037,734 |
$3,310,619 |
$3,004,302 |
||||||
| Covered loans and FDIC indemnification asset |
655,654 |
758,875 |
840,190 |
920,102 |
1,002,622 |
750,897 |
1,093,768 |
||||||
| Investment securities |
1,589,666 |
1,705,219 |
1,838,783 |
1,746,961 |
1,606,313 |
1,710,310 |
1,661,285 |
||||||
| Interest-bearing deposits with other banks |
4,010 |
13,890 |
3,056 |
5,146 |
11,390 |
6,989 |
47,260 |
||||||
| Total earning assets |
$5,659,432 |
$5,791,715 |
$5,887,810 |
$5,779,969 |
$5,658,059 |
$5,778,815 |
$5,806,615 |
||||||
| Total assets |
$6,193,722 |
$6,310,602 |
$6,391,049 |
$6,294,084 |
$6,166,667 |
$6,297,735 |
$6,326,272 |
||||||
| Noninterest-bearing deposits |
$1,072,259 |
$1,063,102 |
$1,049,943 |
$1,112,072 |
$1,052,421 |
$1,061,850 |
$1,009,548 |
||||||
| Interest-bearing deposits |
3,654,311 |
3,792,891 |
3,785,402 |
3,912,854 |
4,013,148 |
3,743,721 |
4,255,239 |
||||||
| Total deposits |
$4,726,570 |
$4,855,993 |
$4,835,345 |
$5,024,926 |
$5,065,569 |
$4,805,571 |
$5,264,787 |
||||||
| Borrowings |
$667,706 |
$644,058 |
$735,327 |
$439,308 |
$257,340 |
$682,116 |
$218,225 |
||||||
| Shareholders' equity |
$693,158 |
$703,804 |
$708,862 |
$714,373 |
$716,797 |
$701,884 |
$713,497 |
||||||
| CREDIT QUALITY RATIOS (excluding covered assets) |
|||||||||||||
| Allowance to ending loans |
1.33% |
1.39% |
1.49% |
1.50% |
1.60% |
1.33% |
1.60% |
||||||
| Allowance to nonaccrual loans |
78.57% |
75.87% |
74.95% |
73.46% |
78.81% |
78.57% |
78.81% |
||||||
| Allowance to nonperforming loans |
61.34% |
62.78% |
62.57% |
62.95% |
66.45% |
61.34% |
66.45% |
||||||
| Nonperforming loans to total loans |
2.16% |
2.22% |
2.38% |
2.39% |
2.41% |
2.16% |
2.41% |
||||||
| Nonperforming assets to ending loans, plus OREO |
2.50% |
2.56% |
2.74% |
2.77% |
2.86% |
2.50% |
2.86% |
||||||
| Nonperforming assets to total assets |
1.38% |
1.38% |
1.40% |
1.36% |
1.41% |
1.38% |
1.41% |
||||||
| Net charge-offs to average loans (annualized) |
0.34% |
0.45% |
0.32% |
0.68% |
0.71% |
0.37% |
0.83% |
||||||
| (1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons. |
|||||||||||||
| (2) September 30, 2013 regulatory capital ratios are preliminary. |
|||||||||||||
| (3) Includes loans held for sale. |
|||||||||||||
| FIRST FINANCIAL BANCORP. |
|||||||||||
| (Dollars in thousands, except per share) |
|||||||||||
| Three months ended, |
Nine months ended, |
||||||||||
| Sep. 30, |
Sep. 30, |
||||||||||
| 2013 |
2012 |
% Change |
2013 |
2012 |
% Change |
||||||
| Interest income |
|||||||||||
| Loans, including fees |
$52,908 |
$59,536 |
(11.1%) |
$163,955 |
$189,362 |
(13.4%) |
|||||
| Investment securities |
|||||||||||
| Taxable |
8,267 |
8,358 |
(1.1%) |
24,938 |
29,254 |
(14.8%) |
|||||
| Tax-exempt |
541 |
111 |
387.4% |
1,681 |
366 |
359.3% |
|||||
| Total investment securities interest |
8,808 |
8,469 |
4.0% |
26,619 |
29,620 |
(10.1%) |
|||||
| Other earning assets |
(2,185) |
(1,700) |
28.5% |
(5,213) |
(5,657) |
(7.8%) |
|||||
| Total interest income |
59,531 |
66,305 |
(10.2%) |
185,361 |
213,325 |
(13.1%) |
|||||
| Interest expense |
|||||||||||
| Deposits |
2,856 |
5,730 |
(50.2%) |
10,000 |
19,827 |
(49.6%) |
|||||
| Short-term borrowings |
286 |
54 |
429.6% |
920 |
103 |
793.2% |
|||||
| Long-term borrowings |
617 |
675 |
(8.6%) |
1,925 |
2,030 |
(5.2%) |
|||||
| Total interest expense |
3,759 |
6,459 |
(41.8%) |
12,845 |
21,960 |
(41.5%) |
|||||
| Net interest income |
55,772 |
59,846 |
(6.8%) |
172,516 |
191,365 |
(9.8%) |
|||||
| Provision for loan and lease losses - uncovered |
1,413 |
3,613 |
(60.9%) |
6,863 |
15,235 |
(55.0%) |
|||||
| Provision for loan and lease losses - covered |
5,293 |
6,622 |
(20.1%) |
6,052 |
25,620 |
(76.4%) |
|||||
| Net interest income after provision for loan and lease losses |
49,066 |
49,611 |
(1.1%) |
159,601 |
150,510 |
6.0% |
|||||
| Noninterest income |
|||||||||||
| Service charges on deposit accounts |
5,447 |
5,499 |
(0.9%) |
15,369 |
15,784 |
(2.6%) |
|||||
| Trust and wealth management fees |
3,366 |
3,374 |
(0.2%) |
10,813 |
10,542 |
2.6% |
|||||
| Bankcard income |
2,637 |
2,387 |
10.5% |
8,215 |
7,502 |
9.5% |
|||||
| Net gains from sales of loans |
751 |
1,319 |
(43.1%) |
2,546 |
3,391 |
(24.9%) |
|||||
| FDIC loss sharing income |
5,555 |
8,496 |
(34.6%) |
7,105 |
29,592 |
(76.0%) |
|||||
| Accelerated discount on covered loans |
1,711 |
3,798 |
(54.9%) |
5,581 |
11,207 |
(50.2%) |
|||||
| Gain on sale of investment securities |
0 |
2,617 |
(100.0%) |
1,724 |
2,617 |
(34.1%) |
|||||
| Other |
2,824 |
3,340 |
(15.4%) |
9,251 |
15,665 |
(40.9%) |
|||||
| Total noninterest income |
22,291 |
30,830 |
(27.7%) |
60,604 |
96,300 |
(37.1%) |
|||||
| Noninterest expenses |
|||||||||||
| Salaries and employee benefits |
23,834 |
27,212 |
(12.4%) |
77,379 |
85,121 |
(9.1%) |
|||||
| Pension settlement charges |
1,396 |
0 |
N/M |
5,712 |
0 |
N/M |
|||||
| Net occupancy |
5,101 |
5,153 |
(1.0%) |
16,650 |
15,560 |
7.0% |
|||||
| Furniture and equipment |
2,213 |
2,332 |
(5.1%) |
6,834 |
6,899 |
(0.9%) |
|||||
| Data processing |
2,584 |
2,334 |
10.7% |
7,612 |
6,311 |
20.6% |
|||||
| Marketing |
1,192 |
1,592 |
(25.1%) |
3,271 |
3,984 |
(17.9%) |
|||||
| Communication |
865 |
788 |
9.8% |
2,479 |
2,595 |
(4.5%) |
|||||
| Professional services |
1,528 |
1,304 |
17.2% |
5,095 |
5,602 |
(9.1%) |
|||||
| State intangible tax |
1,010 |
961 |
5.1% |
3,028 |
2,957 |
2.4% |
|||||
| FDIC assessments |
1,107 |
1,164 |
(4.9%) |
3,380 |
3,597 |
(6.0%) |
|||||
| Loss (gain) - other real estate owned |
184 |
1,372 |
(86.6%) |
902 |
2,681 |
(66.4%) |
|||||
| Loss (gain) - covered other real estate owned |
204 |
(25) |
(916.0%) |
(2,165) |
2,500 |
(186.6%) |
|||||
| Loss sharing expense |
1,724 |
3,584 |
(51.9%) |
5,588 |
8,420 |
(33.6%) |
|||||
| Other |
5,859 |
7,515 |
(22.0%) |
19,425 |
22,296 |
(12.9%) |
|||||
| Total noninterest expenses |
48,801 |
55,286 |
(11.7%) |
155,190 |
168,523 |
(7.9%) |
|||||
| Income before income taxes |
22,556 |
25,155 |
(10.3%) |
65,015 |
78,287 |
(17.0%) |
|||||
| Income tax expense |
7,645 |
8,913 |
(14.2%) |
20,451 |
27,249 |
(24.9%) |
|||||
| Net income |
14,911 |
16,242 |
(8.2%) |
44,564 |
51,038 |
(12.7%) |
|||||
| ADDITIONAL DATA |
|||||||||||
| Net earnings per share - basic |
$0.26 |
$0.28 |
$0.78 |
$0.88 |
|||||||
| Net earnings per share - diluted |
$0.26 |
$0.28 |
$0.77 |
$0.87 |
|||||||
| Dividends declared per share |
$0.27 |
$0.30 |
$0.79 |
$0.90 |
|||||||
| Return on average assets |
0.96% |
1.05% |
0.95% |
1.08% |
|||||||
| Return on average shareholders' equity |
8.53% |
9.01% |
8.49% |
9.56% |
|||||||
| Interest income |
$59,531 |
$66,305 |
(10.2%) |
$185,361 |
$213,325 |
(13.1%) |
|||||
| Tax equivalent adjustment |
516 |
255 |
102.4% |
1,507 |
689 |
118.7% |
|||||
| Interest income - tax equivalent |
60,047 |
66,560 |
(9.8%) |
186,868 |
214,014 |
(12.7%) |
|||||
| Interest expense |
3,759 |
6,459 |
(41.8%) |
12,845 |
21,960 |
(41.5%) |
|||||
| Net interest income - tax equivalent |
$56,288 |
$60,101 |
(6.3%) |
$174,023 |
$192,054 |
(9.4%) |
|||||
| Net interest margin |
3.91% |
4.21% |
3.99% |
4.40% |
|||||||
| Net interest margin (fully tax equivalent) (1) |
3.95% |
4.23% |
4.03% |
4.42% |
|||||||
| Full-time equivalent employees |
1,292 |
1,475 |
|||||||||
| (1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons. |
|||||||||||
| N/M = Not meaningful. |
|||||||||||
| FIRST FINANCIAL BANCORP. |
|||||||||
| (Dollars in thousands, except per share) |
|||||||||
| 2013 |
|||||||||
| Third |
Second |
First |
% Change |
||||||
| Quarter |
Quarter |
Quarter |
YTD |
Linked Qtr. |
|||||
| Interest income |
|||||||||
| Loans, including fees |
$52,908 |
$55,022 |
$56,025 |
$163,955 |
(3.8%) |
||||
| Investment securities |
|||||||||
| Taxable |
8,267 |
8,295 |
8,376 |
24,938 |
(0.3%) |
||||
| Tax-exempt |
541 |
560 |
580 |
1,681 |
(3.4%) |
||||
| Total investment securities interest |
8,808 |
8,855 |
8,956 |
26,619 |
(0.5%) |
||||
| Other earning assets |
(2,185) |
(1,556) |
(1,472) |
(5,213) |
40.4% |
||||
| Total interest income |
59,531 |
62,321 |
63,509 |
185,361 |
(4.5%) |
||||
| Interest expense |
|||||||||
| Deposits |
2,856 |
3,284 |
3,860 |
10,000 |
(13.0%) |
||||
| Short-term borrowings |
286 |
305 |
329 |
920 |
(6.2%) |
||||
| Long-term borrowings |
617 |
654 |
654 |
1,925 |
(5.7%) |
||||
| Total interest expense |
3,759 |
4,243 |
4,843 |
12,845 |
(11.4%) |
||||
| Net interest income |
55,772 |
58,078 |
58,666 |
172,516 |
(4.0%) |
||||
| Provision for loan and lease losses - uncovered |
1,413 |
2,409 |
3,041 |
6,863 |
(41.3%) |
||||
| Provision for loan and lease losses - covered |
5,293 |
(8,283) |
9,042 |
6,052 |
(163.9%) |
||||
| Net interest income after provision for loan and lease losses |
49,066 |
63,952 |
46,583 |
159,601 |
(23.3%) |
||||
| Noninterest income |
|||||||||
| Service charges on deposit accounts |
5,447 |
5,205 |
4,717 |
15,369 |
4.6% |
||||
| Trust and wealth management fees |
3,366 |
3,497 |
3,950 |
10,813 |
(3.7%) |
||||
| Bankcard income |
2,637 |
3,145 |
2,433 |
8,215 |
(16.2%) |
||||
| Net gains from sales of loans |
751 |
1,089 |
706 |
2,546 |
(31.0%) |
||||
| FDIC loss sharing income |
5,555 |
(7,384) |
8,934 |
7,105 |
(175.2%) |
||||
| Accelerated discount on covered loans |
1,711 |
1,935 |
1,935 |
5,581 |
(11.6%) |
||||
| Gain on sale of investment securities |
0 |
188 |
1,536 |
1,724 |
(100.0%) |
||||
| Other |
2,824 |
3,940 |
2,487 |
9,251 |
(28.3%) |
||||
| Total noninterest income |
22,291 |
11,615 |
26,698 |
60,604 |
91.9% |
||||
| Noninterest expenses |
|||||||||
| Salaries and employee benefits |
23,834 |
26,216 |
27,329 |
77,379 |
(9.1%) |
||||
| Pension settlement charges |
1,396 |
4,316 |
0 |
5,712 |
(67.7%) |
||||
| Net occupancy |
5,101 |
5,384 |
6,165 |
16,650 |
(5.3%) |
||||
| Furniture and equipment |
2,213 |
2,250 |
2,371 |
6,834 |
(1.6%) |
||||
| Data processing |
2,584 |
2,559 |
2,469 |
7,612 |
1.0% |
||||
| Marketing |
1,192 |
1,182 |
897 |
3,271 |
0.8% |
||||
| Communication |
865 |
781 |
833 |
2,479 |
10.8% |
||||
| Professional services |
1,528 |
1,764 |
1,803 |
5,095 |
(13.4%) |
||||
| State intangible tax |
1,010 |
1,004 |
1,014 |
3,028 |
0.6% |
||||
| FDIC assessments |
1,107 |
1,148 |
1,125 |
3,380 |
(3.6%) |
||||
| Loss (gain) - other real estate owned |
184 |
216 |
502 |
902 |
(14.8%) |
||||
| Loss (gain) - covered other real estate owned |
204 |
(2,212) |
(157) |
(2,165) |
(109.2%) |
||||
| Loss sharing expense |
1,724 |
1,578 |
2,286 |
5,588 |
9.3% |
||||
| Other |
5,859 |
7,097 |
6,469 |
19,425 |
(17.4%) |
||||
| Total noninterest expenses |
48,801 |
53,283 |
53,106 |
155,190 |
(8.4%) |
||||
| Income before income taxes |
22,556 |
22,284 |
20,175 |
65,015 |
1.2% |
||||
| Income tax expense |
7,645 |
6,455 |
6,351 |
20,451 |
18.4% |
||||
| Net income |
$14,911 |
$15,829 |
$13,824 |
$44,564 |
(5.8%) |
||||
| ADDITIONAL DATA |
|||||||||
| Net earnings per share - basic |
$0.26 |
$0.28 |
$0.24 |
$0.78 |
|||||
| Net earnings per share - diluted |
$0.26 |
$0.27 |
$0.24 |
$0.77 |
|||||
| Dividends declared per share |
$0.27 |
$0.24 |
$0.28 |
$0.79 |
|||||
| Return on average assets |
0.96% |
1.01% |
0.88% |
0.95% |
|||||
| Return on average shareholders' equity |
8.53% |
9.02% |
7.91% |
8.49% |
|||||
| Interest income |
$59,531 |
$62,321 |
$63,509 |
$185,361 |
(4.5%) |
||||
| Tax equivalent adjustment |
516 |
514 |
477 |
1,507 |
0.4% |
||||
| Interest income - tax equivalent |
60,047 |
62,835 |
63,986 |
186,868 |
(4.4%) |
||||
| Interest expense |
3,759 |
4,243 |
4,843 |
12,845 |
(11.4%) |
||||
| Net interest income - tax equivalent |
$56,288 |
$58,592 |
$59,143 |
$174,023 |
(3.9%) |
||||
| Net interest margin |
3.91% |
4.02% |
4.04% |
3.99% |
|||||
| Net interest margin (fully tax equivalent) (1) |
3.95% |
4.06% |
4.07% |
4.03% |
|||||
| Full-time equivalent employees |
1,292 |
1,338 |
1,385 |
||||||
| (1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons. |
|||||||||
| FIRST FINANCIAL BANCORP. |
|||||||||
| (Dollars in thousands, except per share) |
|||||||||
| 2012 |
|||||||||
| Fourth |
Third |
Second |
First |
Full |
|||||
| Quarter |
Quarter |
Quarter |
Quarter |
Year |
|||||
| Interest income |
|||||||||
| Loans, including fees |
$60,389 |
$59,536 |
$63,390 |
$66,436 |
$249,751 |
||||
| Investment securities |
|||||||||
| Taxable |
8,410 |
8,358 |
10,379 |
10,517 |
37,664 |
||||
| Tax-exempt |
370 |
111 |
121 |
134 |
736 |
||||
| Total investment securities interest |
8,780 |
8,469 |
10,500 |
10,651 |
38,400 |
||||
| Other earning assets |
(1,564) |
(1,700) |
(1,967) |
(1,990) |
(7,221) |
||||
| Total interest income |
67,605 |
66,305 |
71,923 |
75,097 |
280,930 |
||||
| Interest expense |
|||||||||
| Deposits |
4,798 |
5,730 |
6,381 |
7,716 |
24,625 |
||||
| Short-term borrowings |
159 |
54 |
37 |
12 |
262 |
||||
| Long-term borrowings |
672 |
675 |
675 |
680 |
2,702 |
||||
| Total interest expense |
5,629 |
6,459 |
7,093 |
8,408 |
27,589 |
||||
| Net interest income |
61,976 |
59,846 |
64,830 |
66,689 |
253,341 |
||||
| Provision for loan and lease losses - uncovered |
3,882 |
3,613 |
8,364 |
3,258 |
19,117 |
||||
| Provision for loan and lease losses - covered |
5,283 |
6,622 |
6,047 |
12,951 |
30,903 |
||||
| Net interest income after provision for loan and lease losses |
52,811 |
49,611 |
50,419 |
50,480 |
203,321 |
||||
| Noninterest income |
|||||||||
| Service charges on deposit accounts |
5,431 |
5,499 |
5,376 |
4,909 |
21,215 |
||||
| Trust and wealth management fees |
3,409 |
3,374 |
3,377 |
3,791 |
13,951 |
||||
| Bankcard income |
2,526 |
2,387 |
2,579 |
2,536 |
10,028 |
||||
| Net gains from sales of loans |
1,179 |
1,319 |
1,132 |
940 |
4,570 |
||||
| FDIC loss sharing income |
5,754 |
8,496 |
8,280 |
12,816 |
35,346 |
||||
| Accelerated discount on covered loans |
2,455 |
3,798 |
3,764 |
3,645 |
13,662 |
||||
| Gain on sale of investment securities |
1,011 |
2,617 |
0 |
0 |
3,628 |
||||
| Other |
4,356 |
3,340 |
9,037 |
3,288 |
20,021 |
||||
| Total noninterest income |
26,121 |
30,830 |
33,545 |
31,925 |
122,421 |
||||
| Noninterest expenses |
|||||||||
| Salaries and employee benefits |
28,033 |
27,212 |
29,048 |
28,861 |
113,154 |
||||
| Net occupancy |
5,122 |
5,153 |
5,025 |
5,382 |
20,682 |
||||
| Furniture and equipment |
2,291 |
2,332 |
2,323 |
2,244 |
9,190 |
||||
| Data processing |
2,526 |
2,334 |
2,076 |
1,901 |
8,837 |
||||
| Marketing |
1,566 |
1,592 |
1,238 |
1,154 |
5,550 |
||||
| Communication |
814 |
788 |
913 |
894 |
3,409 |
||||
| Professional services |
1,667 |
1,304 |
2,151 |
2,147 |
7,269 |
||||
| State intangible tax |
942 |
961 |
970 |
1,026 |
3,899 |
||||
| FDIC assessments |
1,085 |
1,164 |
1,270 |
1,163 |
4,682 |
||||
| Loss (gain) - other real estate owned |
569 |
1,372 |
313 |
996 |
3,250 |
||||
| Loss (gain) - covered other real estate owned |
(54) |
(25) |
1,233 |
1,292 |
2,446 |
||||
| Loss sharing expense |
2,305 |
3,584 |
3,085 |
1,751 |
10,725 |
||||
| Other |
6,608 |
7,515 |
7,814 |
6,967 |
28,904 |
||||
| Total noninterest expenses |
53,474 |
55,286 |
57,459 |
55,778 |
221,997 |
||||
| Income before income taxes |
25,458 |
25,155 |
26,505 |
26,627 |
103,745 |
||||
| Income tax expense |
9,193 |
8,913 |
8,703 |
9,633 |
36,442 |
||||
| Net income |
$16,265 |
$16,242 |
$17,802 |
$16,994 |
$67,303 |
||||
| ADDITIONAL DATA |
|||||||||
| Net earnings per share - basic |
$0.28 |
$0.28 |
$0.31 |
$0.29 |
$1.16 |
||||
| Net earnings per share - diluted |
$0.28 |
$0.28 |
$0.30 |
$0.29 |
$1.14 |
||||
| Dividends declared per share |
$0.28 |
$0.30 |
$0.29 |
$0.31 |
$1.18 |
||||
| Return on average assets |
1.03% |
1.05% |
1.13% |
1.05% |
1.07% |
||||
| Return on average shareholders' equity |
9.06% |
9.01% |
9.98% |
9.67% |
9.43% |
||||
| Interest income |
$67,605 |
$66,305 |
$71,923 |
$75,097 |
$280,930 |
||||
| Tax equivalent adjustment |
366 |
255 |
216 |
218 |
1,055 |
||||
| Interest income - tax equivalent |
67,971 |
66,560 |
72,139 |
75,315 |
281,985 |
||||
| Interest expense |
5,629 |
6,459 |
7,093 |
8,408 |
27,589 |
||||
| Net interest income - tax equivalent |
$62,342 |
$60,101 |
$65,046 |
$66,907 |
$254,396 |
||||
| Net interest margin |
4.27% |
4.21% |
4.49% |
4.51% |
4.37% |
||||
| Net interest margin (fully tax equivalent) (1) |
4.29% |
4.23% |
4.50% |
4.52% |
4.39% |
||||
| Full-time equivalent employees |
1,439 |
1,475 |
1,525 |
1,513 |
|||||
| (1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons. |
|||||||||
| FIRST FINANCIAL BANCORP. |
|||||||||||||
| (Dollars in thousands) |
|||||||||||||
| Sep. 30, |
Jun. 30, |
Mar. 31, |
Dec. 31, |
Sep. 30, |
% Change |
% Change |
|||||||
| 2013 |
2013 |
2013 |
2012 |
2012 |
Linked Qtr. |
Comparable Qtr. |
|||||||
| ASSETS |
|||||||||||||
| Cash and due from banks |
$177,698 |
$114,745 |
$106,249 |
$134,502 |
$154,181 |
54.9% |
15.3% |
||||||
| Interest-bearing deposits with other banks |
10,414 |
2,671 |
1,170 |
24,341 |
21,495 |
289.9% |
(51.6%) |
||||||
| Investment securities available-for-sale |
854,747 |
884,694 |
952,039 |
1,032,096 |
689,680 |
(3.4%) |
23.9% |
||||||
| Investment securities held-to-maturity |
669,093 |
670,246 |
716,214 |
770,755 |
822,319 |
(0.2%) |
(18.6%) |
||||||
| Other investments |
75,945 |
75,645 |
75,375 |
71,492 |
71,492 |
0.4% |
6.2% |
||||||
| Loans held for sale |
10,704 |
18,650 |
28,126 |
16,256 |
23,530 |
(42.6%) |
(54.5%) |
||||||
| Loans |
|||||||||||||
| Commercial |
960,016 |
940,420 |
892,381 |
861,033 |
834,858 |
2.1% |
15.0% |
||||||
| Real estate - construction |
90,089 |
97,246 |
87,542 |
73,517 |
91,897 |
(7.4%) |
(2.0%) |
||||||
| Real estate - commercial |
1,493,969 |
1,477,226 |
1,433,182 |
1,417,008 |
1,338,636 |
1.1% |
11.6% |
||||||
| Real estate - residential |
352,830 |
343,016 |
330,260 |
318,210 |
299,654 |
2.9% |
17.7% |
||||||
| Installment |
49,273 |
50,781 |
53,509 |
56,810 |
59,191 |
(3.0%) |
(16.8%) |
||||||
| Home equity |
373,839 |
370,206 |
365,943 |
367,500 |
368,876 |
1.0% |
1.3% |
||||||
| Credit card |
34,285 |
33,222 |
32,465 |
34,198 |
31,604 |
3.2% |
8.5% |
||||||
| Lease financing |
76,615 |
70,011 |
53,556 |
50,788 |
41,343 |
9.4% |
85.3% |
||||||
| Total loans, excluding covered loans |
3,430,916 |
3,382,128 |
3,248,838 |
3,179,064 |
3,066,059 |
1.4% |
11.9% |
||||||
| Less |
|||||||||||||
| Allowance for loan and lease losses |
45,514 |
47,047 |
48,306 |
47,777 |
49,192 |
(3.3%) |
(7.5%) |
||||||
| Net loans - uncovered |
3,385,402 |
3,335,081 |
3,200,532 |
3,131,287 |
3,016,867 |
1.5% |
12.2% |
||||||
| Covered loans |
518,524 |
622,265 |
687,798 |
748,116 |
825,515 |
(16.7%) |
(37.2%) |
||||||
| Less |
|||||||||||||
| Allowance for loan and lease losses |
23,259 |
32,961 |
45,496 |
45,190 |
48,895 |
(29.4%) |
(52.4%) |
||||||
| Net loans - covered |
495,265 |
589,304 |
642,302 |
702,926 |
776,620 |
(16.0%) |
(36.2%) |
||||||
| Net loans |
3,880,667 |
3,924,385 |
3,842,834 |
3,834,213 |
3,793,487 |
(1.1%) |
2.3% |
||||||
| Premises and equipment |
139,125 |
142,675 |
146,889 |
146,716 |
146,603 |
(2.5%) |
5.1% |
||||||
| Goodwill |
95,050 |
95,050 |
95,050 |
95,050 |
95,050 |
0.0% |
0.0% |
||||||
| Other intangibles |
6,249 |
6,620 |
7,078 |
7,648 |
8,327 |
(5.6%) |
(25.0%) |
||||||
| FDIC indemnification asset |
78,132 |
88,966 |
112,428 |
119,607 |
130,476 |
(12.2%) |
(40.1%) |
||||||
| Accrued interest and other assets |
255,617 |
250,228 |
265,565 |
244,372 |
278,447 |
2.2% |
(8.2%) |
||||||
| Total assets |
$6,253,441 |
$6,274,575 |
$6,349,017 |
$6,497,048 |
$6,235,087 |
(0.3%) |
0.3% |
||||||
| LIABILITIES |
|||||||||||||
| Deposits |
|||||||||||||
| Interest-bearing demand |
$1,068,067 |
$1,131,466 |
$1,113,940 |
$1,160,815 |
$1,112,843 |
(5.6%) |
(4.0%) |
||||||
| Savings |
1,593,895 |
1,601,122 |
1,620,874 |
1,623,614 |
1,568,818 |
(0.5%) |
1.6% |
||||||
| Time |
926,029 |
978,680 |
1,030,124 |
1,068,637 |
1,199,296 |
(5.4%) |
(22.8%) |
||||||
| Total interest-bearing deposits |
3,587,991 |
3,711,268 |
3,764,938 |
3,853,066 |
3,880,957 |
(3.3%) |
(7.5%) |
||||||
| Noninterest-bearing |
1,141,016 |
1,059,368 |
1,056,409 |
1,102,774 |
1,063,654 |
7.7% |
7.3% |
||||||
| Total deposits |
4,729,007 |
4,770,636 |
4,821,347 |
4,955,840 |
4,944,611 |
(0.9%) |
(4.4%) |
||||||
| Short-term borrowings |
|||||||||||||
| Federal funds purchased and securities sold |
|||||||||||||
| under agreements to repurchase |
105,472 |
114,030 |
130,863 |
122,570 |
88,190 |
(7.5%) |
19.6% |
||||||
| FHLB short-term borrowings |
518,200 |
505,900 |
502,200 |
502,000 |
283,000 |
2.4% |
83.1% |
||||||
| Total short-term borrowings |
623,672 |
619,930 |
633,063 |
624,570 |
371,190 |
0.6% |
68.0% |
||||||
| Long-term debt |
61,088 |
73,957 |
74,498 |
75,202 |
75,521 |
(17.4%) |
(19.1%) |
||||||
| Total borrowed funds |
684,760 |
693,887 |
707,561 |
699,772 |
446,711 |
(1.3%) |
53.3% |
||||||
| Accrued interest and other liabilities |
147,635 |
114,600 |
118,495 |
131,011 |
127,799 |
28.8% |
15.5% |
||||||
| Total liabilities |
5,561,402 |
5,579,123 |
5,647,403 |
5,786,623 |
5,519,121 |
(0.3%) |
0.8% |
||||||
| SHAREHOLDERS' EQUITY |
|||||||||||||
| Common stock |
577,429 |
576,641 |
575,514 |
579,293 |
578,129 |
0.1% |
(0.1%) |
||||||
| Retained earnings |
328,993 |
329,633 |
327,635 |
330,004 |
330,014 |
(0.2%) |
(0.3%) |
||||||
| Accumulated other comprehensive loss |
(29,294) |
(25,645) |
(21,475) |
(18,677) |
(18,855) |
14.2% |
55.4% |
||||||
| Treasury stock, at cost |
(185,089) |
(185,177) |
(180,060) |
(180,195) |
(173,322) |
(0.0%) |
6.8% |
||||||
| Total shareholders' equity |
692,039 |
695,452 |
701,614 |
710,425 |
715,966 |
(0.5%) |
(3.3%) |
||||||
| Total liabilities and shareholders' equity |
$6,253,441 |
$6,274,575 |
$6,349,017 |
$6,497,048 |
$6,235,087 |
(0.3%) |
0.3% |
||||||
| FIRST FINANCIAL BANCORP. |
|||||||||||||
| (Dollars in thousands) |
|||||||||||||
| Quarterly Averages |
Year-to-Date Averages |
||||||||||||
| Sep. 30, |
Jun. 30, |
Mar. 31, |
Dec. 31, |
Sep. 30, |
Sep. 30, |
||||||||
| 2013 |
2013 |
2013 |
2012 |
2012 |
2013 |
2012 |
|||||||
| ASSETS |
|||||||||||||
| Cash and due from banks |
$120,154 |
$119,909 |
$111,599 |
$118,619 |
$118,642 |
$117,252 |
$121,121 |
||||||
| Interest-bearing deposits with other banks |
4,010 |
13,890 |
3,056 |
5,146 |
11,390 |
6,989 |
47,260 |
||||||
| Investment securities |
1,589,666 |
1,705,219 |
1,838,783 |
1,746,961 |
1,606,313 |
1,710,310 |
1,661,285 |
||||||
| Loans held for sale |
13,349 |
19,722 |
21,096 |
18,054 |
26,035 |
18,027 |
21,786 |
||||||
| Loans |
|||||||||||||
| Commercial |
937,939 |
904,029 |
863,427 |
819,262 |
811,998 |
902,071 |
829,872 |
||||||
| Real estate - construction |
93,103 |
93,813 |
81,171 |
85,219 |
92,051 |
89,406 |
101,327 |
||||||
| Real estate - commercial |
1,488,047 |
1,445,626 |
1,411,769 |
1,373,781 |
1,322,369 |
1,448,760 |
1,279,441 |
||||||
| Real estate - residential |
347,110 |
334,652 |
323,768 |
307,580 |
293,423 |
335,262 |
290,513 |
||||||
| Installment |
50,130 |
52,313 |
54,684 |
58,283 |
60,691 |
52,359 |
62,938 |
||||||
| Home equity |
371,072 |
367,408 |
365,568 |
368,605 |
365,669 |
368,036 |
361,746 |
||||||
| Credit card |
34,176 |
33,785 |
33,300 |
32,954 |
31,977 |
33,757 |
31,522 |
||||||
| Lease financing |
75,176 |
62,383 |
50,998 |
44,022 |
33,521 |
62,941 |
25,157 |
||||||
| Total loans, excluding covered loans |
3,396,753 |
3,294,009 |
3,184,685 |
3,089,706 |
3,011,699 |
3,292,592 |
2,982,516 |
||||||
| Less |
|||||||||||||
| Allowance for loan and lease losses |
49,451 |
50,172 |
49,408 |
50,172 |
51,486 |
49,677 |
51,783 |
||||||
| Net loans - uncovered |
3,347,302 |
3,243,837 |
3,135,277 |
3,039,534 |
2,960,213 |
3,242,915 |
2,930,733 |
||||||
| Covered loans |
573,243 |
653,892 |
724,846 |
794,838 |
866,486 |
650,105 |
945,355 |
||||||
| Less |
|||||||||||||
| Allowance for loan and lease losses |
31,208 |
41,861 |
46,104 |
48,553 |
51,150 |
39,670 |
48,764 |
||||||
| Net loans - covered |
542,035 |
612,031 |
678,742 |
746,285 |
815,336 |
610,435 |
896,591 |
||||||
| Net loans |
3,889,337 |
3,855,868 |
3,814,019 |
3,785,819 |
3,775,549 |
3,853,350 |
3,827,324 |
||||||
| Premises and equipment |
141,498 |
144,759 |
147,355 |
148,047 |
145,214 |
144,516 |
142,959 |
||||||
| Goodwill |
95,050 |
95,050 |
95,050 |
95,050 |
95,050 |
95,050 |
95,050 |
||||||
| Other intangibles |
6,428 |
6,831 |
7,346 |
8,001 |
8,702 |
6,865 |
9,656 |
||||||
| FDIC indemnification asset |
82,411 |
104,983 |
115,344 |
125,264 |
136,136 |
100,792 |
148,413 |
||||||
| Accrued interest and other assets |
251,819 |
244,371 |
237,401 |
243,123 |
243,636 |
244,584 |
251,418 |
||||||
| Total assets |
$6,193,722 |
$6,310,602 |
$6,391,049 |
$6,294,084 |
$6,166,667 |
$6,297,735 |
$6,326,272 |
||||||
| LIABILITIES |
|||||||||||||
| Deposits |
|||||||||||||
| Interest-bearing demand |
$1,098,524 |
$1,141,767 |
$1,112,664 |
$1,145,800 |
$1,164,111 |
$1,117,600 |
$1,213,876 |
||||||
| Savings |
1,608,351 |
1,639,834 |
1,618,239 |
1,640,427 |
1,588,708 |
1,622,105 |
1,627,068 |
||||||
| Time |
947,436 |
1,011,290 |
1,054,499 |
1,126,627 |
1,260,329 |
1,004,016 |
1,414,295 |
||||||
| Total interest-bearing deposits |
3,654,311 |
3,792,891 |
3,785,402 |
3,912,854 |
4,013,148 |
3,743,721 |
4,255,239 |
||||||
| Noninterest-bearing |
1,072,259 |
1,063,102 |
1,049,943 |
1,112,072 |
1,052,421 |
1,061,850 |
1,009,548 |
||||||
| Total deposits |
4,726,570 |
4,855,993 |
4,835,345 |
5,024,926 |
5,065,569 |
4,805,571 |
5,264,787 |
||||||
| Short-term borrowings |
|||||||||||||
| Federal funds purchased and securities sold |
|||||||||||||
| under agreements to repurchase |
114,505 |
105,299 |
134,709 |
100,087 |
81,147 |
118,097 |
82,579 |
||||||
| Federal Home Loan Bank short-term borrowings |
483,937 |
464,630 |
525,878 |
263,895 |
100,758 |
491,328 |
60,057 |
||||||
| Total short-term borrowings |
598,442 |
569,929 |
660,587 |
363,982 |
181,905 |
609,425 |
142,636 |
||||||
| Long-term debt |
69,264 |
74,129 |
74,740 |
75,326 |
75,435 |
72,691 |
75,589 |
||||||
| Total borrowed funds |
667,706 |
644,058 |
735,327 |
439,308 |
257,340 |
682,116 |
218,225 |
||||||
| Accrued interest and other liabilities |
106,288 |
106,747 |
111,515 |
115,477 |
126,961 |
108,164 |
129,763 |
||||||
| Total liabilities |
5,500,564 |
5,606,798 |
5,682,187 |
5,579,711 |
5,449,870 |
5,595,851 |
5,612,775 |
||||||
| SHAREHOLDERS' EQUITY |
|||||||||||||
| Common stock |
576,953 |
576,391 |
578,452 |
578,691 |
577,547 |
577,260 |
577,446 |
||||||
| Retained earnings |
329,518 |
329,795 |
330,879 |
331,414 |
330,368 |
330,059 |
329,011 |
||||||
| Accumulated other comprehensive loss |
(28,232) |
(19,204) |
(19,576) |
(19,612) |
(17,756) |
(22,369) |
(18,777) |
||||||
| Treasury stock, at cost |
(185,081) |
(183,178) |
(180,893) |
(176,120) |
(173,362) |
(183,066) |
(174,183) |
||||||
| Total shareholders' equity |
693,158 |
703,804 |
708,862 |
714,373 |
716,797 |
701,884 |
713,497 |
||||||
| Total liabilities and shareholders' equity |
$6,193,722 |
$6,310,602 |
$6,391,049 |
$6,294,084 |
$6,166,667 |
$6,297,735 |
$6,326,272 |
||||||
| FIRST FINANCIAL BANCORP. |
||||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||
| Quarterly Averages |
Year-to-Date Averages |
|||||||||||||||||||
| Sep. 30, 2013 |
Jun. 30, 2013 |
Sep. 30, 2012 |
Sep. 30, 2013 |
Sep. 30, 2012 |
||||||||||||||||
| Balance |
Yield |
Balance |
Yield |
Balance |
Yield |
Balance |
Yield |
Balance |
Yield |
|||||||||||
| Earning assets |
||||||||||||||||||||
| Investments: |
||||||||||||||||||||
| Investment securities |
$ 1,589,666 |
2.20% |
$ 1,705,219 |
2.08% |
$ 1,606,313 |
2.09% |
$ 1,710,310 |
2.08% |
$ 1,661,285 |
2.38% |
||||||||||
| Interest-bearing deposits with other banks |
4,010 |
0.49% |
13,890 |
0.32% |
11,390 |
0.45% |
6,989 |
0.38% |
47,260 |
0.29% |
||||||||||
| Gross loans(2) |
4,065,756 |
4.95% |
4,072,606 |
5.26% |
4,040,356 |
5.68% |
4,061,516 |
5.22% |
4,098,070 |
5.99% |
||||||||||
| Total earning assets |
5,659,432 |
4.17% |
5,791,715 |
4.32% |
5,658,059 |
4.65% |
5,778,815 |
4.29% |
5,806,615 |
4.91% |
||||||||||
| Nonearning assets |
||||||||||||||||||||
| Allowance for loan and lease losses |
(80,659) |
(92,033) |
(102,636) |
(89,347) |
(100,547) |
|||||||||||||||
| Cash and due from banks |
120,154 |
119,909 |
118,642 |
117,252 |
121,121 |
|||||||||||||||
| Accrued interest and other assets |
494,795 |
491,011 |
492,602 |
491,015 |
499,083 |
|||||||||||||||
| Total assets |
$ 6,193,722 |
$ 6,310,602 |
$ 6,166,667 |
$ 6,297,735 |
$ 6,326,272 |
|||||||||||||||
| Interest-bearing liabilities |
||||||||||||||||||||
| Deposits: |
||||||||||||||||||||
| Interest-bearing demand |
$ 1,098,524 |
0.12% |
$ 1,141,767 |
0.09% |
$ 1,164,111 |
0.13% |
$ 1,117,600 |
0.11% |
$ 1,213,876 |
0.13% |
||||||||||
| Savings |
1,608,351 |
0.09% |
1,639,834 |
0.10% |
1,588,708 |
0.12% |
1,622,105 |
0.10% |
1,627,068 |
0.13% |
||||||||||
| Time |
947,436 |
0.90% |
1,011,290 |
1.04% |
1,260,329 |
1.53% |
1,004,016 |
1.05% |
1,414,295 |
1.62% |
||||||||||
| Total interest-bearing deposits |
3,654,311 |
0.31% |
3,792,891 |
0.35% |
4,013,148 |
0.57% |
3,743,721 |
0.36% |
4,255,239 |
0.62% |
||||||||||
| Borrowed funds |
||||||||||||||||||||
| Short-term borrowings |
598,442 |
0.19% |
569,929 |
0.21% |
181,905 |
0.12% |
609,425 |
0.20% |
142,636 |
0.10% |
||||||||||
| Long-term debt |
69,264 |
3.53% |
74,129 |
3.54% |
75,435 |
3.55% |
72,691 |
3.54% |
75,589 |
3.59% |
||||||||||
| Total borrowed funds |
667,706 |
0.54% |
644,058 |
0.60% |
257,340 |
1.12% |
682,116 |
0.56% |
218,225 |
1.31% |
||||||||||
| Total interest-bearing liabilities |
4,322,017 |
0.35% |
4,436,949 |
0.38% |
4,270,488 |
0.60% |
4,425,837 |
0.39% |
4,473,464 |
0.66% |
||||||||||
| Noninterest-bearing liabilities |
||||||||||||||||||||
| Noninterest-bearing demand deposits |
1,072,259 |
1,063,102 |
1,052,421 |
1,061,850 |
1,009,548 |
|||||||||||||||
| Other liabilities |
106,288 |
106,747 |
126,961 |
108,164 |
129,763 |
|||||||||||||||
| Shareholders' equity |
693,158 |
703,804 |
716,797 |
701,884 |
713,497 |
|||||||||||||||
| Total liabilities & shareholders' equity |
$ 6,193,722 |
$ 6,310,602 |
$ 6,166,667 |
$ 6,297,735 |
$ 6,326,272 |
|||||||||||||||
| Net interest income(1) |
$ 55,772 |
$ 58,078 |
$ 59,846 |
$ 172,516 |
$ 191,365 |
|||||||||||||||
| Net interest spread(1) |
3.82% |
3.94% |
4.05% |
3.90% |
4.25% |
|||||||||||||||
| Net interest margin(1) |
3.91% |
4.02% |
4.21% |
3.99% |
4.40% |
|||||||||||||||
| (1) Not tax equivalent. |
||||||||||||||||||||
| (2) Loans held for sale, nonaccrual loans, covered loans, and |
||||||||||||||||||||
| FIRST FINANCIAL BANCORP. |
||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||
| Linked Qtr. Income Variance |
Comparable Qtr. Income Variance |
Year-to-Date Income Variance |
||||||||||||||||
| Rate |
Volume |
Total |
Rate |
Volume |
Total |
Rate |
Volume |
Total |
||||||||||
| Earning assets |
||||||||||||||||||
| Investment securities |
$ 491 |
$ (538) |
$ (47) |
$ 431 |
$ (92) |
$ 339 |
$ (3,764) |
$ 763 |
$ (3,001) |
|||||||||
| Interest-bearing deposits with other banks |
6 |
(12) |
(6) |
1 |
(9) |
(8) |
31 |
(115) |
(84) |
|||||||||
| Gross loans(2) |
(3,204) |
467 |
(2,737) |
(7,422) |
317 |
(7,105) |
(23,450) |
(1,429) |
(24,879) |
|||||||||
| Total earning assets |
(2,707) |
(83) |
(2,790) |
(6,990) |
216 |
(6,774) |
(27,183) |
(781) |
(27,964) |
|||||||||
| Interest-bearing liabilities |
||||||||||||||||||
| Total interest-bearing deposits |
$ (352) |
$ (76) |
$ (428) |
$ (2,594) |
(280) |
$ (2,874) |
$ (8,461) |
$ (1,366) |
$ (9,827) |
|||||||||
| Borrowed funds |
||||||||||||||||||
| Short-term borrowings |
(36) |
17 |
(19) |
33 |
199 |
232 |
112 |
705 |
817 |
|||||||||
| Long-term debt |
(1) |
(36) |
(37) |
(3) |
(55) |
(58) |
(28) |
(77) |
(105) |
|||||||||
| Total borrowed funds |
(37) |
(19) |
(56) |
30 |
144 |
174 |
84 |
628 |
712 |
|||||||||
| Total interest-bearing liabilities |
(389) |
(95) |
(484) |
(2,564) |
(136) |
(2,700) |
(8,377) |
(738) |
(9,115) |
|||||||||
| Net interest income(1) |
$ (2,318) |
$ 12 |
$ (2,306) |
$ (4,426) |
$ 352 |
$ (4,074) |
$ (18,806) |
$ (43) |
$ (18,849) |
|||||||||
| (1) Not tax equivalent. |
||||||||||||||||||
| (2) Loans held for sale, nonaccrual loans, covered loans, |
||||||||||||||||||
| FIRST FINANCIAL BANCORP. |
|||||||||||||
| (Dollars in thousands) |
|||||||||||||
| Nine months ended, |
|||||||||||||
| Sep. 30, |
Jun. 30, |
Mar. 31, |
Dec. 31, |
Sep. 30, |
Sep. 30, |
Sep. 30, |
|||||||
| 2013 |
2013 |
2013 |
2012 |
2012 |
2013 |
2012 |
|||||||
| ALLOWANCE FOR LOAN AND LEASE LOSS ACTIVITY |
|||||||||||||
| Balance at beginning of period |
$47,047 |
$48,306 |
$47,777 |
$49,192 |
$50,952 |
$47,777 |
$52,576 |
||||||
| Provision for uncovered loan and lease losses |
1,413 |
2,409 |
3,041 |
3,882 |
3,613 |
6,863 |
15,235 |
||||||
| Gross charge-offs |
|||||||||||||
| Commercial |
1,482 |
859 |
781 |
657 |
1,340 |
3,122 |
3,655 |
||||||
| Real estate - construction |
0 |
0 |
0 |
0 |
180 |
0 |
2,684 |
||||||
| Real estate - commercial |
2,174 |
2,044 |
995 |
2,221 |
2,736 |
5,213 |
8,791 |
||||||
| Real estate - residential |
249 |
326 |
223 |
454 |
565 |
798 |
1,360 |
||||||
| Installment |
99 |
97 |
100 |
267 |
134 |
296 |
310 |
||||||
| Home equity |
411 |
591 |
701 |
1,722 |
380 |
1,703 |
1,939 |
||||||
| Other |
696 |
277 |
410 |
227 |
469 |
1,383 |
1,025 |
||||||
| Total gross charge-offs |
5,111 |
4,194 |
3,210 |
5,548 |
5,804 |
12,515 |
19,764 |
||||||
| Recoveries |
|||||||||||||
| Commercial |
92 |
67 |
319 |
71 |
202 |
478 |
322 |
||||||
| Real estate - construction |
490 |
0 |
136 |
0 |
0 |
626 |
0 |
||||||
| Real estate - commercial |
1,264 |
57 |
39 |
46 |
38 |
1,360 |
219 |
||||||
| Real estate - residential |
98 |
5 |
4 |
3 |
33 |
107 |
70 |
||||||
| Installment |
57 |
110 |
77 |
53 |
72 |
244 |
270 |
||||||
| Home equity |
95 |
225 |
52 |
32 |
31 |
372 |
83 |
||||||
| Other |
69 |
62 |
71 |
46 |
55 |
202 |
181 |
||||||
| Total recoveries |
2,165 |
526 |
698 |
251 |
431 |
3,389 |
1,145 |
||||||
| Total net charge-offs |
2,946 |
3,668 |
2,512 |
5,297 |
5,373 |
9,126 |
18,619 |
||||||
| Ending allowance for uncovered loan and lease losses |
$45,514 |
$47,047 |
$48,306 |
$47,777 |
$49,192 |
$45,514 |
$49,192 |
||||||
| NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES (ANNUALIZED) |
|||||||||||||
| Commercial |
0.59% |
0.35% |
0.22% |
0.28% |
0.56% |
0.39% |
0.54% |
||||||
| Real estate - construction |
(2.09%) |
0.00% |
(0.68%) |
0.00% |
0.78% |
(0.94%) |
3.54% |
||||||
| Real estate - commercial |
0.24% |
0.55% |
0.27% |
0.63% |
0.81% |
0.36% |
0.89% |
||||||
| Real estate - residential |
0.17% |
0.38% |
0.27% |
0.58% |
0.72% |
0.28% |
0.59% |
||||||
| Installment |
0.33% |
(0.10%) |
0.17% |
1.46% |
0.41% |
0.13% |
0.08% |
||||||
| Home equity |
0.34% |
0.40% |
0.72% |
1.82% |
0.38% |
0.48% |
0.69% |
||||||
| Other |
2.27% |
0.90% |
1.63% |
0.94% |
2.51% |
1.63% |
1.99% |
||||||
| Total net charge-offs |
0.34% |
0.45% |
0.32% |
0.68% |
0.71% |
0.37% |
0.83% |
||||||
| COMPONENTS OF NONPERFORMING LOANS, NONPERFORMING ASSETS, AND UNDERPERFORMING ASSETS |
|||||||||||||
| Nonaccrual loans1 |
|||||||||||||
| Commercial |
$8,554 |
$12,925 |
$16,296 |
$15,893 |
$10,105 |
$8,554 |
$10,105 |
||||||
| Real estate - construction |
1,099 |
1,104 |
2,094 |
2,102 |
3,702 |
1,099 |
3,702 |
||||||
| Real estate - commercial |
35,549 |
35,055 |
33,871 |
34,977 |
38,763 |
35,549 |
38,763 |
||||||
| Real estate - residential |
9,346 |
9,369 |
8,295 |
7,869 |
7,070 |
9,346 |
7,070 |
||||||
| Installment |
421 |
249 |
341 |
452 |
284 |
421 |
284 |
||||||
| Home equity |
2,871 |
2,813 |
3,059 |
3,252 |
2,497 |
2,871 |
2,497 |
||||||
| Lease financing |
86 |
496 |
496 |
496 |
0 |
86 |
0 |
||||||
| Nonaccrual loans |
57,926 |
62,011 |
64,452 |
65,041 |
62,421 |
57,926 |
62,421 |
||||||
| Accruing troubled debt restructurings (TDRs) |
16,278 |
12,924 |
12,757 |
10,856 |
11,604 |
16,278 |
11,604 |
||||||
| Total nonperforming loans |
74,204 |
74,935 |
77,209 |
75,897 |
74,025 |
74,204 |
74,025 |
||||||
| Other real estate owned (OREO) |
11,804 |
11,798 |
11,993 |
12,526 |
13,912 |
11,804 |
13,912 |
||||||
| Total nonperforming assets |
86,008 |
86,733 |
89,202 |
88,423 |
87,937 |
86,008 |
87,937 |
||||||
| Accruing loans past due 90 days or more |
265 |
158 |
157 |
212 |
108 |
265 |
108 |
||||||
| Total underperforming assets |
$86,273 |
$86,891 |
$89,359 |
$88,635 |
$88,045 |
$86,273 |
$88,045 |
||||||
| Total classified assets |
$120,423 |
$129,832 |
$130,436 |
$129,040 |
$133,382 |
$120,423 |
$133,382 |
||||||
| CREDIT QUALITY RATIOS (excluding covered assets) |
|||||||||||||
| Allowance for loan and lease losses to |
|||||||||||||
| Nonaccrual loans |
78.57% |
75.87% |
74.95% |
73.46% |
78.81% |
78.57% |
78.81% |
||||||
| Nonperforming loans |
61.34% |
62.78% |
62.57% |
62.95% |
66.45% |
61.34% |
66.45% |
||||||
| Total ending loans |
1.33% |
1.39% |
1.49% |
1.50% |
1.60% |
1.33% |
1.60% |
||||||
| Nonperforming loans to total loans |
2.16% |
2.22% |
2.38% |
2.39% |
2.41% |
2.16% |
2.41% |
||||||
| Nonperforming assets to |
|||||||||||||
| Ending loans, plus OREO |
2.50% |
2.56% |
2.74% |
2.77% |
2.86% |
2.50% |
2.86% |
||||||
| Total assets |
1.38% |
1.38% |
1.40% |
1.36% |
1.41% |
1.38% |
1.41% |
||||||
| Nonperforming assets, excluding accruing TDRs to |
|||||||||||||
| Ending loans, plus OREO |
2.03% |
2.17% |
2.34% |
2.43% |
2.48% |
2.03% |
2.48% |
||||||
| Total assets |
1.12% |
1.18% |
1.20% |
1.19% |
1.22% |
1.12% |
1.22% |
||||||
| 1 Nonaccrual loans include nonaccrual TDRs of $13.0 million, $19.9 million, $22.3 million, $14.1 million, and $13.0 million as of September 30, 2013, June 30, 2013, March 31, 2013, December 31, 2012, and September 30, 2012, respectively. |
|||||||||||||
| FIRST FINANCIAL BANCORP. |
|||||||||||||
| (Dollars in thousands, except per share) |
|||||||||||||
| Nine months ended, |
|||||||||||||
| Sep. 30, |
Jun. 30, |
Mar. 31, |
Dec. 31, |
Sep. 30, |
Sep. 30, |
Sep. 30, |
|||||||
| 2013 |
2013 |
2013 |
2012 |
2012 |
2013 |
2012 |
|||||||
| PER COMMON SHARE |
|||||||||||||
| Market Price |
|||||||||||||
| High |
$16.47 |
$16.05 |
$16.07 |
$16.95 |
$17.86 |
$16.47 |
$18.28 |
||||||
| Low |
$14.89 |
$14.52 |
$14.46 |
$13.90 |
$15.58 |
$14.46 |
$14.88 |
||||||
| Close |
$15.17 |
$14.90 |
$16.05 |
$14.62 |
$16.91 |
$15.17 |
$16.91 |
||||||
| Average shares outstanding - basic |
57,201,390 |
57,291,994 |
57,439,029 |
57,800,988 |
57,976,943 |
57,309,934 |
57,902,102 |
||||||
| Average shares outstanding - diluted |
58,012,588 |
58,128,349 |
58,283,467 |
58,670,666 |
58,940,179 |
58,143,372 |
58,930,570 |
||||||
| Ending shares outstanding |
57,702,444 |
57,698,344 |
58,028,923 |
58,046,235 |
58,510,916 |
57,702,444 |
58,510,916 |
||||||
| REGULATORY CAPITAL |
Preliminary |
Preliminary |
|||||||||||
| Tier 1 Capital |
$631,846 |
$630,819 |
$632,020 |
$637,176 |
$641,828 |
$631,846 |
$641,828 |
||||||
| Tier 1 Ratio |
15.26% |
15.41% |
15.87% |
16.32% |
16.93% |
15.26% |
16.93% |
||||||
| Total Capital |
$684,363 |
$682,927 |
$682,974 |
$686,961 |
$690,312 |
$684,363 |
$690,312 |
||||||
| Total Capital Ratio |
16.53% |
16.68% |
17.15% |
17.60% |
18.21% |
16.53% |
18.21% |
||||||
| Total Capital in excess of minimum |
|||||||||||||
| requirement |
$353,118 |
$355,435 |
$364,376 |
$374,633 |
$387,115 |
$353,118 |
$387,115 |
||||||
| Total Risk-Weighted Assets |
$4,140,561 |
$4,093,644 |
$3,982,479 |
$3,904,096 |
$3,789,957 |
$4,140,561 |
$3,789,957 |
||||||
| Leverage Ratio |
10.29% |
10.12% |
10.00% |
10.25% |
10.54% |
10.29% |
10.54% |
||||||
| OTHER CAPITAL RATIOS |
|||||||||||||
| Ending shareholders' equity to ending |
|||||||||||||
| assets |
11.07% |
11.08% |
11.05% |
10.93% |
11.48% |
11.07% |
11.48% |
||||||
| Ending tangible shareholders' equity |
|||||||||||||
| to ending tangible assets |
9.60% |
9.62% |
9.60% |
9.50% |
9.99% |
9.60% |
9.99% |
||||||
| Average shareholders' equity to |
|||||||||||||
| average assets |
11.19% |
11.15% |
11.09% |
11.35% |
11.62% |
11.15% |
11.28% |
||||||
| Average tangible shareholders' equity |
|||||||||||||
| to average tangible assets |
9.71% |
9.70% |
9.65% |
9.88% |
10.12% |
9.69% |
9.80% |
||||||
| REPURCHASE PROGRAM(1) |
|||||||||||||
| Shares repurchased |
0 |
291,400 |
249,000 |
460,500 |
0 |
540,400 |
0 |
||||||
| Average share repurchase price |
N/A |
$15.47 |
$15.39 |
$14.78 |
N/A |
$15.43 |
N/A |
||||||
| Total cost of shares repurchased |
N/A |
$4,508 |
$3,831 |
$6,806 |
N/A |
$8,339 |
N/A |
||||||
| (1) Represents share repurchases as part of publicly announced plans. |
|||||||||||||
| N/A=Not applicable |
|||||||||||||
SUPPLEMENTAL INFORMATION ON COVERED ASSETS
ACCELERATED DISCOUNT ON LOAN PREPAYMENTS AND DISPOSITIONS
During the third quarter, First Financial recognized approximately $1.7 million in accelerated discount on covered loans, net of the corresponding adjustment on the FDIC indemnification asset. Accelerated discount is recognized when covered loans, which are recorded on the Company's balance sheet at an amount less than the unpaid principal balance, prepay at an amount greater than their recorded book value. Prepayments can occur through either customer driven payments before the maturity date or loan sales. The amount of discount attributable to the credit loss component of each loan varies and the recognized amount is offset by a related reduction in the FDIC indemnification asset. Accelerated discount recognized during the quarter resulted primarily from loan prepayments.
NET INTEREST MARGIN IMPACT
Net interest margin is affected by certain activity related to the covered loan portfolio. The majority of these loans are accounted for under FASB ASC Topic 310-30 and, as such, the Company is required to periodically update its forecast of expected cash flows from these loans. Impairment, as a result of a decrease in expected cash flows, is recognized as provision expense in the period it is measured and has no impact on net interest margin. Improvements in expected cash flows, in excess of any prior impairment, are recognized on a prospective basis through an upward adjustment to the yield earned on the portfolio. Impairment and improvement are both partially offset by the impact of changes in the value of the FDIC indemnification asset. Impairment is partially offset by an increase to the FDIC indemnification asset as a result of FDIC loss sharing income. Improvement, which is reflected as a higher yield, is partially offset by a lower yield earned on the FDIC indemnification asset until the next periodic valuation of the loans and the indemnification asset. The weighted average yield of the acquired loan portfolio may also be subject to change as loans with higher yields pay down more quickly or slowly than loans with lower yields.
The following table shows the estimated yield earned by the Company on its covered and uncovered loan portfolios and the FDIC indemnification asset for the three months ended September 30, 2013.
| Table VII |
For the Three Months Ended |
|||||
| September 30, 2013 |
||||||
| Average |
||||||
| (Dollars in thousands) |
Balance |
Yield |
||||
| Loans, excluding covered loans 1 |
$ 3,410,102 |
4.43% |
||||
| Covered loan portfolio accounted for under ASC Topic 310-302 |
511,356 |
10.03% |
||||
| Covered loan portfolio accounted for under ASC Topic 310-203 |
61,887 |
12.06% |
||||
| FDIC indemnification asset2 |
82,411 |
(10.54%) |
||||
| Total |
$ 4,065,756 |
4.95% |
||||
| Yield earned on total covered loans |
10.25% |
|||||
| Yield earned on total covered loans and FDIC indemnification asset |
7.64% |
|||||
| 1 Includes loans with loss share coverage removed |
||||||
| 2 Future yield adjustments subject to change based on required, periodic valuation procedures |
||||||
| 3 Includes loans with revolving privileges which are scoped out of ASC Topic 310-30 and certain loans |
||||||
| which the Company elected to treat under the cost recovery method of accounting |
||||||
COVERED ASSETS
The following table presents the covered loan portfolio as of September 30, 2013, June 30, 2013 and September 30, 2012.
| Table VIII |
|||||||||||||
| As of |
|||||||||||||
| September 30, 2013 |
June 30, 2013 |
September 30, 2012 |
|||||||||||
| Percent |
Percent |
Percent |
|||||||||||
| (Dollars in thousands) |
Balance |
of Total |
Balance |
of Total |
Balance |
of Total |
|||||||
| Commercial |
$ 52,276 |
10.1% |
$ 69,562 |
11.2% |
$ 121,745 |
14.7% |
|||||||
| Real estate - construction |
8,692 |
1.7% |
9,647 |
1.6% |
12,898 |
1.6% |
|||||||
| Real estate - commercial |
312,798 |
60.3% |
389,282 |
62.6% |
512,320 |
62.1% |
|||||||
| Real estate - residential |
84,418 |
16.3% |
90,707 |
14.6% |
105,113 |
12.7% |
|||||||
| Installment |
6,135 |
1.2% |
7,057 |
1.1% |
9,892 |
1.2% |
|||||||
| Home equity |
51,692 |
10.0% |
53,214 |
8.6% |
60,502 |
7.3% |
|||||||
| Other |
2,513 |
0.5% |
2,796 |
0.4% |
3,045 |
0.4% |
|||||||
| Total |
$ 518,524 |
100.0% |
$ 622,265 |
100.0% |
$ 825,515 |
100.0% |
|||||||
As of September 30, 2013, 13.1% of the Company's total loans were covered loans. During the third quarter, the total balance of covered loans decreased $103.7 million, or 16.7%, compared to the prior quarter. Of this decline, $58.2 million consisted of covered loans classified as likely to exit and resulted from the successful execution of resolution strategies. As required under the loss sharing agreements, First Financial must file monthly certifications with the FDIC on single-family residential loans and quarterly certifications on all other loans. The payment of claims is subject to the FDIC's review for compliance with the loss sharing agreements and to date, all certifications have been filed in a timely manner and without significant issues.
Covered OREO increased $5.3 million, or 23.5%, during the third quarter to $27.7 million as of September 30, 2013 as additions of $8.7 million exceeded resolutions and valuation adjustments of $3.4 million. Additionally, the Company recognized a net loss on sales of covered OREO of $0.2 million during the quarter. The net loss was offset by a corresponding increase in FDIC loss sharing income of approximately 80% of the net loss recognized.
ALLOWANCE FOR LOAN AND LEASE LOSSES - COVERED
Under the applicable accounting guidance, the allowance for loan losses related to covered loans is a result of impairment identified in ongoing valuation procedures and is generally recognized in the current period as provision expense. However, if improvement is noted in a loan pool that had previously experienced impairment, the amount of improvement is recognized as a reduction to the applicable period's provision expense. Additional improvement beyond previously recorded impairment is reflected as a yield adjustment on a prospective basis. The timing inherent in this accounting treatment may result in earnings volatility in future periods.
The following table presents activity in the allowance for loan losses related to covered loans for the three months ended September 30, 2013 and for the trailing three quarters.
| Table IX |
|||||||||
| As of or for the Three Months Ended |
|||||||||
| September 30, |
June 30, |
March 31, |
December 31, |
||||||
| (Dollars in thousands) |
2013 |
2013 |
2013 |
2012 |
|||||
| Balance at beginning of period |
$ 32,961 |
$ 45,496 |
$ 45,190 |
$ 48,895 |
|||||
| Provision for loan and lease losses - covered |
5,293 |
(8,283) |
9,042 |
5,283 |
|||||
| Total gross charge-offs |
(21,009) |
(4,681) |
(9,684) |
(9,568) |
|||||
| Total recoveries |
6,014 |
429 |
948 |
580 |
|||||
| Total net charge-offs |
(14,995) |
(4,252) |
(8,736) |
(8,988) |
|||||
| Ending allowance for loan and lease losses - covered |
$ 23,259 |
$ 32,961 |
$ 45,496 |
$ 45,190 |
|||||
As a percentage of total covered loans, the allowance for loan losses totaled 4.49% as of September 30, 2013 compared to 5.30% as of June 30, 2013.
Net charge-offs on covered loans during the third quarter were $15.0 million compared to $4.3 million for the second quarter, an increase of $10.7 million, or 252.7%. This increase was driven primarily by the resolution strategies related to covered loans discussed above. During the third quarter, the Company recognized provision expense of $5.3 million compared to a negative provision expense of $8.3 million for the linked quarter. The difference between provision expense and net charge-offs primarily relates to the quarterly re-estimation of cash flow expectations required under FASB ASC Topic 310-30.
In addition to the provision expense, the Company incurred loss sharing and covered asset expenses of $1.7 million, consisting primarily of credit expenses, and net losses related to covered OREO of $0.2 million. FDIC loss sharing income of $5.6 million for the quarter reflects the quarterly re-estimation of expected cash flows as well as the corresponding offset related to the net losses on sales of covered OREO and loss sharing and covered asset expenses.
SOURCE First Financial Bancorp
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