Notes To Consolidated Financial Statements
status are carried at the lower of cost or fair value with any difference charged to the allowance for loan and lease losses. Any subsequent change in the carrying value of transferred loans, not to exceed original cost, is recorded in the Consolidated Statements of Income.
Loans and leases, excluding purchased impaired loans.
Loans and leases for which First Financial has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are classified in the Consolidated Balance Sheets as loans and leases. Except for loans which are subject to fair value requirements, loans and leases are carried at the principal amount outstanding, net of unamortized deferred loan origination fees and costs, and net of unearned income. Loan origination and commitment fees received, as well as certain direct loan origination costs paid, are deferred, and the net amount is amortized as an adjustment to the related loan's yield. Interest income is recorded on an accrual basis. When a loan is classified as nonaccrual, the accrual of interest income is discontinued and previously accrued, but unpaid interest is reversed. Any payments received while a loan is classified as nonaccrual are applied as a reduction to the carrying value of the loan. A loan may return to accrual status if collection of future principal and interest payments is no longer doubtful.
Acquired loans.
Acquired loans are recorded at their estimated fair value at the time of acquisition. Estimated fair values for acquired loans are based on a discounted cash flow methodology that considers various factors including the type of loan and related collateral, classification status, interest rate, term of loan, whether or not the loan was amortizing and a discount rate reflecting the Company's assessment of risk inherent in the cash flow estimates. Acquired loans are grouped together according to similar characteristics and treated in the aggregate when applying various valuation techniques. Certain loans acquired in Federal Deposit Insurance Corporation (FDIC)-assisted transactions were initially covered under loss sharing agreements and are referred to as covered loans during indemnification period. Subsequent to the indemnification period, they are referred to as formerly covered loans.
First Financial evaluates acquired loans for impairment in accordance with the provisions of FASB Accounting Standards Codification (ASC) Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Acquired loans with evidence of credit deterioration since origination are accounted for under FASB ASC Topic 310-30 and are referred to as purchased impaired loans. Interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows (accretable difference) is recognized on all purchased impaired loans.
For purposes of applying the guidance under FASB ASC Topic 310-30, First Financial groups acquired loans into pools based on common risk characteristics. Expected cash flows are re-estimated periodically for all purchased impaired loans. The cash flows expected to be collected are estimated based upon the expected remaining life of the underlying loans, which includes the effects of estimated prepayments. Generally, a decline in expected cash flows for a pool of loans is referred to as impairment and recorded as provision expense on a discounted basis during the period (see "Allowance for loan and lease losses" below). Improvement in expected cash flows for a pool of loans, once any previously recorded impairment is recaptured, is recognized prospectively as an adjustment to the yield on the loans in the pool. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change.
For acquired loans that prepay, noninterest income may be recorded related to the accelerated recognition of the remaining purchase discount that would have been recognized over the life of the loan had it not prepaid, offset by a related adjustment to the FDIC indemnification asset if the loan is still covered under FDIC loss sharing protection. This scenario can occur either through a loan sale or ordinary prepayments that are typical in a loan portfolio.
Acquired loans outside the scope of FASB ASC Topic 310-30 are accounted for under FASB ASC Topic 310-20, Receivables-Nonrefundable Fees and Costs. Discounts created when the loans were recorded at their estimated fair values at acquisition are amortized over the remaining term of the loan as an adjustment to the related loan's yield. The accrual of interest income is discontinued when the collection of a loan or interest, in whole or in part, is doubtful.
Allowance for loan and lease losses.
For each reporting period, management maintains the allowance for loan and lease losses (ALLL or the allowance) at a level that it considers sufficient to absorb probable loan and lease losses inherent in the portfolio. Management determines the adequacy of the allowance based on historical loss experience as well as other significant factors such as composition of the portfolio, economic conditions, geographic footprint, the results of periodic internal and external evaluations of delinquent, nonaccrual and classified loans and any other adverse situations that may affect a specific borrower's ability to repay (including the timing of future payments). This evaluation is inherently subjective as it requires utilizing material estimates that may be susceptible to significant change.
Management's determination of the adequacy of the allowance is based on an assessment of the probable loan and lease losses inherent in the portfolio given the conditions at the time. The allowance is generally increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. Loans are charged off when management
58
First Financial Bancorp
2014 Annual Report
believes that the collection of the principal amount owed in full, either through payments from the borrower or from the liquidation of collateral, is unlikely.
In the commercial portfolio, which includes time and demand notes, tax-exempt loans, construction, commercial real estate and mezzanine loans, loan relationships greater than
$250,000
that are considered impaired, or designated as a troubled debt restructuring (TDR), are evaluated to determine the need for a specific allowance based on the borrower's overall financial condition, resources, payment record, guarantor support and the realizable value of any collateral.
The allowance for non-impaired commercial loans and impaired commercial loan relationships less than
$250,000
includes a process of estimating the probable losses inherent in the portfolio by loan type, based on First Financial's internal system of credit risk ratings and historical loss data. These estimates may also be adjusted for management's estimate of probable losses dependent upon trends in the values of the underlying collateral, delinquent and nonaccrual loans, prevailing economic conditions, changes in lending strategies and other influencing factors.
Consumer loans are generally evaluated by loan type, as these loans exhibit homogeneous characteristics. The allowance for consumer loans, which includes residential real estate, installment, home equity, credit card loans and overdrafts, is established by estimating losses inherent in each particular category of consumer loans. The estimate of losses is primarily based on historical loss rates for each category, as well as trends in delinquent and nonaccrual loans, prevailing economic conditions and other significant influencing factors. Consumer loans greater than
$100,000
classified as TDRs are individually evaluated to determine an appropriate allowance.
For loans purchased impaired, expected cash flows are re-estimated periodically with declines in gross expected cash flows at the pool level recorded as provision expense during the period. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change. The related, estimated reimbursement for loan losses due from the FDIC under loss sharing agreements, if applicable, is recorded as both FDIC loss sharing income and an increase to the FDIC indemnification asset.
Reserve for unfunded commitments
. First Financial maintains a reserve that it considers sufficient to absorb probable losses inherent in standby letters of credit and outstanding loan commitments and is included in Accrued interest and other liabilities on the Consolidated Balance Sheets. The determination of the adequacy of the reserve is based upon an evaluation of the unfunded credit facilities, including consideration of historical commitment utilization experience, credit risk rating and historical loss rates, consistent with the allowance for loan and lease losses methodology previously discussed. Adjustments to the reserve for unfunded commitments are included in Other noninterest expense in the Consolidated Statements of Income.
FDIC indemnification asset.
The FDIC indemnification asset results from the loss sharing agreements entered into in conjunction with First Financial's FDIC-assisted transactions, and is measured separately from the related assets covered by loss sharing agreements with the FDIC (covered assets) as it is not contractually embedded in those assets and is not transferable should First Financial choose to dispose of the covered assets. The FDIC indemnification asset represents expected reimbursements from the FDIC for losses on covered assets. Pursuant to the terms of the loss sharing agreements, covered assets are subject to stated loss thresholds whereby the FDIC will reimburse First Financial for
80%
of losses up to the stated loss thresholds, and
95%
of losses in excess of the thresholds. The FDIC indemnification asset was recorded at its estimated fair value at the time of the FDIC-assisted transactions. Fair values were estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses and the applicable loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing of the loss sharing reimbursement from the FDIC.
The accounting for FDIC indemnification asset is closely related to the accounting for the underlying, indemnified assets as well as on-going assessment of the collectibility of the assets. First Financial re-estimates the expected indemnification asset cash flows in conjunction with the periodic re-estimation of cash flows on covered loans accounted for under FASB ASC Topic 310-30. Improvements in cash flow expectations on covered loans generally result in a related decline in the expected indemnification cash flows and are reflected as a yield adjustment on the indemnification asset. Declines in cash flow expectations on covered loans generally result in an increase in expected indemnification cash flows and are reflected as both FDIC loss sharing income and an increase to the indemnification asset. The collectibility assessment includes evaluation of claims activity with the FDIC, adjustments to the indemnification asset from the accelerated discount on covered loans, the yield on the indemnification asset in relation to the yield on the underlying covered loans and the remaining term of the loss sharing agreements. Changes in the assessed collectibility of the indemnification asset, if any, are recognized as FDIC indemnification impairment in Noninterest expenses in the Consolidated Statements of Income.
First Financial Bancorp
2014 Annual Report
59
Notes To Consolidated Financial Statements
Premises and equipment.
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are principally computed on the straight-line method over the estimated useful lives of the assets. Useful lives generally range from
10
to
40
years for building and building improvements;
3
to
10
years for furniture, fixtures and equipment; and
3
to
5
years for software, hardware and data handling equipment. Land improvements are depreciated over
20
years and leasehold improvements are depreciated over the lesser of the base term of the respective lease or the useful life of the asset. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Maintenance and repairs are charged to operations as incurred.
Goodwill and other indefinite lived intangible assets.
Under accounting for business combinations, the net assets of entities acquired by First Financial are recorded at their estimated fair value at the date of acquisition. The excess cost of the acquisition over the fair value of net assets acquired is recorded as goodwill. Goodwill and intangible assets deemed to have indefinite lives, if any, are not amortized, but are subject to annual impairment tests. First Financial performs its annual impairment test effective October 1, or whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. First Financial reviews goodwill for impairment using both income and asset-based approaches.
Core deposit intangibles.
Core deposit intangibles represent the estimated value of acquired relationships with deposit customers. The estimated fair value of core deposit intangibles are based on a discounted cash flow methodology that gives appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits. Core deposit intangibles are amortized on an accelerated basis over their useful lives.
Other real estate owned (OREO).
OREO represents properties acquired by the Company primarily through the loan foreclosure or repossession process, or other resolution activity that results in partial or total satisfaction of problem loans. OREO properties are recorded at the lower of cost or fair value, less estimated disposal costs (net realizable value) upon acquisition. Losses arising at the time of acquisition of such properties are charged against the allowance for loan and lease losses. Management performs periodic valuations to assess the adequacy of the recorded OREO balances and subsequent write-downs in the carrying value of OREO properties are expensed as incurred. Improvements to OREO properties may be capitalized if the improvements contribute to the overall value of the property, but may not be capitalized in excess of the net realizable value of the property. When management disposes of an OREO property, any gains or losses realized at the time of disposal are reflected in the Consolidated Statements of Income.
Certain OREO properties are subject to loss sharing agreements whereby the FDIC will reimburse First Financial for
80%
of losses up to the stated loss thresholds, and
95%
of losses in excess of the thresholds. When management disposes of an OREO property subject to loss sharing agreements, any gains or losses realized at the time of disposal are reflected in the Consolidated Statements of Income, and, in general, are substantially offset by a related adjustment to the FDIC indemnification asset.
Income taxes.
First Financial and its subsidiaries file a consolidated federal income tax return. Each subsidiary provides for income taxes on a separate return basis, and remits to First Financial amounts determined to be currently payable. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Interest and penalties on income tax assessments or income tax refunds are recognized in the Consolidated Financial Statements as a component of noninterest expense.
Pension.
First Financial sponsors a non-contributory defined benefit pension plan covering substantially all employees. The measurement of the accrued benefit liability and the annual pension expense involves actuarial and economic assumptions. The assumptions used in pension accounting include those related to the discount rates, the expected return on plan assets and the rate of compensation increase.
Derivative instruments.
First Financial accounts for its derivative financial instruments in accordance with FASB ASC Topic 815, Derivatives and Hedging. FASB ASC Topic 815 requires all derivative instruments to be carried at fair value on the balance sheet.
The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
60
First Financial Bancorp
2014 Annual Report
First Financial utilizes interest rate swaps designated as fair value hedges as a means to offer commercial borrowers products that meet their needs, but are also designed to achieve First Financial’s desired interest rate risk profile. First Financial utilizes interest rate swaps designated as cash flow hedges to manage the variability of cash flows, primarily net interest income, attributable to changes in interest rates.
Back to back swaps - First Financial enters into swap agreements with commercial borrowers and simultaneously enters into offsetting swap agreements, with substantially matching terms, with institutional counterparties. These matched interest rate swap agreements generally involve the receipt by First Financial of floating rate amounts from the counterparties in exchange for payments to these counterparties by First Financial of fixed rate amounts received from commercial borrowers over the life of the agreements. This results in First Financial’s loan customers receiving fixed rate funding, while providing First Financial with a floating rate asset.
First Financial's matched interest rate swaps qualify as derivatives, but are not designated as hedging instruments. The net interest receivable or payable on matched interest rate swaps is accrued and recognized as an adjustment to interest income. The fair values of back to back swaps are included within Accrued interest and other assets and Accrued interest and other liabilities on the Consolidated Balance Sheets.
Pay fixed interest rate swaps - For unmatched, pay fixed interest rate swaps, which qualify for hedge accounting, the corresponding fair-value adjustment is included on the Consolidated Balance Sheets in the carrying value of the hedged item. The net interest receivable or payable on unmatched interest rate swaps is accrued and recognized as an adjustment to the interest income of the hedged item. Gains and losses from derivatives not considered effective in hedging the change in fair value of the hedged item, if any, are recognized in income immediately.
Cash flow hedges - The net interest receivable or payable on an interest rate swap designated as a cash flow hedge is accrued and recognized as an adjustment to interest income or interest expense, while the fair value is included within Accrued interest and other assets or Accrued interest and other liabilities on the Consolidated Balance Sheets. Changes in the fair value of interest rate swaps designated as cash flow hedges are included in accumulated other comprehensive income (loss). Gains and losses from derivatives not considered effective in hedging the cash flows related to the hedged items, if any, are recognized in income immediately.
Like other financial instruments, derivatives contain an element of credit risk, which is the possibility that First Financial will incur a loss because a counterparty fails to meet its contractual obligations. Generally, the credit risk associated with interest rate swaps is significantly less than the notional values associated with these instruments. The notional values represent contractual balances on which the calculations of amounts to be exchanged are based. First Financial manages this credit risk through counterparty credit policies.
Stock-based compensation.
First Financial grants stock-based awards, including restricted stock awards for and options to purchase the Company’s common stock. Stock option grants are for a fixed number of shares to employees and directors with an exercise price equal to the fair value of the shares at the date of grant. Stock-based compensation expense is recognized in the Consolidated Statements of Income on a straight-line basis over the vesting period. The amortization of stock-based compensation expense reflects estimated forfeitures, adjusted for actual forfeiture experience. As compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise. At the time stock-based awards are exercised, canceled or expire, First Financial may be required to recognize an adjustment to tax expense.
Earnings per share.
Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net earnings per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding, unvested shares and dilutive common stock equivalents outstanding during the period. Common stock equivalents, which consist of common stock issuable under the assumed exercise of stock options granted under First Financial's stock-based compensation plans and the assumed conversion of common stock warrants, are calculated using the treasury stock method.
Cash and due from banks.
Cash and due from banks consist of currency, coin and cash items due from banks. Cash items due from banks include noninterest bearing deposits held at other banks.
Segments and related information.
Consistent with prior years, management continued to review operating performance and make decisions as one banking segment in
2014
.
First Financial Bancorp
2014 Annual Report
61
Notes To Consolidated Financial Statements
2. Recently Adopted and Issued Accounting Standards
In January 2014, the FASB issued an update (ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects) that permits First Financial to make an accounting policy election to account for its investments in qualified affordable housing projects using a proportional amortization method if certain conditions are met. Under the proportional amortization method, First Financial would amortize the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the income statement as a component of income tax expense. The amended guidance requires disclosure of the nature of First Financial’s investments in qualified affordable housing projects, and the effect of the measurement of the investments in qualified affordable housing projects and the related tax credits on First Financial’s financial position and results of operation. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014, with early adoption permitted. First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements, but may impact the
presentation of investments in qualified affordable housing projects.
In January 2014, the FASB issued an update (ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure) which clarifies when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be de-recognized and the real estate property recognized
. The provisions of ASU 2014-04 become effective for First Financial for the interim reporting period ending March 31, 2015. First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.
In April 2014, the FASB issued an update (ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity) which redefines what constitutes a discontinued operation. Under the revised standard, a discontinued operation is a component of an entity or group of components that has been disposed of by sale, disposed of other than by sale or is classified as held for sale, that represents a strategic shift that has or will have a major effect on an entity’s operations and financial results or an acquired business or nonprofit activity that is classified as held for sale on the date of the acquisition. A strategic shift that has or will have a major effect on an entity’s operations and financial results could include the disposal of a major line of business, a major geographic area, a major equity method investment or other major parts of an entity. The new guidance eliminates the criteria prohibiting an entity from reporting a discontinued operation if it has certain continuing cash flows or involvement with the component after the disposal and requires additional disclosures for discontinued operations and new disclosures for individually material disposal transactions that do not meet the definition of a discontinued operation. The provisions of ASU 2014-08 became effective for all interim and annual periods subsequent to January 1, 2015.
First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.
In May 2014, the FASB issued an update (ASU 2014-09, Revenue from Contracts with Customers) which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under the revised standard, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. Certain of the ASU’s provisions also apply to transfers of nonfinancial assets, including in-substance nonfinancial assets that are not an output of an entity’s ordinary activities, such as sales of property, plant, and equipment; real estate; or intangible assets. The ASU also requires significantly expanded disclosures about revenue recognition. The provisions of ASU 2014-09 become effective for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted. First Financial is currently evaluating the impact of this update on its Consolidated Financial Statements.
In June 2014, the FASB issued an update (ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures) that requires repurchase-to-maturity transactions to be accounted for as secured borrowings rather than as sales with a forward repurchase commitment and eliminates current guidance on repurchase financings. The ASU requires separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty. If the derecognition criteria are met, the initial transfer will generally be accounted for as a sale and the repurchase agreement will generally be accounted for as a secured borrowing. The ASU requires new disclosures for repurchase agreements, securities lending transactions and repurchase-to-maturity transactions that are accounted for as secured borrowings. The ASU also requires new disclosures for transfers of financial assets that are accounted for as sales that involve an agreement with the transferee entered into in contemplation of the initial transfer that result in the transferor retaining substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The provisions of ASU 2014-11 become effective for all interim and annual periods subsequent to December 15,
62
First Financial Bancorp
2014 Annual Report
2014. Early adoption is prohibited.
First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.
In August 2014, the FASB issued an update (ASU 2014-14, Receivables - Troubled Debt Restructurings by Creditors: Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure) that requires a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met: a) the loan has a government guarantee that is not separable from the loan before foreclosure, b) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim and c) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The amendments in this ASU become effective for all interim and annual periods subsequent to December 15, 2014. First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.
In August 2014, the FASB issued an update (ASU 2014-15, Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern) that requires management perform a going concern evaluation similar to the auditor’s evaluation required by standards issued by the PCAOB and the AICPA. The ASU requires management to evaluate relevant conditions, events and certain management plans that are known or reasonably knowable as of the evaluation date when determining whether substantial doubt about an entity’s ability to continue as a going concern exists for both annual and interim reporting periods. If management concludes that substantial doubt about an entity’s ability to continue as a going concern, the notes to the financial statements are required to include a statement that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The provisions in this ASU become effective for interim and annual periods ending after December 15, 2016. Early adoption is permitted. First Financial does not anticipate this update will have a material impact on its Consolidated Financial Statements.
3. Restrictions On Cash And Dividends
First Financial Bank is required to maintain average reserve balances either in the form of vault cash or reserves held on deposit with the Federal Reserve Bank, Federal Home Loan Bank or in pass-through reserve accounts with correspondent banks. The average amounts of these required reserve balances, based upon the average level of First Financial's transaction accounts for
2014
and
2013
were approximately
$56.2 million
and
$43.1 million
, respectively. Additionally, First Financial had
$2.0 million
of cash acquired in conjunction with an FDIC-assisted transaction that was restricted for withdrawal and usage as of December 31,
2013
.
Dividends paid by First Financial to its shareholders are principally funded through dividends paid to the Company by its subsidiaries. However, certain restrictions exist regarding the ability of bank subsidiaries to transfer funds to First Financial in the form of cash dividends, loans or advances. The approval of the subsidiaries' respective primary federal regulators is required for First Financial's subsidiaries to pay dividends in excess of the regulatory limit, which is equal to the net income of the current year through the dividend date, combined with its retained net income from the two preceding years. As of
December 31, 2014
, First Financial's subsidiaries had retained earnings of
$383.7 million
of which
$35.1 million
was available for distribution to First Financial without prior regulatory approval.
First Financial Bancorp
2014 Annual Report
63
Notes To Consolidated Financial Statements
4. Investment Securities
The following is a summary of held-to-maturity and available-for-sale investment securities as of
December 31, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
Available-for-sale
|
|
(Dollars in thousands)
|
|
Amortized
cost
|
|
Unrealized
gain
|
|
Unrealized
loss
|
|
Market
value
|
|
Amortized
cost
|
|
Unrealized
gain
|
|
Unrealized
loss
|
|
Market
value
|
|
U.S. Treasuries
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
97
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
97
|
|
|
Securities of U.S. government agencies and corporations
|
|
17,570
|
|
|
24
|
|
|
(23
|
)
|
|
17,571
|
|
|
11,814
|
|
|
67
|
|
|
(1
|
)
|
|
11,880
|
|
|
Mortgage-backed securities
|
|
801,465
|
|
|
7,813
|
|
|
(2,064
|
)
|
|
807,214
|
|
|
611,497
|
|
|
4,462
|
|
|
(13,211
|
)
|
|
602,748
|
|
|
Obligations of state and other political subdivisions
|
|
25,660
|
|
|
485
|
|
|
(193
|
)
|
|
25,952
|
|
|
54,132
|
|
|
784
|
|
|
(921
|
)
|
|
53,995
|
|
|
Asset-backed securities
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
74,784
|
|
|
155
|
|
|
(103
|
)
|
|
74,836
|
|
|
Other securities
|
|
23,301
|
|
|
790
|
|
|
(79
|
)
|
|
24,012
|
|
|
97,180
|
|
|
1,292
|
|
|
(1,560
|
)
|
|
96,912
|
|
|
Total
|
|
$
|
867,996
|
|
|
$
|
9,112
|
|
|
$
|
(2,359
|
)
|
|
$
|
874,749
|
|
|
$
|
849,504
|
|
|
$
|
6,760
|
|
|
$
|
(15,796
|
)
|
|
$
|
840,468
|
|
The following is a summary of held-to-maturity and available-for-sale investment securities as of
December 31, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
Available-for-sale
|
|
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Market
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Market
|
|
(Dollars in thousands)
|
|
cost
|
|
gain
|
|
loss
|
|
value
|
|
cost
|
|
gain
|
|
loss
|
|
value
|
|
U.S. Treasuries
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
97
|
|
|
$
|
0
|
|
|
$
|
(7
|
)
|
|
$
|
90
|
|
|
Securities of U.S. government agencies and corporations
|
|
18,981
|
|
|
0
|
|
|
(791
|
)
|
|
18,190
|
|
|
9,980
|
|
|
0
|
|
|
(404
|
)
|
|
9,576
|
|
|
Mortgage-backed securities
|
|
775,025
|
|
|
1,337
|
|
|
(12,229
|
)
|
|
764,133
|
|
|
678,267
|
|
|
5,372
|
|
|
(28,593
|
)
|
|
655,046
|
|
|
Obligations of state and other political subdivisions
|
|
25,788
|
|
|
152
|
|
|
(1,039
|
)
|
|
24,901
|
|
|
33,410
|
|
|
10
|
|
|
(3,097
|
)
|
|
30,323
|
|
|
Asset-backed securities
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
114,209
|
|
|
1
|
|
|
(616
|
)
|
|
113,594
|
|
|
Other securities
|
|
17,478
|
|
|
283
|
|
|
0
|
|
|
17,761
|
|
|
109,089
|
|
|
262
|
|
|
(4,379
|
)
|
|
104,972
|
|
|
Total
|
|
$
|
837,272
|
|
|
$
|
1,772
|
|
|
$
|
(14,059
|
)
|
|
$
|
824,985
|
|
|
$
|
945,052
|
|
|
$
|
5,645
|
|
|
$
|
(37,096
|
)
|
|
$
|
913,601
|
|
During the year ended
December 31, 2014
, First Financial sold available-for-sale securities with a fair value of
$166.3 million
at the date of sale and recorded a
$0.1 million
pre-tax gain. The investment gain after taxes was
$44 thousand
for the year ended
December 31, 2014
.
During the year ended
December 31, 2013
, First Financial sold available-for-sale securities with a fair value of
$91.0 million
at the date of sale and recorded a
$1.7 million
net pre-tax gain. The net investment gain after taxes was
$1.1 million
for the year ended
December 31, 2013
.
During the year ended
December 31, 2012
, First Financial sold available-for-sale securities with a fair value of
$236.7 million
at the date of sale and recorded a
$3.6 million
net pre-tax gain. The net investment gain after taxes was
$2.3 million
for the year ended
December 31, 2012
.
The carrying value of investment securities pledged as collateral to secure public deposits, repurchase agreements and for other purposes as required by law totaled
$1.1 billion
at
December 31, 2014
and
December 31, 2013
, respectively.
64
First Financial Bancorp
2014 Annual Report
The following table provides a summary of investment securities by estimated weighted average life as of
December 31, 2014
. Estimated lives on certain investment securities may differ from contractual maturities as issuers may have the right to call or prepay obligations with or without call or prepayment penalties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
Available-for-sale
|
|
(Dollars in thousands)
|
Amortized
cost
|
|
Market
value
|
|
Amortized
cost
|
|
Market
value
|
|
Due in one year or less
|
$
|
3,680
|
|
|
$
|
3,745
|
|
|
$
|
23,090
|
|
|
$
|
23,137
|
|
|
Due after one year through five years
|
419,301
|
|
|
420,714
|
|
|
355,360
|
|
|
354,978
|
|
|
Due after five years through ten years
|
334,746
|
|
|
338,620
|
|
|
190,672
|
|
|
186,471
|
|
|
Due after ten years
|
110,269
|
|
|
111,670
|
|
|
280,382
|
|
|
275,882
|
|
|
Total
|
$
|
867,996
|
|
|
$
|
874,749
|
|
|
$
|
849,504
|
|
|
$
|
840,468
|
|
The following tables provide the fair value and gross unrealized losses on investment securities in an unrealized loss position, aggregated by investment category and the length of time the individual securities have been in a continuous unrealized loss position:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
(Dollars in thousands)
|
|
Fair
value
|
|
Unrealized
loss
|
|
Fair
value
|
|
Unrealized
loss
|
|
Fair
value
|
|
Unrealized
loss
|
|
Securities of U.S. government agencies and corporations
|
|
$
|
493
|
|
|
$
|
(1
|
)
|
|
$
|
97
|
|
|
$
|
0
|
|
|
$
|
590
|
|
|
$
|
(1
|
)
|
|
Mortgage-backed securities
|
|
119,641
|
|
|
(420
|
)
|
|
428,486
|
|
|
(13,780
|
)
|
|
548,127
|
|
|
(14,200
|
)
|
|
Obligations of state and other political subdivisions
|
|
12,746
|
|
|
(126
|
)
|
|
37,516
|
|
|
(1,014
|
)
|
|
50,262
|
|
|
(1,140
|
)
|
|
Asset-backed securities
|
|
32,045
|
|
|
(103
|
)
|
|
0
|
|
|
0
|
|
|
32,045
|
|
|
(103
|
)
|
|
Other securities
|
|
12,831
|
|
|
(317
|
)
|
|
30,005
|
|
|
(1,296
|
)
|
|
42,836
|
|
|
(1,613
|
)
|
|
Total
|
|
$
|
177,756
|
|
|
$
|
(967
|
)
|
|
$
|
496,104
|
|
|
$
|
(16,090
|
)
|
|
$
|
673,860
|
|
|
$
|
(17,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
(Dollars in thousands)
|
|
value
|
|
loss
|
|
value
|
|
loss
|
|
value
|
|
loss
|
|
Securities of U.S. government agencies and corporations
|
|
$
|
27,851
|
|
|
$
|
(970
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
27,851
|
|
|
$
|
(970
|
)
|
|
Mortgage-backed securities
|
|
966,718
|
|
|
(32,432
|
)
|
|
108,929
|
|
|
(6,101
|
)
|
|
1,075,647
|
|
|
(38,533
|
)
|
|
Obligations of state and other political subdivisions
|
|
66,502
|
|
|
(5,294
|
)
|
|
1,935
|
|
|
(46
|
)
|
|
68,437
|
|
|
(5,340
|
)
|
|
Asset-backed securities
|
|
93,355
|
|
|
(616
|
)
|
|
0
|
|
|
0
|
|
|
93,355
|
|
|
(616
|
)
|
|
Other securities
|
|
54,866
|
|
|
(2,142
|
)
|
|
7,798
|
|
|
(561
|
)
|
|
62,664
|
|
|
(2,703
|
)
|
|
Total
|
|
$
|
1,209,292
|
|
|
$
|
(41,454
|
)
|
|
$
|
118,662
|
|
|
$
|
(6,708
|
)
|
|
$
|
1,327,954
|
|
|
$
|
(48,162
|
)
|
Gains and losses on debt securities are generally due to higher current market yields relative to the yields of the debt securities at their amortized cost. All securities with unrealized losses are reviewed quarterly to determine if any impairment is considered other than temporary, requiring a write-down to fair value. First Financial considers the percentage loss on a security, duration of the loss, average life or duration of the security, credit rating of the security and payment performance, as well as the Company’s intent and ability to hold the security to maturity when determining whether any impairment is other than temporary. At this time First Financial does not intend to sell, and it is not more likely than not that the Company will be required to sell debt securities temporarily impaired prior to maturity or recovery of the recorded value. First Financial had no other than temporary impairment related to its investment securities portfolio as of
December 31, 2014
or 2013.
First Financial Bancorp
2014 Annual Report
65
Notes To Consolidated Financial Statements
For further detail on the fair value of investment securities, see Note 19 – Fair Value Disclosures.
5. Loans and Leases
First Financial offers clients a variety of commercial and consumer loan and lease products with various interest rates and payment terms. Lending activities are primarily concentrated in Ohio, Indiana and Kentucky, states where the Bank currently operates banking centers. Additionally, First Financial provides equipment and leasehold improvement financing for franchisees in the quick service and casual dining restaurant sector throughout the United States. Commercial loan categories include commercial and industrial (commercial), commercial real estate, construction real estate and lease financing. Consumer loan categories include residential real estate, home equity, installment and credit card. For more information on First Financial's lending practices, see "Lending Practices" in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Purchased impaired loans.
Loans accounted for under FASB ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, are referred to as purchased impaired loans. First Financial accounts for the majority of loans acquired in FDIC transactions as purchased impaired loans, except for loans with revolving privileges, which are outside the scope of FASB ASC Topic 310-30, and loans for which cash flows could not be estimated, which are accounted for under the cost recovery method. These loans include loans previously covered under loss sharing agreements as well as loans that remain subject to FDIC loss sharing coverage.
Purchased impaired loans are not classified as nonperforming assets as the loans are considered to be performing under FASB ASC Topic 310-30. Therefore, interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows (accretable difference) is recognized on all purchased impaired loans.
First Financial had purchased impaired loans totaling
$264.9 million
and
$413.1 million
, at
December 31, 2014
and
2013
, respectively. The outstanding balance of all purchased impaired loans, including all contractual principal, interest, fees and penalties, was
$314.5 million
and
$508.2 million
as of
December 31, 2014
and
December 31, 2013
, respectively. These balances exclude contractual interest not yet accrued.
For more information on First Financial's accounting for purchased impaired loans, see Note 1 - Summary of Significant Accounting Policies.
Changes in the carrying amount of accretable difference for purchased impaired loans for the years ended December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
Balance at beginning of year
|
|
$
|
133,671
|
|
|
$
|
224,694
|
|
|
$
|
344,410
|
|
|
Reclassification from non-accretable difference
|
|
23,216
|
|
|
1,470
|
|
|
29,606
|
|
|
Accretion
|
|
(33,730
|
)
|
|
(58,422
|
)
|
|
(91,485
|
)
|
|
Other net activity
(1)
|
|
(16,535
|
)
|
|
(34,071
|
)
|
|
(57,837
|
)
|
|
Balance at end of year
|
|
$
|
106,622
|
|
|
$
|
133,671
|
|
|
$
|
224,694
|
|
(1)
Includes the impact of loan repayments and charge-offs.
First Financial regularly reviews its forecast of expected cash flows for purchased impaired loans. The Company recognized reclassifications from nonaccretable to accretable difference of
$23.2 million
during 2014,
$1.5 million
during 2013 and
$29.6 million
during 2012 due to changes in the cash flow expectations related to certain loan pools. These reclassifications can result in impairment and provision expense in the current period or yield adjustments on the related loan pools on a prospective basis.
Covered loans.
Loans acquired in FDIC-assisted transactions covered under loss sharing agreements whereby the FDIC will reimburse First Financial for the majority of any losses incurred are referred to as covered loans. Pursuant to the terms of the loss sharing agreements, covered loans are subject to a stated loss threshold whereby the FDIC will reimburse First Financial for
80%
of losses up to a stated loss threshold and
95%
of losses in excess of the threshold. These loss sharing agreements provide for partial loss protection on single-family, residential loans for a period of ten years and First Financial is required to share any recoveries of previously charged-off amounts for the same time period, on the same pro-rata basis with the FDIC. All
66
First Financial Bancorp
2014 Annual Report
other loans are provided loss protection for a period of five years and recoveries of previously charged-off amounts must be shared with the FDIC for an additional three year period, again on the same pro-rata basis.
The Company's loss sharing agreements with the FDIC related to non-single family loans expired effective October 1, 2014, and the ten year period of loss protection on all other covered loans and covered OREO will expire during the third quarter of 2019. Covered loans totaled
$135.7 million
as of
December 31, 2014
and
$457.9 million
as of
December 31, 2013
.
Credit quality.
To facilitate the monitoring of credit quality for commercial loans, and for purposes of determining an appropriate allowance for loan and lease losses, First Financial utilizes the following categories of credit grades:
Pass
- Higher quality loans that do not fit any of the other categories described below.
Special Mention
- First Financial assigns a special mention rating to loans and leases with potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease or in First Financial's credit position at some future date.
Substandard
- First Financial assigns a substandard rating to loans or leases that are inadequately protected by the current sound financial worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans and leases have well-defined weaknesses that jeopardize repayment of the debt. Substandard loans and leases are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not addressed.
Doubtful
- First Financial assigns a doubtful rating to loans and leases with all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors that may work to the advantage and strengthening of the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans.
The credit grades described above, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter.
First Financial considers repayment performance as the best indicator of credit quality for consumer loans. Consumer loans that have principal and interest payments that are past due by ninety days or more are generally classified as nonperforming. Additionally, consumer loans that have been modified in a TDR are classified as nonperforming.
First Financial Bancorp
2014 Annual Report
67
Notes To Consolidated Financial Statements
Commercial and consumer credit exposure by risk attribute was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial
|
|
Construction
|
|
Commercial
|
|
Leasing
|
|
Total
|
|
Pass
|
|
$
|
1,268,456
|
|
|
$
|
195,826
|
|
|
$
|
2,055,432
|
|
|
$
|
75,839
|
|
|
$
|
3,595,553
|
|
|
Special Mention
|
|
30,492
|
|
|
0
|
|
|
21,448
|
|
|
1,728
|
|
|
53,668
|
|
|
Substandard
|
|
16,166
|
|
|
1,745
|
|
|
63,787
|
|
|
0
|
|
|
81,698
|
|
|
Doubtful
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Total
|
|
$
|
1,315,114
|
|
|
$
|
197,571
|
|
|
$
|
2,140,667
|
|
|
$
|
77,567
|
|
|
$
|
3,730,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
Residential
|
|
Installment
|
|
Home Equity
|
|
Other
|
|
Total
|
|
Performing
|
|
$
|
490,314
|
|
|
$
|
46,806
|
|
|
$
|
452,281
|
|
|
$
|
38,475
|
|
|
$
|
1,027,876
|
|
|
Nonperforming
|
|
11,580
|
|
|
514
|
|
|
6,346
|
|
|
0
|
|
|
18,440
|
|
|
Total
|
|
$
|
501,894
|
|
|
$
|
47,320
|
|
|
$
|
458,627
|
|
|
$
|
38,475
|
|
|
$
|
1,046,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial
|
|
Construction
|
|
Commercial
|
|
Leasing
|
|
Total
|
|
Pass
|
|
$
|
1,016,357
|
|
|
$
|
80,586
|
|
|
$
|
1,604,836
|
|
|
$
|
80,135
|
|
|
$
|
2,781,914
|
|
|
Special Mention
|
|
25,064
|
|
|
65
|
|
|
36,736
|
|
|
0
|
|
|
61,865
|
|
|
Substandard
|
|
36,147
|
|
|
8,646
|
|
|
124,048
|
|
|
0
|
|
|
168,841
|
|
|
Doubtful
|
|
416
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
416
|
|
|
Total
|
|
$
|
1,077,984
|
|
|
$
|
89,297
|
|
|
$
|
1,765,620
|
|
|
$
|
80,135
|
|
|
$
|
3,013,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
Residential
|
|
Installment
|
|
Home Equity
|
|
Other
|
|
Total
|
|
Performing
|
|
$
|
425,058
|
|
|
$
|
52,195
|
|
|
$
|
421,203
|
|
|
$
|
37,962
|
|
|
$
|
936,418
|
|
|
Nonperforming
|
|
8,606
|
|
|
579
|
|
|
4,875
|
|
|
0
|
|
|
14,060
|
|
|
Total
|
|
$
|
433,664
|
|
|
$
|
52,774
|
|
|
$
|
426,078
|
|
|
$
|
37,962
|
|
|
$
|
950,478
|
|
Delinquency.
Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payment.
68
First Financial Bancorp
2014 Annual Report
Loan delinquency, including nonaccrual loans, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014
|
|
(Dollars in thousands)
|
|
30 – 59
days
past due
|
|
60 – 89
days
past due
|
|
> 90 days
past due
|
|
Total
past
due
|
|
Current
|
|
Subtotal
|
|
Purchased impaired
|
|
Total
|
|
> 90 days
past due
and still
accruing
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
1,002
|
|
|
$
|
3,647
|
|
|
$
|
2,110
|
|
|
$
|
6,759
|
|
|
$
|
1,290,975
|
|
|
$
|
1,297,734
|
|
|
$
|
17,380
|
|
|
$
|
1,315,114
|
|
|
$
|
0
|
|
|
Real estate - construction
|
|
276
|
|
|
0
|
|
|
223
|
|
|
499
|
|
|
195,773
|
|
|
196,272
|
|
|
1,299
|
|
|
197,571
|
|
|
0
|
|
|
Real estate - commercial
|
|
8,356
|
|
|
838
|
|
|
13,952
|
|
|
23,146
|
|
|
1,944,207
|
|
|
1,967,353
|
|
|
173,314
|
|
|
2,140,667
|
|
|
0
|
|
|
Real estate - residential
|
|
1,198
|
|
|
344
|
|
|
4,224
|
|
|
5,766
|
|
|
426,908
|
|
|
432,674
|
|
|
69,220
|
|
|
501,894
|
|
|
0
|
|
|
Installment
|
|
133
|
|
|
17
|
|
|
272
|
|
|
422
|
|
|
44,235
|
|
|
44,657
|
|
|
2,663
|
|
|
47,320
|
|
|
0
|
|
|
Home equity
|
|
697
|
|
|
466
|
|
|
4,079
|
|
|
5,242
|
|
|
452,357
|
|
|
457,599
|
|
|
1,028
|
|
|
458,627
|
|
|
0
|
|
|
Other
|
|
1,133
|
|
|
128
|
|
|
216
|
|
|
1,477
|
|
|
114,565
|
|
|
116,042
|
|
|
0
|
|
|
116,042
|
|
|
216
|
|
|
Total
|
|
$
|
12,795
|
|
|
$
|
5,440
|
|
|
$
|
25,076
|
|
|
$
|
43,311
|
|
|
$
|
4,469,020
|
|
|
$
|
4,512,331
|
|
|
$
|
264,904
|
|
|
$
|
4,777,235
|
|
|
$
|
216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
(Dollars in thousands)
|
|
30 - 59
days
past due
|
|
60 - 89
days
past due
|
|
> 90 days
past due
|
|
Total
past
due
|
|
Current
|
|
Subtotal
|
|
Purchased impaired
|
|
Total
|
|
> 90 days
past due and still accruing
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
2,076
|
|
|
$
|
496
|
|
|
$
|
7,619
|
|
|
$
|
10,191
|
|
|
$
|
1,024,995
|
|
|
$
|
1,035,186
|
|
|
$
|
42,798
|
|
|
$
|
1,077,984
|
|
|
$
|
0
|
|
|
Real estate - construction
|
|
0
|
|
|
0
|
|
|
223
|
|
|
223
|
|
|
80,518
|
|
|
80,741
|
|
|
8,556
|
|
|
89,297
|
|
|
0
|
|
|
Real estate - commercial
|
|
7,984
|
|
|
4,269
|
|
|
13,995
|
|
|
26,248
|
|
|
1,464,571
|
|
|
1,490,819
|
|
|
274,801
|
|
|
1,765,620
|
|
|
0
|
|
|
Real estate - residential
|
|
2,030
|
|
|
685
|
|
|
5,526
|
|
|
8,241
|
|
|
344,690
|
|
|
352,931
|
|
|
80,733
|
|
|
433,664
|
|
|
0
|
|
|
Installment
|
|
213
|
|
|
40
|
|
|
384
|
|
|
637
|
|
|
46,914
|
|
|
47,551
|
|
|
5,223
|
|
|
52,774
|
|
|
0
|
|
|
Home equity
|
|
1,224
|
|
|
328
|
|
|
3,375
|
|
|
4,927
|
|
|
420,176
|
|
|
425,103
|
|
|
975
|
|
|
426,078
|
|
|
0
|
|
|
Other
|
|
689
|
|
|
148
|
|
|
218
|
|
|
1,055
|
|
|
117,042
|
|
|
118,097
|
|
|
0
|
|
|
118,097
|
|
|
218
|
|
|
Total
|
|
$
|
14,216
|
|
|
$
|
5,966
|
|
|
$
|
31,340
|
|
|
$
|
51,522
|
|
|
$
|
3,498,906
|
|
|
$
|
3,550,428
|
|
|
$
|
413,086
|
|
|
$
|
3,963,514
|
|
|
$
|
218
|
|
Nonaccrual.
Loans are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful or when principal or interest payments are 90 days or more past due. Generally, loans are classified as nonaccrual due to the continued failure to adhere to contractual payment terms by the borrower coupled with other pertinent factors, such as, insufficient collateral value. The accrual of interest income is discontinued and previously accrued, but unpaid interest is reversed when a loan is classified as nonaccrual. Any payments received while a loan is on nonaccrual status are applied as a reduction to the carrying value of the loan. A loan may be returned to accrual status if collection of future principal and interest payments is no longer doubtful.
Purchased impaired loans are classified as performing, even though they may be contractually past due, as any nonpayment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or prospective yield adjustments.
Troubled debt restructurings.
A loan modification is considered a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made by the Company that would not otherwise be considered for a borrower with similar credit characteristics. The most common types of modifications include interest rate reductions, maturity extensions and modifications to principal amortization including interest only structures. Modified terms are dependent upon the financial position and needs of the individual borrower. If the modification agreement is violated, the loan is handled by the Company’s credit administration group for resolution, which may result in foreclosure in the case of real estate.
First Financial Bancorp
2014 Annual Report
69
Notes To Consolidated Financial Statements
TDRs are generally classified as nonaccrual for a minimum period of six months and may qualify for return to accrual status once they have demonstrated sustained performance with the restructured terms of the loan agreement.
First Financial had
262
TDRs totaling
$28.2 million
at
December 31, 2014
, including
$15.9 million
of loans on accrual status and
$12.3 million
of loans classified as nonaccrual. First Financial has an insignificant amount of commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs as of
December 31, 2014
. At
December 31, 2014
, the allowance for loan and lease losses included reserves of
$3.7 million
related to TDRs. For the year ended
December 31, 2014
, First Financial charged off
$1.0 million
for the portion of TDRs determined to be uncollectible. At
December 31, 2014
, approximately
$10.5 million
of the accruing TDRs have been performing in accordance with the restructured terms for more than one year.
First Financial had
229
TDRs totaling
$29.2 million
at
December 31, 2013
, including
$15.4 million
of loans on accrual status and
$13.8 million
of loans classified as nonaccrual. First Financial had an insignificant amount of commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs as of
December 31, 2013
. At
December 31, 2013
, the allowance for loan and lease losses included reserves of
$4.4 million
related to TDRs. For the year ended
December 31, 2013
, First Financial charged off
$2.8 million
for the portion of TDRs determined to be uncollectible. At
December 31, 2013
, approximately
$9.0 million
of the accruing TDRs had been performing in accordance with the restructured terms for more than one year.
The following table provides information on loan modifications classified as TDRs during the years ended
December 31, 2014
and
2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
2014
|
|
2013
|
|
|
Total TDRs
|
|
Total TDRs
|
|
(Dollars in thousands)
|
Number of loans
|
|
Pre-modification loan balance
|
|
Period end balance
|
|
Number of loans
|
|
Pre-modification loan balance
|
|
Period end balance
|
|
Commercial
|
24
|
|
|
$
|
5,282
|
|
|
$
|
4,256
|
|
|
15
|
|
$
|
8,582
|
|
|
$
|
6,431
|
|
|
Real estate - construction
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
0
|
|
|
0
|
|
|
Real estate - commercial
|
16
|
|
|
5,235
|
|
|
3,937
|
|
|
18
|
|
4,925
|
|
|
3,477
|
|
|
Real estate - residential
|
31
|
|
|
1,767
|
|
|
1,516
|
|
|
38
|
|
2,612
|
|
|
2,317
|
|
|
Installment
|
8
|
|
|
47
|
|
|
29
|
|
|
18
|
|
333
|
|
|
227
|
|
|
Home equity
|
36
|
|
|
1,977
|
|
|
1,036
|
|
|
42
|
|
1,615
|
|
|
1,117
|
|
|
Total
|
115
|
|
|
$
|
14,308
|
|
|
$
|
10,774
|
|
|
131
|
|
$
|
18,067
|
|
|
$
|
13,569
|
|
The following table provides information on how TDRs were modified during the years ended
December 31, 2014
and
2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
Extended maturities
|
$
|
6,961
|
|
|
$
|
8,146
|
|
|
Adjusted interest rates
|
299
|
|
520
|
|
|
Combination of rate and maturity changes
|
991
|
|
950
|
|
|
Forbearance
|
373
|
|
0
|
|
|
Other
(1)
|
2,150
|
|
3,953
|
|
|
Total
|
$
|
10,774
|
|
|
$
|
13,569
|
|
(1)
Other includes covenant modifications and other concessions or combination of concessions that do not consist of interest rate adjustments, forbearance and maturity extensions.
First Financial considers repayment performance as an indication of the effectiveness of the Company's loan modifications. Borrowers that are
ninety
days or more past due on any principal or interest payments for a TDR, or who prematurely terminate a restructured loan agreement without paying off the contractual principal balance (for example, in a deed-in-lieu arrangement), are considered to be in payment default of the terms of the TDR agreement.
70
First Financial Bancorp
2014 Annual Report
The following table provides information on TDRs for which there was a payment default during the period that occurred within twelve months of the loan modification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2014
|
|
2013
|
|
(Dollars in thousands)
|
|
Number
of loans
|
|
Period end balance
|
|
Number
of loans
|
|
Period end balance
|
|
Commercial
|
|
1
|
|
$
|
143
|
|
|
4
|
|
$
|
4,875
|
|
|
Real estate - construction
|
|
0
|
|
0
|
|
0
|
|
0
|
|
Real estate - commercial
|
|
2
|
|
182
|
|
3
|
|
236
|
|
Real estate - residential
|
|
3
|
|
29
|
|
3
|
|
112
|
|
Installment
|
|
0
|
|
0
|
|
4
|
|
24
|
|
Home equity
|
|
3
|
|
91
|
|
8
|
|
198
|
|
Total
|
|
9
|
|
$
|
445
|
|
|
22
|
|
$
|
5,445
|
|
Impaired loans.
Loans classified as nonaccrual, excluding purchased impaired loans and loans modified as TDRs, are considered impaired. First Financial had purchased impaired loans of
$264.9 million
,
$413.1 million
and
$687.3 million
as of December 31, 2014, 2013 and 2012, respectively. The following table provides information on impaired loans, excluding purchased impaired loans, as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
Impaired loans
|
|
|
|
|
|
|
|
Nonaccrual loans
(1)
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
6,627
|
|
|
$
|
8,474
|
|
|
$
|
20,391
|
|
|
Real estate-construction
|
|
223
|
|
|
223
|
|
|
2,102
|
|
|
Real estate-commercial
|
|
27,969
|
|
|
18,635
|
|
|
37,963
|
|
|
Real estate-residential
|
|
7,241
|
|
|
8,606
|
|
|
7,869
|
|
|
Installment
|
|
451
|
|
|
579
|
|
|
452
|
|
|
Home equity
|
|
5,958
|
|
|
4,875
|
|
|
7,479
|
|
|
Other
|
|
0
|
|
|
0
|
|
|
507
|
|
|
Total nonaccrual loans
|
|
48,469
|
|
|
41,392
|
|
|
76,763
|
|
|
Accruing troubled debt restructurings
|
|
15,928
|
|
|
15,429
|
|
|
10,856
|
|
|
Total impaired loans
|
|
$
|
64,397
|
|
|
$
|
56,821
|
|
|
$
|
87,619
|
|
|
|
|
|
|
|
|
|
|
Interest income effect
|
|
|
|
|
|
|
|
Gross amount of interest that would have been recorded under original terms
|
|
$
|
3,581
|
|
|
$
|
4,698
|
|
|
$
|
5,515
|
|
|
Interest included in income
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
537
|
|
|
560
|
|
|
872
|
|
|
Troubled debt restructurings
|
|
456
|
|
|
444
|
|
|
338
|
|
|
Total interest included in income
|
|
993
|
|
|
1,004
|
|
|
1,210
|
|
|
Net impact on interest income
|
|
$
|
2,588
|
|
|
$
|
3,694
|
|
|
$
|
4,305
|
|
|
|
|
|
|
|
|
|
|
Commitments outstanding to borrowers with nonaccrual loans
|
|
$
|
0
|
|
|
$
|
38
|
|
|
$
|
3,489
|
|
(1)
Nonaccrual loans include nonaccrual TDRs of
$12.3 million
,
$13.8 million
and
$14.1 million
as of December 31, 2014, 2013 and 2012, respectively.
First Financial individually reviews all impaired commercial loan relationships greater than
$250,000
, as well as consumer loan TDRs greater than
$100,000
, to determine if a specific allowance is necessary based on the borrower’s overall financial condition, resources, payment record, support from guarantors and the realizable value of any collateral. Specific allowances
First Financial Bancorp
2014 Annual Report
71
Notes To Consolidated Financial Statements
are based on discounted cash flows using the loan's initial effective interest rate or the fair value of the collateral for certain collateral dependent loans.
First Financial's investment in impaired loans is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2014
|
|
(Dollars in thousands)
|
|
Current balance
|
|
Contractual
principal
balance
|
|
Related
allowance
|
|
Average
balance
|
|
Interest
income
recognized
|
|
Loans with no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
7,611
|
|
|
$
|
9,284
|
|
|
$
|
0
|
|
|
$
|
7,146
|
|
|
$
|
146
|
|
|
Real estate - construction
|
|
223
|
|
|
443
|
|
|
0
|
|
|
223
|
|
|
0
|
|
|
Real estate - commercial
|
|
19,285
|
|
|
23,631
|
|
|
0
|
|
|
15,653
|
|
|
285
|
|
|
Real estate - residential
|
|
9,561
|
|
|
10,867
|
|
|
0
|
|
|
9,485
|
|
|
182
|
|
|
Installment
|
|
514
|
|
|
577
|
|
|
0
|
|
|
513
|
|
|
8
|
|
|
Home equity
|
|
6,246
|
|
|
9,041
|
|
|
0
|
|
|
5,658
|
|
|
85
|
|
|
Other
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Total
|
|
43,440
|
|
|
53,843
|
|
|
0
|
|
|
38,678
|
|
|
706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
2,398
|
|
|
2,605
|
|
|
739
|
|
|
4,234
|
|
|
57
|
|
|
Real estate - construction
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Real estate - commercial
|
|
16,439
|
|
|
17,662
|
|
|
4,002
|
|
|
11,471
|
|
|
187
|
|
|
Real estate - residential
|
|
2,019
|
|
|
2,080
|
|
|
310
|
|
|
2,088
|
|
|
40
|
|
|
Installment
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Home equity
|
|
101
|
|
|
101
|
|
|
2
|
|
|
101
|
|
|
3
|
|
|
Other
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Total
|
|
20,957
|
|
|
22,448
|
|
|
5,053
|
|
|
17,894
|
|
|
287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
10,009
|
|
|
11,889
|
|
|
739
|
|
|
11,380
|
|
|
203
|
|
|
Real estate - construction
|
|
223
|
|
|
443
|
|
|
0
|
|
|
223
|
|
|
0
|
|
|
Real estate - commercial
|
|
35,724
|
|
|
41,293
|
|
|
4,002
|
|
|
27,124
|
|
|
472
|
|
|
Real estate - residential
|
|
11,580
|
|
|
12,947
|
|
|
310
|
|
|
11,573
|
|
|
222
|
|
|
Installment
|
|
514
|
|
|
577
|
|
|
0
|
|
|
513
|
|
|
8
|
|
|
Home equity
|
|
6,347
|
|
|
9,142
|
|
|
2
|
|
|
5,759
|
|
|
88
|
|
|
Other
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Total
|
|
$
|
64,397
|
|
|
$
|
76,291
|
|
|
$
|
5,053
|
|
|
$
|
56,572
|
|
|
$
|
993
|
|
72
First Financial Bancorp
2014 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
(Dollars in thousands)
|
|
Current
balance
|
|
Contractual
principal
balance
|
|
Related
allowance
|
|
Average
balance
|
|
Interest
income
recognized
|
|
Loans with no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
6,087
|
|
|
$
|
8,214
|
|
|
$
|
0
|
|
|
$
|
12,544
|
|
|
$
|
176
|
|
|
Real estate - construction
|
|
223
|
|
|
443
|
|
|
0
|
|
|
599
|
|
|
0
|
|
|
Real estate - commercial
|
|
13,704
|
|
|
19,079
|
|
|
0
|
|
|
18,349
|
|
|
384
|
|
|
Real estate - residential
|
|
10,291
|
|
|
12,087
|
|
|
0
|
|
|
10,225
|
|
|
152
|
|
|
Installment
|
|
647
|
|
|
668
|
|
|
0
|
|
|
465
|
|
|
6
|
|
|
Home equity
|
|
5,101
|
|
|
7,007
|
|
|
0
|
|
|
5,756
|
|
|
59
|
|
|
Other
|
|
0
|
|
|
0
|
|
|
0
|
|
|
156
|
|
|
0
|
|
|
Total
|
|
36,053
|
|
|
47,498
|
|
|
0
|
|
|
48,094
|
|
|
777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
7,013
|
|
|
8,353
|
|
|
2,080
|
|
|
5,047
|
|
|
71
|
|
|
Real estate - construction
|
|
0
|
|
|
0
|
|
|
0
|
|
|
726
|
|
|
7
|
|
|
Real estate - commercial
|
|
11,638
|
|
|
14,424
|
|
|
2,872
|
|
|
21,098
|
|
|
110
|
|
|
Real estate - residential
|
|
2,016
|
|
|
2,072
|
|
|
348
|
|
|
1,997
|
|
|
37
|
|
|
Installment
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Home equity
|
|
101
|
|
|
101
|
|
|
2
|
|
|
101
|
|
|
2
|
|
|
Other
|
|
0
|
|
|
0
|
|
|
0
|
|
|
167
|
|
|
0
|
|
|
Total
|
|
20,768
|
|
|
24,950
|
|
|
5,302
|
|
|
29,136
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
13,100
|
|
|
16,567
|
|
|
2,080
|
|
|
17,591
|
|
|
247
|
|
|
Real estate - construction
|
|
223
|
|
|
443
|
|
|
0
|
|
|
1,325
|
|
|
7
|
|
|
Real estate - commercial
|
|
25,342
|
|
|
33,503
|
|
|
2,872
|
|
|
39,447
|
|
|
494
|
|
|
Real estate - residential
|
|
12,307
|
|
|
14,159
|
|
|
348
|
|
|
12,222
|
|
|
189
|
|
|
Installment
|
|
647
|
|
|
668
|
|
|
0
|
|
|
465
|
|
|
6
|
|
|
Home equity
|
|
5,202
|
|
|
7,108
|
|
|
2
|
|
|
5,857
|
|
|
61
|
|
|
Other
|
|
0
|
|
|
0
|
|
|
0
|
|
|
323
|
|
|
0
|
|
|
Total
|
|
$
|
56,821
|
|
|
$
|
72,448
|
|
|
$
|
5,302
|
|
|
$
|
77,230
|
|
|
$
|
1,004
|
|
First Financial Bancorp
2014 Annual Report
73
Notes To Consolidated Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2012
|
|
(Dollars in thousands)
|
|
Current
balance
|
|
Contractual
principal
balance
|
|
Related
allowance
|
|
Average
balance
|
|
Interest
income
recognized
|
|
Loans with no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
$
|
19,459
|
|
|
$
|
21,929
|
|
|
$
|
0
|
|
|
$
|
13,863
|
|
|
$
|
277
|
|
|
Real estate - construction
|
|
462
|
|
|
672
|
|
|
0
|
|
|
3,857
|
|
|
15
|
|
|
Real estate - commercial
|
|
18,768
|
|
|
24,794
|
|
|
0
|
|
|
17,707
|
|
|
295
|
|
|
Real estate - residential
|
|
9,222
|
|
|
10,817
|
|
|
0
|
|
|
8,463
|
|
|
81
|
|
|
Installment
|
|
452
|
|
|
556
|
|
|
0
|
|
|
452
|
|
|
2
|
|
|
Home equity
|
|
7,478
|
|
|
9,392
|
|
|
0
|
|
|
4,429
|
|
|
24
|
|
|
Other
|
|
337
|
|
|
337
|
|
|
0
|
|
|
78
|
|
|
0
|
|
|
Total
|
|
56,178
|
|
|
68,497
|
|
|
0
|
|
|
48,849
|
|
|
694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans with an allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
3,560
|
|
|
4,252
|
|
|
1,151
|
|
|
5,350
|
|
|
161
|
|
|
Real estate - construction
|
|
1,640
|
|
|
2,168
|
|
|
838
|
|
|
5,033
|
|
|
81
|
|
|
Real estate - commercial
|
|
24,014
|
|
|
25,684
|
|
|
7,155
|
|
|
25,499
|
|
|
235
|
|
|
Real estate - residential
|
|
1,956
|
|
|
2,003
|
|
|
290
|
|
|
2,278
|
|
|
38
|
|
|
Installment
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Home equity
|
|
101
|
|
|
101
|
|
|
2
|
|
|
81
|
|
|
1
|
|
|
Other
|
|
170
|
|
|
170
|
|
|
92
|
|
|
34
|
|
|
0
|
|
|
Total
|
|
31,441
|
|
|
34,378
|
|
|
9,528
|
|
|
38,275
|
|
|
516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
23,019
|
|
|
26,181
|
|
|
1,151
|
|
|
19,213
|
|
|
438
|
|
|
Real estate - construction
|
|
2,102
|
|
|
2,840
|
|
|
838
|
|
|
8,890
|
|
|
96
|
|
|
Real estate - commercial
|
|
42,782
|
|
|
50,478
|
|
|
7,155
|
|
|
43,206
|
|
|
530
|
|
|
Real estate - residential
|
|
11,178
|
|
|
12,820
|
|
|
290
|
|
|
10,741
|
|
|
119
|
|
|
Installment
|
|
452
|
|
|
556
|
|
|
0
|
|
|
452
|
|
|
2
|
|
|
Home equity
|
|
7,579
|
|
|
9,493
|
|
|
2
|
|
|
4,510
|
|
|
25
|
|
|
Other
|
|
507
|
|
|
507
|
|
|
92
|
|
|
112
|
|
|
0
|
|
|
Total
|
|
$
|
87,619
|
|
|
$
|
102,875
|
|
|
$
|
9,528
|
|
|
$
|
87,124
|
|
|
$
|
1,210
|
|
74
First Financial Bancorp
2014 Annual Report
OREO.
OREO is comprised of properties acquired by the Company primarily through the loan foreclosure or repossession process, or other resolution activities that result in partial or total satisfaction of problem loans.
Changes in OREO were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
(Dollars in thousands)
|
|
2014
(1)
|
|
2013
(1)
|
|
2012
(1)
|
|
Balance at beginning of year
|
|
$
|
46,926
|
|
|
$
|
41,388
|
|
|
$
|
56,135
|
|
|
Additions
|
|
|
|
|
|
|
|
Commercial
|
|
8,208
|
|
|
35,966
|
|
|
23,500
|
|
|
Residential
|
|
2,329
|
|
|
1,734
|
|
|
6,456
|
|
|
Total additions
|
|
10,537
|
|
|
37,700
|
|
|
29,956
|
|
|
Disposals
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
28,933
|
|
|
25,214
|
|
|
30,616
|
|
|
Residential
|
|
1,637
|
|
|
2,105
|
|
|
4,741
|
|
|
Total disposals
|
|
30,570
|
|
|
27,319
|
|
|
35,357
|
|
|
Valuation adjustments
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
3,765
|
|
|
4,184
|
|
|
8,162
|
|
|
Residential
|
|
454
|
|
|
659
|
|
|
1,184
|
|
|
Total valuation adjustments
|
|
4,219
|
|
|
4,843
|
|
|
9,346
|
|
|
Balance at end of year
|
|
$
|
22,674
|
|
|
$
|
46,926
|
|
|
$
|
41,388
|
|
(1) Includes OREO subject to loss sharing agreements of
$0.3 million
,
$27.1 million
and
$28.9 million
at
December 31, 2014
,
2013
and 2012, respectively.
FDIC indemnification asset.
Changes in the balance of the FDIC indemnification asset and the related impact to the Consolidated Statements of Income are presented in the table that follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Years ended December 31,
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
Affected Line Item in the Consolidated Statements of Income
|
|
Balance at beginning of year
|
$
|
45,091
|
|
|
$
|
119,607
|
|
|
$
|
173,009
|
|
|
|
|
Adjustments not reflected in income
|
|
|
|
|
|
|
|
|
Net FDIC claims (received) / paid
|
(6,785
|
)
|
|
(22,103
|
)
|
|
(60,169
|
)
|
|
|
|
Adjustments reflected in income
|
|
|
|
|
|
|
|
|
Amortization
|
(5,531
|
)
|
|
(7,672
|
)
|
|
(7,332
|
)
|
|
Interest income, other earning assets
|
|
FDIC loss sharing income
|
365
|
|
|
3,720
|
|
|
35,346
|
|
|
Noninterest income, FDIC loss sharing income
|
|
Offset to accelerated discount
|
(10,474
|
)
|
|
(26,044
|
)
|
|
(21,247
|
)
|
|
Noninterest income, accelerated discount on covered loans
|
|
Impairment valuation adjustment
|
0
|
|
|
(22,417
|
)
|
|
0
|
|
|
Noninterest expenses, FDIC indemnification impairment
|
|
Balance at end of year
|
$
|
22,666
|
|
|
$
|
45,091
|
|
|
$
|
119,607
|
|
|
|
The accounting for FDIC indemnification assets is closely related to the accounting for the underlying, indemnified assets as well as on-going assessment of the collectibility of the indemnification assets. The primary activities impacting the FDIC indemnification asset are FDIC claims, amortization, FDIC loss sharing income and accelerated discount.
FDIC claims -
First Financial files quarterly certifications with the FDIC and submits claims for losses, valuation adjustments and collection expenses incurred, less recoveries of any previous amounts claimed that are reimbursable back to the FDIC, as allowed under the loss sharing agreements. Cash reimbursements are generally received within 30 days of filing and are recorded as a credit to the indemnification asset balance, thus reducing its carrying value.
First Financial Bancorp
2014 Annual Report
75
Notes To Consolidated Financial Statements
Amortization -
As the yield on covered loans increased over time as a result of improvement in the expected cash flows on covered loans, the yield on the indemnification asset declined. The yield on the indemnification asset became negative in the first quarter of 2011 at which time the indemnification asset began to decline through monthly amortization at the negative yield.
FDIC loss sharing income -
FDIC loss sharing income represents the proportionate share of credit costs on covered assets that First Financial expects to receive from the FDIC. Credit costs on covered assets include provision expense on covered loans, losses on covered OREO and other covered collection and asset resolution costs recorded as loss sharing expense under noninterest expenses in the Consolidated Statements of Income.
Offset to accelerated discount -
Accelerated discounts on covered loans occur when covered loans prepay and represent the accelerated recognition of the remaining discount that would have been recognized over the life of the loan had the loan not prepaid. In conjunction with the recognition of accelerated discount, First Financial also recognizes a related offset through noninterest income and reduction to the indemnification asset for a portion of the discount representing expected credit loss included in the discount recorded at acquisition.
First Financial’s periodic collectibility assessment included evaluation of these primary sources of indemnification asset recovery, the resulting projected balances and collectibility / recovery of the indemnification asset upon expiration of the non-single family loss protection in the third quarter of 2014 and expiration of the SFR loss protection in the third quarter 2019.
As a result of improvement in future expected cash flows on covered loans, a meaningful decline in loss claims filed with the FDIC, higher reimbursements to the FDIC related to positive asset resolutions in recent periods and the significantly shorter remaining life of the indemnification asset in comparison to the weighted average life of the related covered loans, which extended covered assets and related losses beyond the commercial indemnification period, the Company recorded a valuation adjustment to reduce the value of the FDIC indemnification asset of
$22.4 million
during 2013.
6. Allowance for Loan and Lease Losses
Loans and leases.
For each reporting period, management maintains the allowance for loan and lease losses at a level that it considers sufficient to absorb probable loan and lease losses inherent in the portfolio. Management determines the adequacy of the allowance based on historical loss experience as well as other significant factors such as composition of the portfolio, economic conditions, geographic footprint, the results of periodic internal and external evaluations of delinquent, nonaccrual and classified loans and any other adverse situations that may affect a specific borrower's ability to repay (including the timing of future payments). This evaluation is inherently subjective as it requires utilizing material estimates that may be susceptible to significant change. For further discussion of First Financial's allowance methodology, see Note 1 - Summary of Significant Accounting Policies.
The allowance is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. First Financial's policy is to charge-off all or a portion of a loan when, in management's opinion, it is unlikely to collect the principal amount owed in full either through payments from the borrower or from the liquidation of collateral.
During 2014, First Financial completed the mergers of The First Bexley Bank (First Bexley), Insight Bank (Insight) and Guernsey Bancorp, Inc (Guernsey). Loans acquired in connection with those mergers were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan and lease loss (ALLL). See Note 20 – Business Combinations for further detail.
Covered/formerly covered loans.
The majority of covered/formerly covered loans are purchased impaired loans, whereby First Financial is required to periodically re-estimate the expected cash flows on the loans. For further detail regarding accounting for purchased impaired loans and the related allowance, see Note 1 - Summary of Significant Accounting Policies.
First Financial updated the valuations related to covered/formerly covered loans periodically during 2014 and, as a result of improved cash flow expectations from the updated valuations, recognized negative provision expense, or impairment recapture, of
$1.8 million
and realized net charge-offs of
$7.0 million
, resulting in an ending allowance of
$10.0 million
as of
December 31, 2014
. During 2013, the Company recognized total provision expense of
$0.2 million
and realized net charge-offs of
$26.5 million
, resulting in an ending allowance of
$18.9 million
. During 2012, the Company recognized total provision expense of
$30.9 million
and realized net charge-offs of
$28.5 million
, resulting in an ending allowance of
$45.2 million
.
76
First Financial Bancorp
2014 Annual Report
First Financial also recognized loss sharing expenses of
$3.6 million
for 2014,
$5.9 million
for 2013 and
$13.2 million
for 2012 primarily related to attorney fees, delinquent taxes, appraisals and losses on covered OREO during the period. The receivable due from the FDIC under loss sharing agreements related to covered provision expense, losses on covered OREO and loss sharing expenses of
$0.4 million
for 2014,
$3.7 million
for 2013, and
$35.3 million
for 2012, was recognized as FDIC loss sharing income and a corresponding increase to the FDIC indemnification asset.
Changes in the allowance for loan and lease losses for the three years ended December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
Changes in the allowance for loan and lease losses on loans, excluding covered/formerly covered
|
|
|
|
Balance at beginning of year
|
|
$
|
43,829
|
|
|
$
|
47,777
|
|
|
$
|
52,576
|
|
|
Provision for loan and lease losses
|
|
3,369
|
|
|
8,714
|
|
|
19,117
|
|
|
Loans charged-off
|
|
(7,877
|
)
|
|
(17,283
|
)
|
|
(25,312
|
)
|
|
Recoveries
|
|
3,499
|
|
|
4,621
|
|
|
1,396
|
|
|
Balance at end of year
|
|
$
|
42,820
|
|
|
$
|
43,829
|
|
|
$
|
47,777
|
|
|
|
|
|
|
|
|
|
|
Changes in the allowance for loan and lease losses on covered/formerly covered loans
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
18,901
|
|
|
$
|
45,190
|
|
|
$
|
42,835
|
|
|
Provision for loan and lease losses
|
|
(1,841
|
)
|
|
195
|
|
|
30,903
|
|
|
Loans charged-off
|
|
(18,096
|
)
|
|
(39,224
|
)
|
|
(33,907
|
)
|
|
Recoveries
|
|
11,074
|
|
|
12,740
|
|
|
5,359
|
|
|
Balance at end of year
|
|
$
|
10,038
|
|
|
$
|
18,901
|
|
|
$
|
45,190
|
|
|
|
|
|
|
|
|
|
|
Changes in the allowance for loan and lease losses on total loans
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
62,730
|
|
|
$
|
92,967
|
|
|
$
|
95,411
|
|
|
Provision for loan and lease losses
|
|
1,528
|
|
|
8,909
|
|
|
50,020
|
|
|
Loans charged-off
|
|
(25,973
|
)
|
|
(56,507
|
)
|
|
(59,219
|
)
|
|
Recoveries
|
|
14,573
|
|
|
17,361
|
|
|
6,755
|
|
|
Balance at end of year
|
|
$
|
52,858
|
|
|
$
|
62,730
|
|
|
$
|
92,967
|
|
First Financial Bancorp
2014 Annual Report
77
Notes To Consolidated Financial Statements
Changes in the allowance for loan and lease losses by loan category as of December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Comm
|
|
Constr
|
|
Comm
|
|
Resid
|
|
Install
|
|
Home equity
|
|
Other
|
|
Total
|
|
Covered/formerly covered
|
|
Grand Total
|
|
Allowance for loan and lease losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
10,568
|
|
|
$
|
824
|
|
|
$
|
20,478
|
|
|
$
|
3,379
|
|
|
$
|
365
|
|
|
$
|
5,209
|
|
|
$
|
3,006
|
|
|
$
|
43,829
|
|
|
$
|
18,901
|
|
|
$
|
62,730
|
|
|
Provision for loan and lease losses
|
|
871
|
|
|
221
|
|
|
1,325
|
|
|
181
|
|
|
23
|
|
|
565
|
|
|
183
|
|
|
3,369
|
|
|
(1,841
|
)
|
|
1,528
|
|
|
Gross charge-offs
|
|
1,440
|
|
|
0
|
|
|
2,329
|
|
|
922
|
|
|
283
|
|
|
1,745
|
|
|
1,158
|
|
|
7,877
|
|
|
18,096
|
|
|
25,973
|
|
|
Recoveries
|
|
1,260
|
|
|
0
|
|
|
1,194
|
|
|
190
|
|
|
218
|
|
|
231
|
|
|
406
|
|
|
3,499
|
|
|
11,074
|
|
|
14,573
|
|
|
Total net charge-offs
|
|
180
|
|
|
0
|
|
|
1,135
|
|
|
732
|
|
|
65
|
|
|
1,514
|
|
|
752
|
|
|
4,378
|
|
|
7,022
|
|
|
11,400
|
|
|
Ending allowance for loan and lease losses
|
|
$
|
11,259
|
|
|
$
|
1,045
|
|
|
$
|
20,668
|
|
|
$
|
2,828
|
|
|
$
|
323
|
|
|
$
|
4,260
|
|
|
$
|
2,437
|
|
|
$
|
42,820
|
|
|
$
|
10,038
|
|
|
$
|
52,858
|
|
|
Ending allowance on loans individually evaluated for impairment
|
|
$
|
739
|
|
|
$
|
0
|
|
|
$
|
4,002
|
|
|
$
|
310
|
|
|
$
|
0
|
|
|
$
|
2
|
|
|
$
|
0
|
|
|
$
|
5,053
|
|
|
$
|
0
|
|
|
$
|
5,053
|
|
|
Ending allowance on loans collectively evaluated for impairment
|
|
10,520
|
|
|
1,045
|
|
|
16,666
|
|
|
2,518
|
|
|
323
|
|
|
4,258
|
|
|
2,437
|
|
|
37,767
|
|
|
10,038
|
|
|
47,805
|
|
|
Ending allowance for loan and lease losses
|
|
$
|
11,259
|
|
|
$
|
1,045
|
|
|
$
|
20,668
|
|
|
$
|
2,828
|
|
|
$
|
323
|
|
|
$
|
4,260
|
|
|
$
|
2,437
|
|
|
$
|
42,820
|
|
|
$
|
10,038
|
|
|
$
|
52,858
|
|
|
Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of loans individually evaluated for impairment
|
|
$
|
6,122
|
|
|
$
|
0
|
|
|
$
|
25,938
|
|
|
$
|
2,963
|
|
|
$
|
0
|
|
|
$
|
609
|
|
|
$
|
0
|
|
|
$
|
35,632
|
|
|
$
|
0
|
|
|
$
|
35,632
|
|
|
Ending balance of loans collectively evaluated for impairment
|
|
1,291,190
|
|
|
196,272
|
|
|
1,948,757
|
|
|
429,712
|
|
|
44,269
|
|
|
415,420
|
|
|
113,969
|
|
|
4,439,589
|
|
|
302,014
|
|
|
4,741,603
|
|
|
Total loans
|
|
$
|
1,297,312
|
|
|
$
|
196,272
|
|
|
$
|
1,974,695
|
|
|
$
|
432,675
|
|
|
$
|
44,269
|
|
|
$
|
416,029
|
|
|
$
|
113,969
|
|
|
$
|
4,475,221
|
|
|
$
|
302,014
|
|
|
$
|
4,777,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Comm
|
|
Constr
|
|
Comm
|
|
Resid
|
|
Install
|
|
Home equity
|
|
Other
|
|
Total
|
|
Covered/formerly covered
|
|
Grand Total
|
|
Allowance for loan and lease losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
7,926
|
|
|
$
|
3,268
|
|
|
$
|
24,151
|
|
|
$
|
3,599
|
|
|
$
|
522
|
|
|
$
|
5,173
|
|
|
$
|
3,138
|
|
|
$
|
47,777
|
|
|
$
|
45,190
|
|
|
$
|
92,967
|
|
|
Provision for loan and lease losses
|
|
5,385
|
|
|
(3,115
|
)
|
|
2,659
|
|
|
593
|
|
|
(132
|
)
|
|
1,937
|
|
|
1,387
|
|
|
8,714
|
|
|
195
|
|
|
8,909
|
|
|
Gross charge-offs
|
|
3,415
|
|
|
1
|
|
|
8,326
|
|
|
1,016
|
|
|
335
|
|
|
2,409
|
|
|
1,781
|
|
|
17,283
|
|
|
39,224
|
|
|
56,507
|
|
|
Recoveries
|
|
672
|
|
|
672
|
|
|
1,994
|
|
|
203
|
|
|
310
|
|
|
508
|
|
|
262
|
|
|
4,621
|
|
|
12,740
|
|
|
17,361
|
|
|
Total net charge-offs
|
|
2,743
|
|
|
(671
|
)
|
|
6,332
|
|
|
813
|
|
|
25
|
|
|
1,901
|
|
|
1,519
|
|
|
12,662
|
|
|
26,484
|
|
|
39,146
|
|
|
Ending allowance for loan and lease losses
|
|
$
|
10,568
|
|
|
$
|
824
|
|
|
$
|
20,478
|
|
|
$
|
3,379
|
|
|
$
|
365
|
|
|
$
|
5,209
|
|
|
$
|
3,006
|
|
|
$
|
43,829
|
|
|
$
|
18,901
|
|
|
$
|
62,730
|
|
|
Ending allowance on loans individually evaluated for impairment
|
|
$
|
2,080
|
|
|
$
|
0
|
|
|
$
|
2,872
|
|
|
$
|
348
|
|
|
$
|
0
|
|
|
$
|
2
|
|
|
$
|
0
|
|
|
$
|
5,302
|
|
|
$
|
0
|
|
|
$
|
5,302
|
|
|
Ending allowance on loans collectively evaluated for impairment
|
|
8,488
|
|
|
824
|
|
|
17,606
|
|
|
3,031
|
|
|
365
|
|
|
5,207
|
|
|
3,006
|
|
|
38,527
|
|
|
18,901
|
|
|
57,428
|
|
|
Ending allowance for loan and lease losses
|
|
$
|
10,568
|
|
|
$
|
824
|
|
|
$
|
20,478
|
|
|
$
|
3,379
|
|
|
$
|
365
|
|
|
$
|
5,209
|
|
|
$
|
3,006
|
|
|
$
|
43,829
|
|
|
$
|
18,901
|
|
|
$
|
62,730
|
|
|
Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of loans individually evaluated for impairment
|
|
$
|
10,391
|
|
|
$
|
0
|
|
|
$
|
18,023
|
|
|
$
|
3,493
|
|
|
$
|
122
|
|
|
$
|
648
|
|
|
$
|
0
|
|
|
$
|
32,677
|
|
|
$
|
0
|
|
|
$
|
32,677
|
|
|
Ending balance of loans collectively evaluated for impairment
|
|
1,025,277
|
|
|
80,741
|
|
|
1,478,964
|
|
|
349,438
|
|
|
47,011
|
|
|
375,806
|
|
|
115,727
|
|
|
3,472,964
|
|
|
457,873
|
|
|
3,930,837
|
|
|
Total loans
|
|
$
|
1,035,668
|
|
|
$
|
80,741
|
|
|
$
|
1,496,987
|
|
|
$
|
352,931
|
|
|
$
|
47,133
|
|
|
$
|
376,454
|
|
|
$
|
115,727
|
|
|
$
|
3,505,641
|
|
|
$
|
457,873
|
|
|
$
|
3,963,514
|
|
78
First Financial Bancorp
2014 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Comm
|
|
Constr
|
|
Comm
|
|
Resid
|
|
Install
|
|
Home equity
|
|
Other
|
|
Total
|
|
Covered/formerly covered
|
|
Grand Total
|
|
Allowance for loan and lease losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
10,289
|
|
|
$
|
4,424
|
|
|
$
|
18,228
|
|
|
$
|
4,994
|
|
|
$
|
1,659
|
|
|
$
|
10,751
|
|
|
$
|
2,231
|
|
|
$
|
52,576
|
|
|
$
|
42,835
|
|
|
$
|
95,411
|
|
|
Provision for loan and lease losses
|
|
1,556
|
|
|
1,528
|
|
|
16,670
|
|
|
346
|
|
|
(883
|
)
|
|
(2,032
|
)
|
|
1,932
|
|
|
19,117
|
|
|
30,903
|
|
|
50,020
|
|
|
Gross charge-offs
|
|
4,312
|
|
|
2,684
|
|
|
11,012
|
|
|
1,814
|
|
|
577
|
|
|
3,661
|
|
|
1,252
|
|
|
25,312
|
|
|
33,907
|
|
|
59,219
|
|
|
Recoveries
|
|
393
|
|
|
0
|
|
|
265
|
|
|
73
|
|
|
323
|
|
|
115
|
|
|
227
|
|
|
1,396
|
|
|
5,359
|
|
|
6,755
|
|
|
Total net charge-offs
|
|
3,919
|
|
|
2,684
|
|
|
10,747
|
|
|
1,741
|
|
|
254
|
|
|
3,546
|
|
|
1,025
|
|
|
23,916
|
|
|
28,548
|
|
|
52,464
|
|
|
Ending allowance for loan and lease losses
|
|
$
|
7,926
|
|
|
$
|
3,268
|
|
|
$
|
24,151
|
|
|
$
|
3,599
|
|
|
$
|
522
|
|
|
$
|
5,173
|
|
|
$
|
3,138
|
|
|
$
|
47,777
|
|
|
$
|
45,190
|
|
|
$
|
92,967
|
|
|
Ending allowance on loans individually evaluated for impairment
|
|
$
|
1,151
|
|
|
$
|
838
|
|
|
$
|
7,155
|
|
|
$
|
290
|
|
|
$
|
0
|
|
|
$
|
2
|
|
|
$
|
92
|
|
|
$
|
9,528
|
|
|
$
|
0
|
|
|
$
|
9,528
|
|
|
Ending allowance on loans collectively evaluated for impairment
|
|
6,775
|
|
|
2,430
|
|
|
16,996
|
|
|
3,309
|
|
|
522
|
|
|
5,171
|
|
|
3,046
|
|
|
38,249
|
|
|
45,190
|
|
|
83,439
|
|
|
Ending allowance for loan and lease losses
|
|
$
|
7,926
|
|
|
$
|
3,268
|
|
|
$
|
24,151
|
|
|
$
|
3,599
|
|
|
$
|
522
|
|
|
$
|
5,173
|
|
|
$
|
3,138
|
|
|
$
|
47,777
|
|
|
$
|
45,190
|
|
|
$
|
92,967
|
|
|
Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance of loans individually evaluated for impairment
|
|
$
|
16,661
|
|
|
$
|
2,076
|
|
|
$
|
35,422
|
|
|
$
|
2,604
|
|
|
$
|
0
|
|
|
$
|
101
|
|
|
$
|
496
|
|
|
$
|
57,360
|
|
|
$
|
0
|
|
|
$
|
57,360
|
|
|
Ending balance of loans collectively evaluated for impairment
|
|
844,372
|
|
|
71,441
|
|
|
1,381,586
|
|
|
315,606
|
|
|
56,810
|
|
|
367,399
|
|
|
84,490
|
|
|
3,121,704
|
|
|
748,116
|
|
|
3,869,820
|
|
|
Total loans, excluding covered loans
|
|
$
|
861,033
|
|
|
$
|
73,517
|
|
|
$
|
1,417,008
|
|
|
$
|
318,210
|
|
|
$
|
56,810
|
|
|
$
|
367,500
|
|
|
$
|
84,986
|
|
|
$
|
3,179,064
|
|
|
$
|
748,116
|
|
|
$
|
3,927,180
|
|
7. Premises and Equipment
Premises and equipment at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
Land and land improvements
|
$
|
42,238
|
|
|
$
|
40,802
|
|
|
Buildings
|
109,806
|
|
|
108,231
|
|
|
Furniture and fixtures
|
57,536
|
|
|
59,563
|
|
|
Leasehold improvements
|
17,948
|
|
|
19,070
|
|
|
Construction in progress
|
6,113
|
|
|
184
|
|
|
|
233,641
|
|
|
227,850
|
|
|
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
92,260
|
|
|
90,740
|
|
|
Total
|
$
|
141,381
|
|
|
$
|
137,110
|
|
Rental expense recorded under operating leases in 2014, 2013 and 2012 was
$7.6 million
,
$8.3 million
and
$7.5 million
, respectively.
First Financial's future minimum lease payments for operating leases are as follows:
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
2015
|
$
|
6,637
|
|
|
2016
|
5,962
|
|
|
2017
|
4,855
|
|
|
2018
|
3,901
|
|
|
2019
|
3,745
|
|
|
Thereafter
|
13,900
|
|
|
Total
|
$
|
39,000
|
|
First Financial Bancorp
2014 Annual Report
79
Notes To Consolidated Financial Statements
8. Goodwill and Other Intangible Assets
Goodwill.
Assets and liabilities acquired in a business combination are recorded at their estimated fair values as of the acquisition date. The excess cost of the acquisition over the fair value of net assets acquired is recorded as goodwill. During the third quarter of 2014, First Financial recorded additions to goodwill related to the acquisitions of First Bexley, Insight and Guernsey. For further detail, see Note 20 – Business Combinations.
Changes in the carrying amount of goodwill for the year ended
December 31, 2014
are shown below.
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Balance at January 1, 2014
|
$
|
95,050
|
|
|
Goodwill resulting from business combinations
|
42,689
|
|
|
Balance at December 31, 2014
|
$
|
137,739
|
|
Goodwill is not amortized, but is measured for impairment on an annual basis as of October 1 of each year, or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. First Financial performed its annual impairment test of goodwill as of October 1, 2014 and no impairment was indicated. As of December 31, 2014, no events or changes in circumstances indicated that the fair value of a reporting unit was below its carrying value.
Other intangible assets.
Other intangible assets primarily consist of core deposit intangibles. Core deposit intangibles represent the estimated fair value of acquired customer deposit relationships. Core deposit intangibles are recorded at their estimated fair value at the date of acquisition and are then amortized on an
accelerated basis
over their estimated useful lives. Core deposit intangibles were
$7.7 million
and
$5.9 million
as of
December 31, 2014
and
December 31, 2013
, respectively. First Financial recorded additions to core deposit intangibles of
$3.5 million
related to the third quarter 2014 acquisitions. First Financial's core deposit intangibles have an estimated weighted average remaining life of
6.6
years as of
December 31, 2014
. Amortization expense recognized on intangible assets for 2014, 2013 and 2012 was
$1.7 million
,
$1.5 million
and
$2.6 million
, respectively.
9. Borrowings
Short-term borrowings on the Consolidated Balance Sheets include repurchase agreements utilized for corporate sweep accounts with cash management account agreements in place, overnight advances from the Federal Loan Home Bank (FHLB) and a short-term line of credit. All repurchase agreements are subject to terms and conditions of repurchase/security agreements between First Financial Bank and the client. To secure the Bank's liability to the client, First Financial Bank is authorized to sell or repurchase U.S. Treasury, government agency and mortgage-backed securities.
During the second quarter of 2014, First Financial entered into a short-term credit facility with an unaffiliated bank for
$15.0 million
that matures on June 1, 2015. This facility can have a variable or fixed interest rate and provides First Financial additional liquidity, if needed, for various corporate activities, including the repurchase of First Financial shares and the payment of dividends to shareholders. As of
December 31, 2014
, there was
no
outstanding balance. The credit agreement requires First Financial to comply with certain covenants including those related to asset quality and capital levels. First Financial was in compliance with all covenants associated with this line of credit as of
December 31, 2014
.
80
First Financial Bancorp
2014 Annual Report
The following is a summary of short-term borrowings for the last three years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
(Dollars in thousands)
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
At December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to repurchase
|
$
|
103,192
|
|
|
0.05
|
%
|
|
$
|
94,749
|
|
|
0.05
|
%
|
|
$
|
122,570
|
|
|
0.13
|
%
|
|
Federal Home Loan Bank borrowings
|
558,200
|
|
|
0.18
|
%
|
|
654,000
|
|
|
0.17
|
%
|
|
502,000
|
|
|
0.17
|
%
|
|
Total
|
$
|
661,392
|
|
|
0.16
|
%
|
|
$
|
748,749
|
|
|
0.16
|
%
|
|
$
|
624,570
|
|
|
0.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to repurchase
|
$
|
119,795
|
|
|
0.05
|
%
|
|
$
|
115,486
|
|
|
0.08
|
%
|
|
$
|
86,980
|
|
|
0.08
|
%
|
|
Federal Home Loan Bank borrowings
|
627,181
|
|
|
0.19
|
%
|
|
472,062
|
|
|
0.23
|
%
|
|
111,295
|
|
|
0.17
|
%
|
|
Total
|
$
|
746,976
|
|
|
0.17
|
%
|
|
$
|
587,548
|
|
|
0.20
|
%
|
|
$
|
198,275
|
|
|
0.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum month-end balances
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to repurchase
|
$
|
132,332
|
|
|
|
|
$
|
158,911
|
|
|
|
|
$
|
170,751
|
|
|
|
|
Federal Home Loan Bank borrowings
|
820,500
|
|
|
|
|
654,000
|
|
|
|
|
502,000
|
|
|
|
Long-term debt primarily consists of FHLB long-term advances and repurchase agreements utilizing investment securities pledged as collateral. These instruments are primarily utilized to reduce overnight liquidity risk and to mitigate interest rate sensitivity on the Consolidated Balance Sheets. First Financial has
$25.0 million
in repurchase agreements which have remaining maturities of less than
1
year and a weighted average rate of
3.54%
. Securities pledged as collateral in conjunction with the repurchase agreements are included within Investment securities on the Consolidated Balance Sheets.
FHLB advances, both short-term and long-term, must be collateralized with qualifying assets, typically certain commercial and residential real estate loans, as well as certain government and agency securities. For ease of borrowing execution, First Financial utilizes a blanket collateral agreement with the FHLB, and at
December 31, 2014
, had collateral pledged with a book value of
$3.2 billion
.
The following is a summary of First Financial's long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
(Dollars in thousands)
|
Amount
|
|
Average Rate
|
|
Amount
|
|
Average Rate
|
|
Federal Home Loan Bank
|
$
|
22,466
|
|
|
2.52
|
%
|
|
$
|
7,505
|
|
|
3.72
|
%
|
|
National Market Repurchase Agreement
|
25,000
|
|
|
3.54
|
%
|
|
52,500
|
|
|
3.49
|
%
|
|
Capital loan with municipality
|
775
|
|
|
0.00
|
%
|
|
775
|
|
|
0.00
|
%
|
|
Total long-term debt
|
$
|
48,241
|
|
|
3.01
|
%
|
|
$
|
60,780
|
|
|
3.48
|
%
|
As of
December 31, 2014
, First Financial's long-term debt matures as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
FHLB
|
|
Repurchase
Agreement
|
|
2015
|
$
|
6,403
|
|
|
$
|
25,000
|
|
|
2016
|
10,338
|
|
|
0
|
|
|
2017
|
55
|
|
|
0
|
|
|
2018
|
3,117
|
|
|
0
|
|
|
2019
|
969
|
|
|
0
|
|
|
Thereafter
|
1,584
|
|
|
0
|
|
|
Total
|
$
|
22,466
|
|
|
$
|
25,000
|
|
First Financial Bancorp
2014 Annual Report
81
Notes To Consolidated Financial Statements
10. Derivatives
First Financial uses certain derivative instruments, including interest rate caps, floors and swaps, to meet the needs of its clients while managing the interest rate risk associated with certain transactions. First Financial does not use derivatives for speculative purposes. For discussion of First Financial's accounting for derivative instruments, see Note 1 - Summary of Significant Accounting Policies.
First Financial primarily utilizes interest rate swaps as a means to offer borrowers credit-based products that meet their needs and may from time to time utilize interest rate swaps to manage the interest rate risk profile of the Company.
Interest rate swap agreements establish the basis on which interest rate payments are exchanged with counterparties, referred to as the notional amount. As only interest rate payments are exchanged, the cash requirements and credit risk associated with interest rate swaps are significantly less than the notional amount and the Company’s credit risk exposure is limited to the market value of the instruments. First Financial manages this market value credit risk through counterparty credit policies. These policies require the Company to maintain a total derivative notional position of less than
35%
of assets, total credit exposure of less than
3%
of capital and no single counterparty credit risk exposure greater than
$20.0 million
. The Company is currently well below all single counterparty and portfolio limits. At
December 31, 2014
, the Company had a total counterparty notional amount outstanding of approximately
$566.2 million
, spread among
nine
counterparties, with an outstanding liability from these contracts of
$12.4 million
. At
December 31, 2013
, First Financial had a total counterparty notional amount outstanding of
$561.6 million
, spread among
nine
counterparties, with an outstanding liability from these contracts of
$9.3 million
.
First Financial’s exposure to credit loss, in the event of nonperformance by a borrower, is limited to the market value of the derivative instrument associated with that borrower. First Financial monitors its derivative credit exposure to borrowers by monitoring the creditworthiness of the related loan customers through the normal credit review processes the Company performs on all borrowers. Additionally, the Company monitors derivative credit risk exposure related to problem loans through the Company's allowance for loan and lease losses committee. First Financial considers the market value of a derivative instrument to be part of the carrying value of the related loan for these purposes as the borrower is contractually obligated to pay First Financial this amount in the event the derivative contract is terminated.
Fair value hedges.
First Financial utilizes interest rate swaps designated as fair value hedges as a means to offer commercial borrowers fixed rate funding while providing the Company with floating rate assets. The following table details the location and amounts recognized in the Consolidated Balance Sheets for fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
|
|
|
|
|
|
Estimated fair value
|
|
|
|
Estimated fair value
|
|
(Dollars in thousands)
|
|
Balance
Sheet Location
|
|
Notional
amount
|
|
Gain
|
|
Loss
|
|
Notional
amount
|
|
Gain
|
|
Loss
|
|
Fair Value Hedges - Instruments associated with loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed interest rate swaps with counterparty
|
|
Accrued interest and other liabilities
|
|
$
|
8,739
|
|
|
$
|
0
|
|
|
$
|
(440
|
)
|
|
$
|
9,836
|
|
|
$
|
0
|
|
|
$
|
(865
|
)
|
|
Matched interest rate swaps with borrower
|
|
Accrued interest and other assets and other liabilities
|
|
407,423
|
|
|
11,150
|
|
|
(249
|
)
|
|
451,744
|
|
|
11,710
|
|
|
(1,767
|
)
|
|
Matched interest rate swaps with counterparty
|
|
Accrued interest and other liabilities
|
|
407,423
|
|
|
249
|
|
|
(11,227
|
)
|
|
451,744
|
|
|
1,767
|
|
|
(11,799
|
)
|
|
Total
|
|
|
|
$
|
823,585
|
|
|
$
|
11,399
|
|
|
$
|
(11,916
|
)
|
|
$
|
913,324
|
|
|
$
|
13,477
|
|
|
$
|
(14,431
|
)
|
In connection with its use of derivative instruments, First Financial and its counterparties are required to post cash collateral to offset the market position of the derivative instruments under certain conditions. First Financial maintains the right to offset these derivative positions with the collateral posted against them by or with the relevant counterparties. First Financial classifies the derivative cash collateral outstanding with its counterparties as an adjustment to the fair value of the derivative contracts within Accrued interest and other assets or Accrued interest and other liabilities in the Consolidated Balance Sheets.
82
First Financial Bancorp
2014 Annual Report
The following table discloses the gross and net amounts of assets and liabilities recognized in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
(Dollars in thousands)
|
Gross amounts of recognized liabilities
|
|
Gross amounts offset in the Consolidated Balance Sheets
|
|
Net amounts of assets presented in the Consolidated Balance Sheets
|
|
Gross amounts of recognized liabilities
|
|
Gross amounts offset in the Consolidated Balance Sheets
|
|
Net amounts of liabilities presented in the Consolidated Balance Sheets
|
|
Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed interest rate swaps with counterparty
|
$
|
440
|
|
|
$
|
0
|
|
|
$
|
440
|
|
|
$
|
865
|
|
|
$
|
(663
|
)
|
|
$
|
202
|
|
|
Matched interest rate swaps
|
11,476
|
|
|
(12,260
|
)
|
|
(784
|
)
|
|
13,566
|
|
|
(9,533
|
)
|
|
4,033
|
|
|
Total
|
$
|
11,916
|
|
|
$
|
(12,260
|
)
|
|
$
|
(344
|
)
|
|
$
|
14,431
|
|
|
$
|
(10,196
|
)
|
|
$
|
4,235
|
|
The following table details the derivative financial instruments, the average remaining maturities and the weighted-average interest rates being paid and received by First Financial at
December 31, 2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Rate
|
|
(Dollars in thousands)
|
|
Notional
amount
|
|
Average
maturity
(years)
|
|
Fair
value
|
|
Receive
|
|
Pay
|
|
Asset conversion swaps
|
|
|
|
|
|
|
|
|
|
|
|
Pay fixed interest rate swaps with counterparty
|
|
$
|
8,739
|
|
|
2.0
|
|
$
|
(440
|
)
|
|
2.09
|
%
|
|
6.85
|
%
|
|
Receive fixed, matched interest rate swaps with borrower
|
|
407,423
|
|
|
4.1
|
|
10,901
|
|
|
4.66
|
%
|
|
2.65
|
%
|
|
Pay fixed, matched interest rate swaps with counterparty
|
|
407,423
|
|
|
4.1
|
|
(10,978
|
)
|
|
2.65
|
%
|
|
4.66
|
%
|
|
Total asset conversion swaps
|
|
$
|
823,585
|
|
|
4.1
|
|
$
|
(517
|
)
|
|
3.64
|
%
|
|
3.69
|
%
|
Cash flow hedges.
First Financial utilizes interest rate swaps designated as cash flow hedges to hedge against interest rate volatility on indexed floating rate deposits, totaling
$150.0 million
as of
December 31, 2014
and
$100.0 million
as of
December 31, 2013
. These interest rate swaps qualify for hedge accounting and involve the receipt by First Financial of variable-rate interest amounts in exchange for fixed-rate interest payments by First Financial and have a remaining weighted average term of approximately
4.3 years
. Accrued interest and other liabilities included
$1.7 million
at
December 31, 2014
and accrued interest and other assets included
$0.8 million
at
December 31, 2013
, respectively, reflecting the fair value of these cash flow hedges.
Credit derivatives.
In conjunction with participating interests in commercial loans, First Financial periodically enters into risk participation agreements with other counterparties whereby First Financial assumes a portion of the credit exposure associated with an interest rate swap on the participated loan in exchange for a fee. Under these agreements, First Financial will make payments to the counterparty if the loan customer defaults on its obligation to perform under the interest rate swap contract with the counterparty. The total notional value of these agreements totaled
$26.4 million
as of
December 31, 2014
and
$13.3 million
as of
December 31, 2013
. The fair value of these agreements were recorded on the Consolidated Balance Sheets as liabilities of
$0.1 million
as of
December 31, 2014
and
$28 thousand
as of
December 31, 2013
.
11. Commitments and Contingencies
In the normal course of business, First Financial offers a variety of financial instruments with off-balance-sheet risk to its clients to assist them in meeting their requirement for liquidity and credit enhancement. These financial instruments include standby letters of credit and outstanding commitments to extend credit. GAAP does not require these financial instruments to be recorded in the Consolidated Financial Statements.
First Financial’s exposure to credit loss, in the event of nonperformance by the counterparty to the financial instrument for standby letters of credit and outstanding commitments to extend credit, is represented by the contractual amounts of those instruments. First Financial uses the same credit policies in issuing commitments and conditional obligations as it does for credit instruments recorded on the Consolidated Balance Sheets.
First Financial Bancorp
2014 Annual Report
83
Notes To Consolidated Financial Statements
Letters of credit.
Letters of credit are conditional commitments issued by First Financial to guarantee the performance of a client to a third party. First Financial’s portfolio of standby letters of credit consists primarily of performance assurances made on behalf of clients who have a contractual commitment to produce or deliver goods or services. The risk to First Financial arises from its obligation to make payment in the event of the clients’ contractual default to produce the contracted good or service to a third party. First Financial has issued letters of credit (including standby letters of credit) aggregating
$22.8 million
and
$14.0 million
at
December 31, 2014
, and
December 31, 2013
, respectively. Management conducts regular reviews of these instruments on an individual client basis.
Loan commitments.
Loan commitments are agreements to extend credit to a client as long as there is no violation of any condition established in the commitment agreement. 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. The amount of collateral obtained, if deemed necessary by First Financial upon extension of credit, is based on management’s credit evaluation of the client. The collateral held varies, but may include securities, real estate, inventory, plant or equipment. First Financial had commitments outstanding to extend credit totaling
$1.8 billion
and
$1.4 billion
at
December 31, 2014
and
December 31, 2013
, respectively.
First Financial utilizes the allowance for loan and lease losses methodology to maintain a reserve that it considers sufficient to absorb probable losses inherent in standby letters of credit and outstanding loan commitments. For further detail on the reserve for unfunded commitments methodology, see Note 1 – Summary of Significant Accounting Policies.
Contingencies/Litigation –
First Financial and its subsidiaries are engaged in various matters of litigation, assertions of improper or fraudulent loan practices or lending violations and other matters from time to time, and have a number of unresolved claims pending. Additionally, as part of the ordinary course of business, First Financial and its subsidiaries are parties to litigation involving claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral and foreclosure interests, that is incidental to our regular business activities. While the ultimate liability with respect to these other litigation matters and claims cannot be determined at this time, First Financial believes that damages, if any, and other amounts relating to pending matters are not probable or cannot be reasonably estimated as of
December 31, 2014
. Reserves are established for these various matters of litigation, when appropriate, under FASB ASC Topic 450, Contingencies, based in part upon the advice of legal counsel.
12. Loans to Related Parties
Loans to directors, executive officers, principal holders of First Financial’s common stock and certain related persons were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
Beginning balance
|
|
$
|
8,097
|
|
|
$
|
10,426
|
|
|
$
|
10,599
|
|
|
Additions
|
|
5,034
|
|
|
827
|
|
|
1,791
|
|
|
Deductions
|
|
(6,936
|
)
|
|
(3,156
|
)
|
|
(1,964
|
)
|
|
Ending balance
|
|
$
|
6,195
|
|
|
$
|
8,097
|
|
|
$
|
10,426
|
|
|
Loans 90 days past due
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Related parties of First Financial, as defined for inclusion in the table above, were clients of, and had transactions with, subsidiaries of First Financial in the ordinary course of business during the periods noted. Similar transactions with related parties may be expected in future periods. All outstanding loans, commitments, financing leases, transactions in money market instruments and deposit relationships included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with non-related parties, and did not involve greater than a normal risk of collectibility or present other unfavorable features.
13. Income Taxes
Income tax expense consisted of the following components:
84
First Financial Bancorp
2014 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2012
|
|
Current expense
|
|
|
|
|
|
|
Federal
|
$
|
49,561
|
|
|
$
|
41,679
|
|
|
$
|
45,571
|
|
|
State
|
2,872
|
|
|
2,883
|
|
|
4,956
|
|
|
Total current expense
|
52,433
|
|
|
44,562
|
|
|
50,527
|
|
|
Deferred (benefit) expense
|
|
|
|
|
|
|
Federal
|
(19,368
|
)
|
|
(21,393
|
)
|
|
(12,499
|
)
|
|
State
|
(3,037
|
)
|
|
(3,935
|
)
|
|
(1,586
|
)
|
|
Total deferred (benefit) expense
|
(22,405
|
)
|
|
(25,328
|
)
|
|
(14,085
|
)
|
|
Income tax expense
|
$
|
30,028
|
|
|
$
|
19,234
|
|
|
$
|
36,442
|
|
The difference between the federal income tax rates, applied to income before income taxes, and the effective rates were due to the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2012
|
|
Income taxes computed at federal statutory rate (35%) on income before income taxes
|
$
|
33,260
|
|
|
$
|
23,646
|
|
|
$
|
36,311
|
|
|
Tax-exempt income
|
(1,912
|
)
|
|
(1,266
|
)
|
|
(626
|
)
|
|
Bank-owned life insurance
|
(392
|
)
|
|
(409
|
)
|
|
(680
|
)
|
|
Tax credits
|
(1,100
|
)
|
|
(1,100
|
)
|
|
(1,200
|
)
|
|
State income taxes, net of federal tax benefit
|
(107
|
)
|
|
(588
|
)
|
|
2,191
|
|
|
Tax settlement of unconsolidated subsidiary
|
0
|
|
|
(1,318
|
)
|
|
0
|
|
|
Other
|
279
|
|
|
269
|
|
|
446
|
|
|
Income tax expense
|
$
|
30,028
|
|
|
$
|
19,234
|
|
|
$
|
36,442
|
|
First Financial Bancorp
2014 Annual Report
85
Notes To Consolidated Financial Statements
The major components of the temporary differences that give rise to deferred tax assets and liabilities at
December 31, 2014
, and
2013
, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
Deferred tax assets
|
|
|
|
|
Allowance for loan and lease losses
|
$
|
19,227
|
|
|
$
|
23,074
|
|
|
Deferred compensation
|
533
|
|
|
564
|
|
|
Postretirement benefits other than pension liability
|
938
|
|
|
86
|
|
|
Accrued stock-based compensation
|
1,170
|
|
|
1,222
|
|
|
Other real estate owned write-downs
|
1,962
|
|
|
2,507
|
|
|
Interest on nonaccrual loans
|
1,586
|
|
|
1,145
|
|
|
Accrued expenses
|
4,616
|
|
|
3,617
|
|
|
Net unrealized losses on investment securities and derivatives
|
1,926
|
|
|
8,871
|
|
|
Fair value adjustment on acquisitions
|
844
|
|
|
0
|
|
|
Other
|
438
|
|
|
465
|
|
|
Total deferred tax assets
|
33,240
|
|
|
41,551
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
Tax depreciation greater than book depreciation
|
(6,310
|
)
|
|
(7,450
|
)
|
|
FHLB and FRB stock
|
(5,852
|
)
|
|
(6,230
|
)
|
|
Mortgage-servicing rights
|
(136
|
)
|
|
(12
|
)
|
|
Leasing activities
|
(5,297
|
)
|
|
(3,833
|
)
|
|
Deferred section 597 gain
|
0
|
|
|
(20,550
|
)
|
|
Prepaid pension
|
(14,333
|
)
|
|
(15,727
|
)
|
|
Intangible assets
|
(12,963
|
)
|
|
(11,612
|
)
|
|
Deferred loan fees and costs
|
(1,167
|
)
|
|
(2,136
|
)
|
|
Prepaid expenses
|
(364
|
)
|
|
(535
|
)
|
|
Fair value adjustments on acquisitions
|
0
|
|
|
(6,714
|
)
|
|
Other
|
(1,824
|
)
|
|
(1,180
|
)
|
|
Total deferred tax liabilities
|
(48,246
|
)
|
|
(75,979
|
)
|
|
Total net deferred tax liability
|
$
|
(15,006
|
)
|
|
$
|
(34,428
|
)
|
The realization of the Company’s deferred tax assets is dependent upon the Company’s ability to generate taxable income in future periods, the reversal of deferred tax liabilities during the same period and the ability to carryback any losses. The Company has evaluated the available evidence supporting the realization of its deferred tax assets and determined it is more likely than not that the assets will be realized and thus no valuation allowance was required at December 31, 2014 and 2013.
At
December 31, 2014
and
2013
, First Financial had no FASB ASC Topic 740-10 unrecognized tax benefits recorded. First Financial does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months.
First Financial regularly reviews its tax positions and establishes reserves for income tax-related uncertainties based on estimates of whether it is more likely than not that the tax uncertainty would be sustained upon challenge by the appropriate tax authorities which would then result in additional taxes, penalties and interest due. These evaluations are inherently subjective as they require material estimates and may be susceptible to significant change. Provision for tax reserves, if any, is included in income tax expense in the Consolidated Financial Statements. Management determined that no reserve for income tax-related uncertainties was necessary as of December 31, 2014 and 2013.
First Financial and its subsidiaries are subject to U.S. federal income tax as well as state and local income tax in several jurisdictions. Tax years prior to 2011 have been closed and are no longer subject to U.S. federal income tax examinations. The tax year 2012 is currently under examination by the federal taxing authority. At this time, First Financial is not aware of any material impact to the Company's financial position or results of operations as a result of this examination. Tax years 2011 through 2013 remain open to examination by the federal taxing authority.
86
First Financial Bancorp
2014 Annual Report
First Financial is no longer subject to state and local income tax examinations for years prior to 2010. Tax years 2010 through 2013 remain open to state and local examination by various other jurisdictions.
14. Employee Benefit Plans
Pension plan.
First Financial sponsors a non-contributory defined benefit pension plan covering substantially all employees and uses a December 31 measurement date for the plan.
Prior to the fourth quarter of 2013, plan assets were administered and managed by the Wealth Management division of First Financial Bank. During the fourth quarter of 2013, the investment management and trustee services were transitioned to a third party vendor. As of December 31, 2013 and 2014, plan assets were primarily invested in publicly traded equity mutual funds and fixed income mutual funds. The pension plan does not directly own any shares of First Financial common stock or any other First Financial security or product.
The investment objective of the Plan is to structure the assets to, as much as feasible, mirror the liabilities of the Plan. The current target asset allocation set by the Bank for the Plan is
60%
equities and
40%
fixed income, with the aim to use the fixed income component to match the identified near and long-term plan distributions and the equity component to generate growth of capital to meet other future Plan liabilities. The determination of the overall expected long-term return on plan assets was based on the composition of plan assets and a consensus of estimates from similarly managed portfolios of expected future returns.
Associates are eligible to request a lump sum distribution from the Company's pension plan at retirement or upon leaving the Company. As a result of lump sum distributions from the plan during 2013, First Financial was required to re-measure the plan's assets and liabilities and recognized pension settlement charges of
$6.2 million
. Consistent with FASB ASC Topic 715, Compensation - Retirement Benefits, pension settlement charges are an acceleration of previously deferred costs that would have been recognized in future periods and are triggered when lump sum distributions exceed an annual accounting threshold for the plan. The accounting threshold for lump sum distributions reset on January 1, 2014 and the annual accounting threshold was not exceeded during the year. Therefore, First Financial recognized
no
pension settlement charges for the year ended
December 31, 2014
.
As a result of the plan’s updated actuarial projections for 2014, First Financial recorded income related to its pension plan of
$1.1 million
for 2014, compared to expense of
$5.5 million
for 2013 and income of
$0.5 million
for 2012. First Financial made
no
cash contributions to the pension plan in 2012, 2013 or 2014 and does not expect to make a cash contribution to the plan in 2015.
First Financial Bancorp
2014 Annual Report
87
Notes To Consolidated Financial Statements
The following tables set forth information concerning amounts recognized in First Financial's Consolidated Balance Sheets and Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollars in thousands)
|
|
2014
|
|
2013
|
|
Change in benefit obligation
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
55,591
|
|
|
$
|
67,678
|
|
|
Service cost
|
|
4,119
|
|
|
3,705
|
|
|
Interest cost
|
|
2,388
|
|
|
2,319
|
|
|
Amendments
|
|
0
|
|
|
124
|
|
|
Actuarial gain (loss)
|
|
6,025
|
|
|
(6,745
|
)
|
|
Benefits paid, excluding settlement
|
|
(8,343
|
)
|
|
(1,111
|
)
|
|
Settlements
|
|
0
|
|
|
(10,379
|
)
|
|
Benefit obligation at end of year
|
|
59,780
|
|
|
55,591
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
131,647
|
|
|
123,716
|
|
|
Actual return on plan assets
|
|
10,022
|
|
|
19,421
|
|
|
Employer contribution
|
|
0
|
|
|
0
|
|
|
Benefits paid, excluding settlement
|
|
(8,343
|
)
|
|
(1,111
|
)
|
|
Settlements
|
|
0
|
|
|
(10,379
|
)
|
|
Fair value of plan assets at end of year
|
|
133,326
|
|
|
131,647
|
|
|
|
|
|
|
|
|
Amounts recognized in the Consolidated Balance Sheets
|
|
|
|
|
|
Assets
|
|
73,546
|
|
|
76,056
|
|
|
Liabilities
|
|
0
|
|
|
0
|
|
|
Net amount recognized
|
|
$
|
73,546
|
|
|
$
|
76,056
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive income (loss)
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
31,644
|
|
|
$
|
28,411
|
|
|
Net prior service cost
|
|
(3,159
|
)
|
|
(3,573
|
)
|
|
Deferred tax assets
|
|
(10,581
|
)
|
|
(9,273
|
)
|
|
Net amount recognized
|
|
$
|
17,904
|
|
|
$
|
15,565
|
|
|
|
|
|
|
|
|
Change in accumulated other comprehensive income (loss)
|
|
$
|
2,339
|
|
|
$
|
(15,773
|
)
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
59,063
|
|
|
$
|
53,664
|
|
88
First Financial Bancorp
2014 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollars in thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
Service cost
|
|
$
|
4,119
|
|
|
$
|
3,705
|
|
|
$
|
3,483
|
|
|
Interest cost
|
|
2,388
|
|
|
2,319
|
|
|
2,550
|
|
|
Expected return on assets
|
|
(9,055
|
)
|
|
(8,988
|
)
|
|
(9,055
|
)
|
|
Amortization of prior service cost
|
|
(413
|
)
|
|
(423
|
)
|
|
(423
|
)
|
|
Recognized net actuarial loss
|
|
1,824
|
|
|
2,709
|
|
|
2,964
|
|
|
Settlement charges
|
|
0
|
|
|
6,174
|
|
|
0
|
|
|
Net periodic benefit (income) cost
|
|
(1,137
|
)
|
|
5,496
|
|
|
(481
|
)
|
|
|
|
|
|
|
|
|
|
Other changes recognized in accumulated other comprehensive income
|
|
|
|
|
|
Net actuarial (gain) loss
|
|
5,058
|
|
|
(17,178
|
)
|
|
(1,954
|
)
|
|
Prior service cost
|
|
0
|
|
|
124
|
|
|
0
|
|
|
Amortization of prior service cost
|
|
413
|
|
|
423
|
|
|
423
|
|
|
Amortization of gain
|
|
(1,824
|
)
|
|
(2,709
|
)
|
|
(2,964
|
)
|
|
Settlement charges
|
|
0
|
|
|
(6,174
|
)
|
|
0
|
|
|
Total recognized in accumulated other comprehensive income
|
|
3,647
|
|
|
(25,514
|
)
|
|
(4,495
|
)
|
|
Total recognized in net periodic benefit cost and accumulated other comprehensive income
|
|
$
|
2,510
|
|
|
$
|
(20,018
|
)
|
|
$
|
(4,976
|
)
|
|
|
|
|
|
|
|
|
|
Amount expected to be recognized in net periodic pension expense in the coming year
|
|
|
|
|
|
Amortization of loss
|
|
$
|
1,780
|
|
|
$
|
1,926
|
|
|
$
|
3,248
|
|
|
Amortization of prior service credit
|
|
(413
|
)
|
|
(413
|
)
|
|
(423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions to determine
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2014
|
|
2013
|
|
Benefit obligations
|
|
|
|
|
|
Discount rate
|
|
3.76
|
%
|
|
4.62
|
%
|
|
Rate of compensation increase
|
|
3.50
|
%
|
|
3.50
|
%
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
|
|
|
|
Discount rate
|
|
4.62
|
%
|
|
3.73
|
%
|
|
Expected return on plan assets
|
|
7.50
|
%
|
|
7.50
|
%
|
|
Rate of compensation increase
|
|
3.50
|
%
|
|
3.50
|
%
|
The fair value of the plan assets as of
December 31, 2014
by asset category is shown in the table that follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
(Dollars in thousands)
|
|
Total
|
|
Quoted Prices in
Active Markets
for
Identical Assets
(Level 1)
|
|
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Asset Category
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
172
|
|
|
$
|
172
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Fixed income mutual funds
|
|
49,938
|
|
|
49,938
|
|
|
0
|
|
|
0
|
|
|
Equity mutual funds
|
|
83,216
|
|
|
83,216
|
|
|
0
|
|
|
0
|
|
|
Total
|
|
$
|
133,326
|
|
|
$
|
133,326
|
|
|
$
|
0
|
|
|
$
|
0
|
|
First Financial Bancorp
2014 Annual Report
89
Notes To Consolidated Financial Statements
The fair value of the plan assets as of
December 31, 2013
by asset category is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
(Dollars in thousands)
|
|
Total
|
|
Quoted Prices in
Active Markets
for
Identical Assets
(Level 1)
|
|
Significant
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Asset Category
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
126
|
|
|
$
|
126
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Fixed income mutual funds
|
|
50,277
|
|
|
50,277
|
|
|
0
|
|
|
0
|
|
|
Equity mutual funds
|
|
81,244
|
|
|
81,244
|
|
|
0
|
|
|
0
|
|
|
Total
|
|
$
|
131,647
|
|
|
$
|
131,647
|
|
|
$
|
0
|
|
|
$
|
0
|
|
An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. See Note 19 – Fair Value Disclosures for further information related to the framework for measuring fair value and the fair value hierarchy.
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Retirement
Benefits
|
|
2015
|
|
$
|
4,436
|
|
|
2016
|
|
5,946
|
|
|
2017
|
|
4,433
|
|
|
2018
|
|
5,089
|
|
|
2019
|
|
4,442
|
|
|
Thereafter
|
|
26,926
|
|
Effective January 1, 2014 all active plan participants immediately vest in their benefit, compared to the three year vesting period in effect as of December 31, 2013. Also beginning January 1, 2014, the Pension Plan no longer offers additional benefits for associates with compensation in excess of 50% of the Social Security wage base.
401(k) thrift plan.
First Financial sponsors a defined contribution 401(k) thrift plan which covers substantially all employees. Employees may contribute up to
50.0%
of their earnings into the plan, not to exceed applicable limitations prescribed by the Internal Revenue Service. First Financial contributions to the 401(k) plan are at the discretion of the board of directors and considers management's recommendation. First Financial measures the Company's performance compared to its identified peer group in determining whether to recommend a matching contribution, with the amount of the recommended matching contribution not to exceed 3% of the employee's annual earnings. Prior to January 1, 2014, First Financial contributed
$1.00
for every
$1.00
an employee contributed up to
3.00%
of the employee's earnings and then contributed
$0.50
for every
$1.00
thereafter, up to a maximum First Financial total contribution of
4.00%
of the employee's earnings. All First Financial matching contributions vest immediately. There were
no
contributions to the 401(k) plan during 2014. First Financial contributed
$2.4 million
to the plan during 2013 and
$2.6 million
during 2012.
Bank-owned life insurance.
First Financial purchases life insurance policies on the lives of certain employees and is the owner and beneficiary of the policies. The Bank invests in these policies to provide an efficient form of funding for long-term retirement and other employee benefits costs. The policies are included within Accrued interest and other assets in the Consolidated Balance Sheets at each policy’s respective cash surrender value, with changes recorded in other noninterest income in the Consolidated Statements of Income. The carrying value of bank-owned life insurance policies was
$93.0 million
and
$88.7 million
at
December 31, 2014
, and
2013
, respectively.
90
First Financial Bancorp
2014 Annual Report
15. Accumulated Other Comprehensive Income (Loss)
Shareholders’ equity is affected by transactions and valuations of asset and liability positions that require adjustments to accumulated other comprehensive income (loss). The related tax effects allocated to other comprehensive income and accumulated other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
Total other comprehensive income
|
|
Total accumulated
other comprehensive income
|
|
(Dollars in thousands)
|
Prior to
Reclassification
|
|
Reclassification
from
|
|
Pre-tax
|
|
Tax-effect
|
|
Net of tax
|
|
Beginning Balance
|
|
Net Activity
|
|
Ending Balance
|
|
Unrealized gain (loss) on investment securities
|
$
|
21,718
|
|
|
$
|
70
|
|
|
$
|
21,648
|
|
|
$
|
(7,865
|
)
|
|
$
|
13,783
|
|
|
$
|
(16,289
|
)
|
|
$
|
13,783
|
|
|
$
|
(2,506
|
)
|
|
Unrealized gain (loss) on derivatives
|
(2,902
|
)
|
|
(432
|
)
|
|
(2,470
|
)
|
|
919
|
|
|
(1,551
|
)
|
|
602
|
|
|
(1,551
|
)
|
|
(949
|
)
|
|
Retirement obligation
|
(5,058
|
)
|
|
(1,411
|
)
|
|
(3,647
|
)
|
|
1,308
|
|
|
(2,339
|
)
|
|
(15,565
|
)
|
|
(2,339
|
)
|
|
(17,904
|
)
|
|
Foreign currency translation
|
(21
|
)
|
|
0
|
|
|
(21
|
)
|
|
0
|
|
|
(21
|
)
|
|
(29
|
)
|
|
(21
|
)
|
|
(50
|
)
|
|
Total
|
$
|
13,737
|
|
|
$
|
(1,773
|
)
|
|
$
|
15,510
|
|
|
$
|
(5,638
|
)
|
|
$
|
9,872
|
|
|
$
|
(31,281
|
)
|
|
$
|
9,872
|
|
|
$
|
(21,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
Total other comprehensive income
|
|
Total accumulated
other comprehensive income
|
|
(Dollars in thousands)
|
Prior to
Reclassification
|
|
Reclassification
from
|
|
Pre-tax
|
|
Tax-effect
|
|
Net of tax
|
|
Beginning Balance
|
|
Net Activity
|
|
Ending Balance
|
|
Unrealized gain (loss) on investment securities
|
$
|
(44,365
|
)
|
|
$
|
1,724
|
|
|
$
|
(46,089
|
)
|
|
$
|
16,998
|
|
|
$
|
(29,091
|
)
|
|
$
|
12,802
|
|
|
$
|
(29,091
|
)
|
|
$
|
(16,289
|
)
|
|
Unrealized gain (loss) on derivatives
|
778
|
|
|
(412
|
)
|
|
1,190
|
|
|
(445
|
)
|
|
745
|
|
|
(143
|
)
|
|
745
|
|
|
602
|
|
|
Retirement obligation
|
17,054
|
|
|
(8,460
|
)
|
|
25,514
|
|
|
(9,741
|
)
|
|
15,773
|
|
|
(31,338
|
)
|
|
15,773
|
|
|
(15,565
|
)
|
|
Foreign currency translation
|
(31
|
)
|
|
0
|
|
|
(31
|
)
|
|
0
|
|
|
(31
|
)
|
|
2
|
|
|
(31
|
)
|
|
(29
|
)
|
|
Total
|
$
|
(26,564
|
)
|
|
$
|
(7,148
|
)
|
|
$
|
(19,416
|
)
|
|
$
|
6,812
|
|
|
$
|
(12,604
|
)
|
|
$
|
(18,677
|
)
|
|
$
|
(12,604
|
)
|
|
$
|
(31,281
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
Total other comprehensive income
|
|
Total accumulated
other comprehensive income
|
|
(Dollars in thousands)
|
|
Pre-tax
|
|
Tax-effect
|
|
Net of tax
|
|
Beginning Balance
|
|
Net Activity
|
|
Ending Balance
|
|
Unrealized gain (loss) on investment securities
|
|
$
|
214
|
|
|
$
|
(81
|
)
|
|
$
|
133
|
|
|
$
|
12,669
|
|
|
$
|
133
|
|
|
$
|
12,802
|
|
|
Unrealized gain (loss) on derivatives
|
|
(229
|
)
|
|
86
|
|
|
(143
|
)
|
|
0
|
|
|
(143
|
)
|
|
(143
|
)
|
|
Retirement obligation
|
|
4,495
|
|
|
(1,697
|
)
|
|
2,798
|
|
|
(34,136
|
)
|
|
2,798
|
|
|
(31,338
|
)
|
|
Foreign currency translation
|
|
25
|
|
|
0
|
|
|
25
|
|
|
(23
|
)
|
|
25
|
|
|
2
|
|
|
Total
|
|
$
|
4,505
|
|
|
$
|
(1,692
|
)
|
|
$
|
2,813
|
|
|
$
|
(21,490
|
)
|
|
$
|
2,813
|
|
|
$
|
(18,677
|
)
|
First Financial Bancorp
2014 Annual Report
91
Notes To Consolidated Financial Statements
The following table details the activity reclassified from accumulated other comprehensive income into income during the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Reclassified from Accumulated Other Comprehensive Income
(1)
|
|
|
|
|
|
December 31,
|
|
|
|
(Dollars in thousands)
|
|
2014
|
|
2013
|
|
Affected Line Item in the Consolidated Statements of Income
|
|
Gain and loss on cash flow hedges
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
(432
|
)
|
|
$
|
(412
|
)
|
|
Interest expense - deposits
|
|
Realized gains and losses on securities available-for-sale
|
|
70
|
|
|
1,724
|
|
|
Gains on sales of investments securities
|
|
Defined benefit pension plan
|
|
|
|
|
|
|
|
Amortization of prior service cost
(2)
|
|
413
|
|
|
423
|
|
|
Salaries and employee benefits
|
|
Recognized net actuarial loss
(2)
|
|
(1,824
|
)
|
|
(2,709
|
)
|
|
Salaries and employee benefits
|
|
Pension settlement charges
|
|
0
|
|
|
(6,174
|
)
|
|
Pension settlement charges
|
|
Amortization and settlement charges of defined benefit pension items
|
|
(1,411
|
)
|
|
(8,460
|
)
|
|
|
|
Total reclassifications for the period, before tax
|
|
$
|
(1,773
|
)
|
|
$
|
(7,148
|
)
|
|
|
(1)
Negative amounts are debits to profit/loss.
(2)
Included in the computation of net periodic pension cost (see Note 14 - Employee Benefit Plans for additional details).
16. Capital
Risk-based capital.
First Financial and its subsidiary, First Financial Bank, are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate regulatory action.
Quantitative measures established by regulation to ensure capital adequacy require First Financial to maintain minimum amounts and ratios as defined by the regulations of Total and Tier 1 capital to risk-weighted assets and to average assets. Management believes, as of
December 31, 2014
, that First Financial met all capital adequacy requirements to which it is subject. At
December 31, 2014
and
2013
, regulatory notifications categorized First Financial as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, First Financial must maintain minimum Total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratios as set forth in the table below. There have been no conditions or events since those notifications that management believes has changed the Company's categorization.
For purposes of calculating the leverage ratio, average assets represents quarterly average assets less assets ineligible for total risk-based capital including all or portions of intangible assets, mortgage servicing assets and the allowance for loan and lease losses.
First Financial's Tier 1 capital is comprised of total shareholders' equity less unrealized gains and losses on investment securities available-for-sale, accounted for under FASB ASC Topic 320, Investments-Debt and Equity Securities, and any amounts resulting from the application of FASB ASC Topic 715, Compensation-Retirement Benefits, that are recorded within accumulated other comprehensive income (loss), intangible assets and any valuation related to mortgage servicing rights. Total risk-based capital consists of Tier 1 capital plus the qualifying allowance for loan and lease losses and gross unrealized gains on equity securities.
In July 2013, the Board of Governors of the Federal Reserve System approved a final rule implementing changes intended to strengthen the regulatory capital framework for all banking organizations (Basel III). The final rule includes transition periods to ease the potential burden, with community banks such as First Financial subject to the final rule beginning January 1, 2015. Among other things, Basel III includes new minimum risk-based and leverage capital requirements for all banks. The rule
92
First Financial Bancorp
2014 Annual Report
includes a new minimum ratio of common equity tier 1 capital to risk-weighted assets of 4.5% and a new capital conservation buffer of 2.5% of risk-weighted assets that will be phased-in over a transition period ending December 31, 2018. Further, the minimum ratio of tier 1 capital to risk-weighted assets is increased from 4.0% to 6.0% and all banks are now subject to a 4.0% minimum leverage ratio. The required total risk-based capital ratio will not change.
Failure to maintain the required common equity Tier 1 capital conservation buffer will result in potential restrictions on a bank’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees. The Basel III requirements also provide strict eligibility criteria for regulatory capital instruments and change the method for calculating risk-weighted assets in an effort to better identify riskier assets requiring higher capital allocations.
Management expects that First Financial will continue to exceed all regulatory capital requirements under Basel III.
Actual and required capital amounts and ratios at year-end are presented in the table that follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
For capital
adequacy purposes
|
|
To be well capitalized under
prompt corrective
action provisions
|
|
(Dollars in thousands)
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
|
728,284
|
|
|
13.71
|
%
|
|
$
|
424,926
|
|
|
8.00
|
%
|
|
N/A
|
|
|
N/A
|
|
|
First Financial Bank
|
662,865
|
|
|
12.52
|
%
|
|
423,447
|
|
|
8.00
|
%
|
|
$
|
529,309
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
673,955
|
|
|
12.69
|
%
|
|
212,463
|
|
|
4.00
|
%
|
|
N/A
|
|
|
N/A
|
|
|
First Financial Bank
|
602,133
|
|
|
11.38
|
%
|
|
211,724
|
|
|
4.00
|
%
|
|
317,585
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital to average assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
673,955
|
|
|
9.44
|
%
|
|
285,514
|
|
|
4.00
|
%
|
|
N/A
|
|
|
N/A
|
|
|
First Financial Bank
|
602,133
|
|
|
8.44
|
%
|
|
285,311
|
|
|
4.00
|
%
|
|
356,639
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
For capital
adequacy purposes
|
|
To be well capitalized
under
prompt corrective
action provisions
|
|
(Dollars in thousands)
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
|
679,074
|
|
|
15.88
|
%
|
|
$
|
342,092
|
|
|
8.00
|
%
|
|
N/A
|
|
|
N/A
|
|
|
First Financial Bank
|
588,643
|
|
|
13.80
|
%
|
|
341,184
|
|
|
8.00
|
%
|
|
$
|
426,480
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital to risk-weighted assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
624,850
|
|
|
14.61
|
%
|
|
171,046
|
|
|
4.00
|
%
|
|
N/A
|
|
|
N/A
|
|
|
First Financial Bank
|
527,712
|
|
|
12.37
|
%
|
|
170,592
|
|
|
4.00
|
%
|
|
255,888
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital to average assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
624,850
|
|
|
10.11
|
%
|
|
247,106
|
|
|
4.00
|
%
|
|
N/A
|
|
|
N/A
|
|
|
First Financial Bank
|
527,712
|
|
|
8.55
|
%
|
|
246,739
|
|
|
4.00
|
%
|
|
308,423
|
|
|
5.00
|
%
|
Shelf Registrations.
On July 31, 2014, First Financial filed a shelf registration on Form S-3 with the Securities and Exchange Commission. This shelf registration allows First Financial to raise capital from time to time through the sale of various types of securities, subject to approval by the Company's board of directors, and expires on July 31, 2017.
First Financial Bancorp
2014 Annual Report
93
Notes To Consolidated Financial Statements
Share repurchases.
In October 2012, First Financial's board of directors approved a share repurchase plan under which the Company has the ability to repurchase up to
5,000,000
common shares. In January 2014, First Financial's board of directors suspended further share repurchase activity under the 2012 share repurchase plan in connection with the Company's Columbus acquisitions and continued that suspension for the remainder of 2014.
The Company repurchased
40,255
shares under the 2012 share repurchase plan during 2014 at an average price of
$17.32
per share and
750,145
shares under this plan during 2013 at an average price of
$15.70
. At
December 31, 2014
,
3,749,100
common shares remained available for purchase under this repurchase plan.
Preferred Stock.
During the second quarter of 2014, First Financial's shareholders approved an amendment to the Company's Articles of Incorporation authorizing the Company to issue up to
10,000,000
preferred shares. The Company has not issued and has no current plans, arrangements or agreements to issue any of the authorized preferred shares at this time.
17. Stock Options and Awards
First Financial follows the provisions of FASB ASC Topic 718, Compensation-Stock Compensation, which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation expense over the service period for all awards expected to vest. Share-based compensation expense for stock options and restricted stock awards included in salaries and employee benefits expense for the year ended
December 31, 2014
, and
2013
, was
$4.0 million
and
$3.8 million
, respectively. Total unrecognized compensation cost related to non-vested share-based compensation was
$4.6 million
at
December 31, 2014
and is expected to be recognized over a weighted average period of
1.9 years
.
As of
December 31, 2014
, First Financial had
five
stock-based compensation plans. The 1999 Stock Incentive Plan for Officers and Employees and the 1999 Stock Option Plan for Non-Employee Directors (the 1999 Plans) provides incentive stock options, non-qualified stock options and stock awards to certain key employees and non-qualified stock options to non-employee directors of First Financial for up to
7,507,500
common shares. The options become exercisable at a rate of
25%
per year on the anniversary date of the grant and remain outstanding for
10
years after the initial grant date with all options expiring at the end of the exercise period. No additional awards may be granted under the 1999 Plans.
On June 15, 2009, the shareholders approved the 2009 Employee Stock Plan and the 2009 Non-Employee Director Plan providing for the issuance of
1,500,000
shares and
75,000
shares, respectively. The 2009 Employee Stock Plan expired on June 15, 2012, and thus, no new awards may be granted under this plan. On May 22, 2012, First Financial shareholders approved the First Financial Bancorp. 2012 Stock Plan and amendments to the 2009 Non-Employee Director Plan. At
December 31, 2014
, there were
1,268,872
shares and
7,371
shares available for issuance under these plans, respectively.
First Financial utilizes the Black-Scholes valuation model to determine the fair value of its stock options. In addition to the stock option strike price, the Black-Scholes valuation model incorporates the following assumptions: the expected dividend yield based on historical dividend payouts; the expected stock price volatility based on the historical volatility of Company stock for a period approximating the expected life of the options; the risk-free rate based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option; and the expected option life represented by the period of time the options are expected to be outstanding, and is based on historical trends.
No
options were granted in 2014, 2013 or 2012.
94
First Financial Bancorp
2014 Annual Report
Stock option activity for the year ended
December 31, 2014
, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
Number of shares
|
|
Weighted
average exercise price
|
|
Weighted average
remaining contractual life
|
|
Aggregate intrinsic value
|
|
Outstanding at beginning of year
|
|
986,676
|
|
|
$
|
14.82
|
|
|
|
|
|
|
Granted
|
|
0
|
|
|
0.00
|
|
|
|
|
|
|
Exercised
|
|
(478,024
|
)
|
|
14.95
|
|
|
|
|
|
|
Forfeited or expired
|
|
(95,526
|
)
|
|
16.37
|
|
|
|
|
|
|
Outstanding at end of year
|
|
413,126
|
|
|
$
|
14.32
|
|
|
2.1 years
|
|
$
|
1,767
|
|
|
Exercisable at end of year
|
|
413,126
|
|
|
$
|
14.32
|
|
|
2.1 years
|
|
$
|
1,767
|
|
The intrinsic value of stock options is defined as the difference between the current market value and the exercise price. First Financial uses treasury shares purchased under the Company's share repurchase program to satisfy share-based exercises.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
Total intrinsic value of options exercised
|
|
$
|
1,479
|
|
|
$
|
3,247
|
|
|
$
|
1,277
|
|
|
Cash received from exercises
|
|
$
|
1,056
|
|
|
$
|
73
|
|
|
$
|
320
|
|
|
Tax benefit from exercises
|
|
$
|
1,475
|
|
|
$
|
1,422
|
|
|
$
|
1,576
|
|
Restricted stock awards have historically been recorded as deferred compensation, a component of shareholders' equity, at the fair value of these awards as of the grant date and amortized on a straight-line basis to salaries and benefits expense over the specified vesting periods, which is currently three years for employees and one year for non-employee directors. The vesting of these awards for employees and non-employee directors only require a service period to be met, however, in 2013 and 2014, additional awards were granted which also require certain performance measures to be met.
Activity in restricted stock for the previous three years ended December 31 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
2013
|
|
2012
|
|
|
|
Number of shares
|
|
Weighted
average
grant date
fair value
|
|
Number of shares
|
|
Weighted
average
grant date
fair value
|
|
Number of shares
|
|
Weighted
average
grant date
fair value
|
|
Nonvested at beginning of year
|
|
456,032
|
|
|
$
|
16.00
|
|
|
518,756
|
|
|
$
|
16.65
|
|
|
518,736
|
|
|
$
|
15.99
|
|
|
Granted
|
|
273,933
|
|
|
16.80
|
|
|
302,175
|
|
|
15.65
|
|
|
290,706
|
|
|
17.00
|
|
|
Vested
|
|
(215,796
|
)
|
|
16.19
|
|
|
(263,302
|
)
|
|
16.63
|
|
|
(228,233
|
)
|
|
15.58
|
|
|
Forfeited
|
|
(19,717
|
)
|
|
16.40
|
|
|
(101,597
|
)
|
|
16.26
|
|
|
(62,453
|
)
|
|
16.61
|
|
|
Nonvested at end of year
|
|
494,452
|
|
|
$
|
16.43
|
|
|
456,032
|
|
|
$
|
16.00
|
|
|
518,756
|
|
|
$
|
16.65
|
|
The fair value of restricted stock is determined based on the number of shares granted and the quoted price of First Financial's common stock. The total fair value of restricted stock vested during
2014
was
$3.5 million
.
First Financial Bancorp
2014 Annual Report
95
Notes To Consolidated Financial Statements
18. Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per share data)
|
|
2014
|
|
2013
|
|
2012
|
|
Numerator
|
|
|
|
|
|
|
|
Net income
|
|
$
|
65,000
|
|
|
$
|
48,349
|
|
|
$
|
67,303
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
Basic earnings per common share - weighted average shares
|
|
58,662,836
|
|
|
57,270,233
|
|
|
57,876,685
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
Employee stock awards
|
|
589,157
|
|
|
692,050
|
|
|
873,293
|
|
|
Warrants
|
|
140,674
|
|
|
110,771
|
|
|
118,814
|
|
|
Diluted earnings per common share - adjusted weighted average shares
|
|
59,392,667
|
|
|
58,073,054
|
|
|
58,868,792
|
|
|
|
|
|
|
|
|
|
|
Earnings per share available to common shareholders
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.11
|
|
|
$
|
0.84
|
|
|
$
|
1.16
|
|
|
Diluted
|
|
$
|
1.09
|
|
|
$
|
0.83
|
|
|
$
|
1.14
|
|
Warrants to purchase
465,117
shares of the Company's common stock were outstanding as of
December 31, 2014
,
2013
and
2012
, respectively. These warrants, each representing the right to purchase one share of common stock, no par value per share, have an exercise price of
$12.12
and expire on December 23, 2018.
Stock options and warrants, with an exercise price greater than the average market price of the common shares, were not included in the computation of net income per diluted share as they would have been anti-dilutive. These out-of-the-money options were
20,626
,
215,452
and
1,092,253
at
December 31, 2014
,
2013
and
2012
, respectively.
As of
December 31, 2014
, 2013, and 2012,
no
preferred shares were issued or outstanding.
19. Fair Value Disclosures
Fair Value Measurement
The fair value framework as disclosed in the Fair Value Measurements and Disclosure Topic of FASB ASC Topic 825, Financial Instruments (Fair Value Topic), includes a hierarchy which focuses on prioritizing the inputs used in valuation techniques. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1), a lower priority to observable inputs other than quoted prices in active markets for identical assets and liabilities (Level 2), and the lowest priority to unobservable inputs (Level 3). When determining the fair value measurements for assets and liabilities, First Financial looks to active markets to price identical assets or liabilities whenever possible and classifies such items in Level 1. When identical assets and liabilities are not traded in active markets, First Financial looks to observable market data for similar assets and liabilities and classifies such items as Level 2. Certain assets and liabilities are not actively traded in observable markets and First Financial must use alternative techniques, based on unobservable inputs, to determine the fair value and classifies such items as Level 3. The level within the fair value hierarchy is based on the lowest level of input that is significant in the fair value measurement.
The following methods, assumptions and valuation techniques were used by First Financial to measure different financial assets and liabilities at fair value and in estimating its fair value disclosures for financial instruments.
Cash and short-term investments.
The carrying amounts reported in the Consolidated Balance Sheets for cash and short-term investments, such as federal funds sold, approximated the fair value of those instruments. The Company classifies cash and short-term investments in Level 1 of the fair value hierarchy.
Investment securities.
Investment securities classified as trading and available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices
96
First Financial Bancorp
2014 Annual Report
are not available, fair values are measured utilizing independent valuation techniques of identical or similar investment securities. First Financial compiles prices from various sources who may apply such techniques as matrix pricing to determine the value of identical or similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for the specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities. Any investment securities not valued based upon the methods above are considered Level 3.
First Financial utilizes information provided by a third-party investment securities administrator in analyzing the investment securities portfolio in accordance with the fair value hierarchy of the Fair Value Topic. The administrator’s evaluation of investment security portfolio pricing is performed using a combination of prices and data from other sources, along with internally developed matrix pricing models and assistance from the administrator’s internal fixed income analysts and trading desk. The administrator’s month-end pricing process includes a series of quality assurance activities where prices are compared to recent market conditions, previous evaluation prices and between the various pricing services. These processes produce a series of quality assurance reports on which price exceptions are identified, reviewed and where appropriate, securities are repriced. In the event of a materially different price, the administrator will report the variance as a “price challenge” and review the pricing methodology in detail. The results of the quality assurance process are incorporated into the selection of pricing providers by the portfolio manager.
First Financial reviews the pricing methodologies utilized by the administrator to ensure the fair value determination is consistent with the applicable accounting guidance and that the investments are properly classified in the fair value hierarchy. Further, the Company periodically validates the fair values for a sample of securities in the portfolio by comparing the fair values provided by the administrator to prices from other independent sources for the same or similar securities. First Financial analyzes unusual or significant variances, conducts additional research with the administrator, if necessary, and takes appropriate action based on its findings.
Loans held for sale.
Loans held for sale are carried at the lower of cost or fair value. These loans currently consist of one-to-four family residential real estate loans originated for sale to qualified third parties. Fair value is based on the contractual price to be received from these third parties, which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, First Financial records any fair value adjustments on a nonrecurring basis. Gains and losses on the sale of loans are recorded as net gains from sales of loans within noninterest income in the Consolidated Statements of Income.
Loans and leases.
The fair value of commercial, commercial real estate, residential real estate and consumer loans were estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities or repricing frequency. The Company classifies the estimated fair value of loans as Level 3 in the fair value hierarchy.
Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. Impaired loans are valued at the lower of cost or fair value for purposes of determining the appropriate amount of impairment to be allocated to the allowance for loan and lease losses. Fair value is generally measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal conducted by an independent, licensed third-party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Impaired loans allocated to the allowance for loan and lease losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan and lease losses on the Consolidated Statements of Income.
Fair values for purchased impaired loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and a discount rate reflecting the Company's assessment of risk inherent in the cash flow estimates. These loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. First Financial estimated the cash flows expected to be collected on these loans based upon the expected remaining life of the underlying loans, which includes the effects of estimated prepayments. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change.
First Financial Bancorp
2014 Annual Report
97
Notes To Consolidated Financial Statements
Fair values for acquired loans accounted for outside of FASB ASC Topic 310-30 were estimated by discounting the future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities or repricing frequency. The carrying amount of accrued interest approximates its fair value.
The Company classifies the estimated fair value of covered loans as Level 3 in the fair value hierarchy.
FDIC indemnification asset.
Fair value of the FDIC indemnification asset was estimated using projected cash flows related to the loss sharing agreements based on expected reimbursements for losses and the applicable loss sharing percentages. The expected cash flows are discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC. These cash flow evaluations are inherently subjective as they require material estimates, all of which may be susceptible to significant change, and may be impacted by the relatively short remaining term of loss sharing coverage on covered commercial assets. The five year period of loss protection expired for the majority of First Financial's covered commercial loans and covered OREO during the third quarter of 2014. The Company classifies the estimated fair value of the indemnification asset as Level 3 in the fair value hierarchy.
Deposit liabilities.
The fair value of demand deposits, savings accounts and certain money-market deposits was the amount payable on demand at the reporting date. The carrying amounts for variable-rate certificates of deposit approximated their fair values at the reporting date. The fair value of fixed-rate certificates of deposit was estimated using a discounted cash flow calculation which applies the interest rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest approximates its fair value. The Company classifies the estimated fair value of deposit liabilities as Level 2 in the fair value hierarchy.
Borrowings.
The carrying amounts of federal funds purchased and securities sold under agreements to repurchase and other short-term borrowings approximate their fair values. The Company classifies the estimated fair value of short-term borrowings as Level 1 of the fair value hierarchy.
The fair value of long-term debt is estimated using a discounted cash flow calculation which utilizes the interest rates currently offered for borrowings of similar remaining maturities. Third-party valuations are used for long-term debt with embedded options, such as call features. The Company classifies the estimated fair value of long-term debt as Level 2 in the fair value hierarchy.
Commitments to extend credit and standby letters of credit.
Pricing of these financial instruments is based on the credit quality and relationship, fees, interest rates, probability of funding and compensating balance and other covenants or requirements. Loan commitments generally have fixed expiration dates, are variable rate and contain termination and other clauses which provide for relief from funding in the event that there is a significant deterioration in the credit quality of the client. Many loan commitments are expected to expire without being drawn upon. The rates and terms of the commitments to extend credit and the standby letters of credit are competitive with those in First Financial’s market area. The carrying amounts are reasonable estimates of the fair value of these financial instruments. Carrying amounts, which are comprised of the
unamortized fee income and, where necessary, reserves for any expected credit losses from these financial instruments, are immaterial.
Derivatives.
The fair values of derivative instruments are based primarily on a net present value calculation of the cash flows related to the interest rate swaps at the reporting date, using primarily observable market inputs such as interest rate yield curves. The discounted net present value calculated represents the cost to terminate the swap if First Financial should choose to do so. Additionally, First Financial utilizes a vendor-developed, proprietary model to value the credit risk component of both the derivative assets and liabilities. The credit valuation adjustment is recorded as an adjustment to the fair value of the derivative asset or liability on the reporting date. Derivative instruments are classified as Level 2 in the fair value hierarchy.
98
First Financial Bancorp
2014 Annual Report
The estimated fair values of financial instruments not measured at fair value on either a recurring or nonrecurring basis in First Financial’s consolidated financial statements were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
Estimated fair value
|
|
(Dollars in thousands)
|
value
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|
December 31, 2014
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
Cash and short-term investments
|
$
|
132,752
|
|
$
|
132,752
|
|
$
|
132,752
|
|
$
|
0
|
|
$
|
0
|
|
|
Investment securities held-to-maturity
|
867,996
|
|
874,749
|
|
0
|
|
874,749
|
|
0
|
|
|
Other investments
|
52,626
|
|
52,626
|
|
0
|
|
52,626
|
|
0
|
|
|
Loans held for sale
|
11,005
|
|
11,005
|
|
0
|
|
11,005
|
|
0
|
|
|
Loans and leases, net of ALLL
|
4,724,377
|
|
4,763,619
|
|
0
|
|
0
|
|
4,763,619
|
|
|
FDIC indemnification asset
|
22,666
|
|
12,449
|
|
0
|
|
0
|
|
12,449
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
1,285,527
|
|
$
|
1,285,527
|
|
$
|
0
|
|
$
|
1,285,527
|
|
$
|
0
|
|
|
Interest-bearing demand
|
1,225,378
|
|
1,225,378
|
|
0
|
|
1,225,378
|
|
0
|
|
|
Savings
|
1,889,473
|
|
1,889,473
|
|
0
|
|
1,889,473
|
|
0
|
|
|
Time
|
1,255,364
|
|
1,254,070
|
|
0
|
|
1,254,070
|
|
0
|
|
|
Total deposits
|
5,655,742
|
|
5,654,448
|
|
0
|
|
5,654,448
|
|
0
|
|
|
Short-term borrowings
|
661,392
|
|
661,392
|
|
661,392
|
|
0
|
|
0
|
|
|
Long-term debt
|
48,241
|
|
49,674
|
|
0
|
|
49,674
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
Estimated Fair Value
|
|
(Dollars in thousands)
|
Value
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|
December 31, 2013
|
|
|
|
|
|
|
Financial assets
|
|
|
|
|
|
|
Cash and short-term investments
|
$
|
143,450
|
|
$
|
143,450
|
|
$
|
143,450
|
|
$
|
0
|
|
$
|
0
|
|
|
Investment securities held-to-maturity
|
837,272
|
|
824,985
|
|
0
|
|
824,985
|
|
0
|
|
|
Other investments
|
47,427
|
|
47,427
|
|
0
|
|
47,427
|
|
0
|
|
|
Loans held for sale
|
8,114
|
|
8,114
|
|
0
|
|
8,114
|
|
0
|
|
|
Loans and leases, net of ALLL
|
3,900,784
|
|
3,907,321
|
|
0
|
|
0
|
|
3,907,321
|
|
|
FDIC indemnification asset
|
45,091
|
|
34,820
|
|
0
|
|
0
|
|
34,820
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
1,147,452
|
|
$
|
1,147,452
|
|
$
|
0
|
|
$
|
1,147,452
|
|
$
|
0
|
|
|
Interest-bearing demand
|
1,125,723
|
|
1,125,723
|
|
0
|
|
1,125,723
|
|
0
|
|
|
Savings
|
1,612,005
|
|
1,612,005
|
|
0
|
|
1,612,005
|
|
0
|
|
|
Time
|
952,327
|
|
951,220
|
|
0
|
|
951,220
|
|
0
|
|
|
Total deposits
|
4,837,507
|
|
4,836,400
|
|
0
|
|
4,836,400
|
|
0
|
|
|
Short-term borrowings
|
748,749
|
|
748,749
|
|
748,749
|
|
0
|
|
0
|
|
|
Long-term debt
|
60,780
|
|
62,706
|
|
0
|
|
62,706
|
|
0
|
|
First Financial Bancorp
2014 Annual Report
99
Notes To Consolidated Financial Statements
The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
Assets/Liabilities
|
|
(Dollars in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
at Fair Value
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
0
|
|
|
$
|
11,399
|
|
|
$
|
0
|
|
|
$
|
11,399
|
|
|
Available-for-sale investment securities
|
|
8,406
|
|
|
832,062
|
|
|
0
|
|
|
840,468
|
|
|
Total
|
|
$
|
8,406
|
|
|
$
|
843,461
|
|
|
$
|
0
|
|
|
$
|
851,867
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
0
|
|
|
$
|
13,662
|
|
|
$
|
0
|
|
|
$
|
13,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
Assets/Liabilities
|
|
(Dollars in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
at Fair Value
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
0
|
|
|
$
|
13,477
|
|
|
$
|
0
|
|
|
$
|
13,477
|
|
|
Available-for-sale investment securities
|
|
7,976
|
|
|
905,625
|
|
|
0
|
|
|
913,601
|
|
|
Total
|
|
$
|
7,976
|
|
|
$
|
919,102
|
|
|
$
|
0
|
|
|
$
|
927,078
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
0
|
|
|
$
|
14,431
|
|
|
$
|
0
|
|
|
$
|
14,431
|
|
Certain financial assets and liabilities are measured at fair value on a nonrecurring basis. Adjustments to the fair market value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following table summarizes financial assets and liabilities measured at fair value on a nonrecurring basis as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
(Dollars in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
December 31, 2014
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Impaired loans
(1)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
14,096
|
|
|
OREO
|
|
0
|
|
|
0
|
|
|
13,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
(Dollars in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
December 31, 2013
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Impaired loans
(1)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
13,699
|
|
|
OREO
|
|
0
|
|
|
0
|
|
|
14,295
|
|
(1)
Amounts represent the fair value of collateral for impaired loans allocated to the allowance for loan and lease losses. Fair values are determined using actual market prices (Level 1), observable market data for similar assets and liabilities (Level 2), and independent third party valuations and borrower records, discounted as appropriate (Level 3).
100
First Financial Bancorp
2014 Annual Report
20. Business Combinations
First Financial completed the following three business combinations in the Columbus, Ohio market during the third quarter 2014:
First Bexley.
Founded in 2006 and conducting operations out of one full service branch location in Bexley, Ohio, First Bexley served commercial and consumer clients throughout Columbus and central Ohio. Under the merger agreement, First Financial acquired First Bexley in a cash and stock transaction in which First Bexley was merged with and into First Financial Bank on August 7, 2014.
Insight.
Insight was founded in 2006 and conducted operations out of one full service location in Worthington, Ohio, and a mortgage origination office in Newark, Ohio, and provided commercial and consumer banking services to clients throughout Columbus and central Ohio. Under the merger agreement, First Financial acquired Insight in a cash and stock transaction in which Insight merged with and into First Financial Bank on August 7, 2014.
Guernsey.
Headquartered in Worthington, Ohio, Guernsey conducted operations out of three full service branches, and served commercial and consumer clients throughout Columbus and central Ohio. Under the terms of the merger agreement, First Financial acquired Guernsey for cash consideration and the transfer of a single bank-owned property to Guernsey's sole shareholder. The Company also paid off all amounts due under a promissory note to a third party on behalf of Guernsey. The Guernsey Bank, an Ohio state chartered bank and wholly-owned subsidiary of Guernsey, merged with and into First Financial as part of the agreement on August 21, 2014.
The First Bexley, Insight and Guernsey transactions were accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the acquisition dates, in accordance with FASB ASC Topic 805, Business Combinations. The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisitions as additional information relative to closing date fair values become available. The Company continues to finalize the fair values of loans and intangible assets and liabilities. As a result, the fair value adjustment in the accounts are preliminary and may change as information becomes available but no later than August 2015.
The following table provides the purchase price calculation as of the acquisition dates and the identifiable assets purchased and the liabilities assumed at their estimated fair value. These fair value measurements are based on third-party valuations.
First Financial Bancorp
2014 Annual Report
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
First Bexley
|
|
Insight
|
|
Guernsey
|
|
Total
|
|
Purchase consideration
|
|
|
|
|
|
|
|
|
Cash consideration
|
$
|
10,810
|
|
|
$
|
9,880
|
|
|
$
|
13,500
|
|
|
$
|
34,190
|
|
|
Stock consideration
|
33,699
|
|
|
26,730
|
|
|
0
|
|
|
60,429
|
|
|
Other consideration
|
0
|
|
|
0
|
|
|
2,523
|
|
|
2,523
|
|
|
Total purchase consideration
|
$
|
44,509
|
|
|
$
|
36,610
|
|
|
$
|
16,023
|
|
|
$
|
97,142
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired
|
|
|
|
|
|
|
|
|
Loans
|
$
|
314,807
|
|
|
$
|
219,008
|
|
|
$
|
72,448
|
|
|
$
|
606,263
|
|
|
Intangible assets
|
1,280
|
|
|
1,277
|
|
|
999
|
|
|
3,556
|
|
|
Other assets
|
25,456
|
|
|
30,799
|
|
|
61,238
|
|
|
117,493
|
|
|
Total assets
|
$
|
341,543
|
|
|
$
|
251,084
|
|
|
$
|
134,685
|
|
|
$
|
727,312
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
273,860
|
|
|
$
|
179,330
|
|
|
$
|
115,415
|
|
|
$
|
568,605
|
|
|
Borrowings
|
40,000
|
|
|
44,149
|
|
|
10,742
|
|
|
94,891
|
|
|
Other liabilities
|
1,454
|
|
|
7,303
|
|
|
606
|
|
|
9,363
|
|
|
Total liabilities
|
$
|
315,314
|
|
|
$
|
230,782
|
|
|
$
|
126,763
|
|
|
$
|
672,859
|
|
|
|
|
|
|
|
|
|
|
|
Net identifiable assets
|
$
|
26,229
|
|
|
$
|
20,302
|
|
|
$
|
7,922
|
|
|
$
|
54,453
|
|
|
Goodwill
|
$
|
18,280
|
|
|
$
|
16,308
|
|
|
$
|
8,101
|
|
|
$
|
42,689
|
|
The amount of goodwill arising from the First Bexley, Insight and Guernsey acquisitions reflects the increased market share and related synergies that are expected to result from the acquisitions. The goodwill arising from the First Bexley and Insight transactions is not deductible for income tax purposes as the mergers were accounted for as tax-free exchanges. The tax-free exchanges resulted in a carryover of tax attributes and tax basis to the Company's subsequent income tax filings and was adjusted for any fair value adjustments required in accounting for the acquisitions. The goodwill arising from the Guernsey transaction is deductible for tax purposes as the Guernsey transaction was considered a taxable exchange.
First Financial Bancorp
2014 Annual Report
102
21. First Financial Bancorp. (Parent Company Only) Financial Information
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
Assets
|
|
|
|
|
Cash
|
$
|
55,192
|
|
|
$
|
88,420
|
|
|
Investment securities, available for sale
|
276
|
|
|
229
|
|
|
Other investments
|
5,399
|
|
|
4,851
|
|
|
Subordinated notes from subsidiaries
|
7,500
|
|
|
7,500
|
|
|
Investment in subsidiaries
|
|
|
|
|
Commercial banks
|
712,067
|
|
|
557,872
|
|
|
Nonbanks
|
0
|
|
|
18,682
|
|
|
Total investment in subsidiaries
|
712,067
|
|
|
576,554
|
|
|
Premises and equipment
|
1,431
|
|
|
1,455
|
|
|
Other assets
|
13,870
|
|
|
13,942
|
|
|
Total assets
|
$
|
795,735
|
|
|
$
|
692,951
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Dividends payable
|
$
|
10,249
|
|
|
$
|
9,178
|
|
|
Other liabilities
|
1,409
|
|
|
1,612
|
|
|
Total liabilities
|
11,658
|
|
|
10,790
|
|
|
Shareholders’ equity
|
784,077
|
|
|
682,161
|
|
|
Total liabilities and shareholders’ equity
|
$
|
795,735
|
|
|
$
|
692,951
|
|
Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2012
|
|
Income
|
|
|
|
|
|
|
Interest income
|
$
|
73
|
|
|
$
|
75
|
|
|
$
|
55
|
|
|
Noninterest income
|
92
|
|
|
0
|
|
|
421
|
|
|
Dividends from subsidiaries
|
31,700
|
|
|
58,700
|
|
|
73,800
|
|
|
Total income
|
31,865
|
|
|
58,775
|
|
|
74,276
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Salaries and employee benefits
|
4,041
|
|
|
4,042
|
|
|
4,612
|
|
|
Miscellaneous professional services
|
708
|
|
|
663
|
|
|
916
|
|
|
Other
|
5,307
|
|
|
5,059
|
|
|
5,209
|
|
|
Total expenses
|
10,056
|
|
|
9,764
|
|
|
10,737
|
|
|
Income before income taxes and equity in undistributed net earnings of subsidiaries
|
21,809
|
|
|
49,011
|
|
|
63,539
|
|
|
Income tax benefit
|
(3,674
|
)
|
|
(3,659
|
)
|
|
(3,869
|
)
|
|
Equity in undistributed earnings (loss) of subsidiaries
|
39,517
|
|
|
(4,321
|
)
|
|
(105
|
)
|
|
Net income
|
$
|
65,000
|
|
|
$
|
48,349
|
|
|
$
|
67,303
|
|
First Financial Bancorp
2014 Annual Report
103
Notes To Consolidated Financial Statements
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2012
|
|
Operating activities
|
|
|
|
|
|
|
Net income
|
$
|
65,000
|
|
|
$
|
48,349
|
|
|
$
|
67,303
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities
|
|
|
|
|
|
Equity in undistributed (earnings) loss of subsidiaries
|
(39,517
|
)
|
|
4,321
|
|
|
105
|
|
|
Depreciation and amortization
|
24
|
|
|
26
|
|
|
27
|
|
|
Stock-based compensation expense
|
3,970
|
|
|
3,803
|
|
|
4,186
|
|
|
Deferred income taxes
|
180
|
|
|
(676
|
)
|
|
(207
|
)
|
|
(Decrease) increase in dividends payable
|
1,071
|
|
|
(7,691
|
)
|
|
673
|
|
|
(Decrease) increase in other liabilities
|
(1,654
|
)
|
|
7,719
|
|
|
(1,799
|
)
|
|
Decrease (increase) in other assets
|
(264
|
)
|
|
1,266
|
|
|
(139
|
)
|
|
Net cash provided by (used in) operating activities
|
28,810
|
|
|
57,117
|
|
|
70,149
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
Capital contributions to subsidiaries
|
(27,601
|
)
|
|
0
|
|
|
0
|
|
|
Outlays for business acquisitions
|
(17,065
|
)
|
|
0
|
|
|
0
|
|
|
Proceeds from disposal of subsidiaries
|
18,695
|
|
|
0
|
|
|
0
|
|
|
Proceeds from calls and maturities of investment securities
|
29
|
|
|
48
|
|
|
0
|
|
|
Purchases of investment securities
|
(192
|
)
|
|
(88
|
)
|
|
(474
|
)
|
|
Purchases of premises and equipment
|
0
|
|
|
(80
|
)
|
|
0
|
|
|
Other
|
0
|
|
|
307
|
|
|
109
|
|
|
Net cash provided by (used in) investing activities
|
(26,134
|
)
|
|
187
|
|
|
(365
|
)
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
Cash dividends paid on common stock
|
(34,848
|
)
|
|
(61,429
|
)
|
|
(67,797
|
)
|
|
Treasury stock purchase
|
(697
|
)
|
|
(11,778
|
)
|
|
(6,806
|
)
|
|
Proceeds from exercise of stock options, net of shares purchased
|
1,056
|
|
|
73
|
|
|
320
|
|
|
Excess tax benefit on share-based compensation
|
153
|
|
|
686
|
|
|
438
|
|
|
Other
|
(1,568
|
)
|
|
(2,632
|
)
|
|
(1,400
|
)
|
|
Net cash provided by (used in) financing activities
|
(35,904
|
)
|
|
(75,080
|
)
|
|
(75,245
|
)
|
|
Decrease in cash
|
(33,228
|
)
|
|
(17,776
|
)
|
|
(5,461
|
)
|
|
Cash at beginning of year
|
88,420
|
|
|
106,196
|
|
|
111,657
|
|
|
Cash at end of year
|
$
|
55,192
|
|
|
$
|
88,420
|
|
|
$
|
106,196
|
|
104
First Financial Bancorp
2014 Annual Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly Financial And Common Stock Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
(Dollars in thousands, except per share data)
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
2014
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
58,988
|
|
|
$
|
58,727
|
|
|
$
|
63,391
|
|
|
$
|
66,753
|
|
|
Interest expense
|
|
4,169
|
|
|
4,423
|
|
|
5,028
|
|
|
5,614
|
|
|
Net interest income
|
|
54,819
|
|
|
54,304
|
|
|
58,363
|
|
|
61,139
|
|
|
Provision for loan and lease losses
|
|
(1,033
|
)
|
|
(384
|
)
|
|
893
|
|
|
2,052
|
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
Gain on sale of investment securities
|
|
50
|
|
|
0
|
|
|
0
|
|
|
20
|
|
|
FDIC loss sharing income
|
|
(508
|
)
|
|
1,108
|
|
|
(192
|
)
|
|
(43
|
)
|
|
Accelerated discount on covered loans
|
|
1,015
|
|
|
621
|
|
|
789
|
|
|
1,759
|
|
|
All other
|
|
13,618
|
|
|
14,608
|
|
|
15,914
|
|
|
15,206
|
|
|
Total noninterest income
|
|
14,175
|
|
|
16,337
|
|
|
16,511
|
|
|
16,942
|
|
|
Noninterest expenses
|
|
47,842
|
|
|
47,111
|
|
|
51,419
|
|
|
49,662
|
|
|
Income before income taxes
|
|
22,185
|
|
|
23,914
|
|
|
22,562
|
|
|
26,367
|
|
|
Income tax expense
|
|
7,081
|
|
|
7,961
|
|
|
7,218
|
|
|
7,768
|
|
|
Net income
|
|
$
|
15,104
|
|
|
$
|
15,953
|
|
|
$
|
15,344
|
|
|
$
|
18,599
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.26
|
|
|
$
|
0.28
|
|
|
$
|
0.26
|
|
|
$
|
0.31
|
|
|
Diluted
|
|
$
|
0.26
|
|
|
$
|
0.28
|
|
|
$
|
0.26
|
|
|
$
|
0.30
|
|
|
Cash dividends paid per common share
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
Market price
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
18.20
|
|
|
$
|
18.43
|
|
|
$
|
17.66
|
|
|
$
|
19.00
|
|
|
Low
|
|
$
|
15.98
|
|
|
$
|
15.51
|
|
|
$
|
15.83
|
|
|
$
|
15.34
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
63,509
|
|
|
$
|
62,321
|
|
|
$
|
59,531
|
|
|
$
|
59,847
|
|
|
Interest expense
|
|
4,843
|
|
|
4,243
|
|
|
3,759
|
|
|
4,043
|
|
|
Net interest income
|
|
58,666
|
|
|
58,078
|
|
|
55,772
|
|
|
55,804
|
|
|
Provision for loan and lease losses
|
|
12,083
|
|
|
(5,874
|
)
|
|
6,706
|
|
|
(4,006
|
)
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
Gain on sale of investment securities
|
|
1,536
|
|
|
188
|
|
|
0
|
|
|
0
|
|
|
FDIC loss sharing income
|
|
8,934
|
|
|
(7,384
|
)
|
|
5,555
|
|
|
(3,385
|
)
|
|
Accelerated discount on covered loans
|
|
1,935
|
|
|
1,935
|
|
|
1,711
|
|
|
1,572
|
|
|
All other
|
|
14,293
|
|
|
16,876
|
|
|
15,025
|
|
|
14,856
|
|
|
Total noninterest income
|
|
26,698
|
|
|
11,615
|
|
|
22,291
|
|
|
13,043
|
|
|
Noninterest expenses
|
|
53,106
|
|
|
53,283
|
|
|
48,801
|
|
|
70,285
|
|
|
Income before income taxes
|
|
20,175
|
|
|
22,284
|
|
|
22,556
|
|
|
2,568
|
|
|
Income tax expense
|
|
6,351
|
|
|
6,455
|
|
|
7,645
|
|
|
(1,217
|
)
|
|
Net income
|
|
$
|
13,824
|
|
|
$
|
15,829
|
|
|
$
|
14,911
|
|
|
$
|
3,785
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.24
|
|
|
$
|
0.28
|
|
|
$
|
0.26
|
|
|
$
|
0.07
|
|
|
Diluted
|
|
$
|
0.24
|
|
|
$
|
0.27
|
|
|
$
|
0.26
|
|
|
$
|
0.07
|
|
|
Cash dividends paid per common share
|
|
$
|
0.28
|
|
|
$
|
0.28
|
|
|
$
|
0.24
|
|
|
$
|
0.27
|
|
|
Market price
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
16.07
|
|
|
$
|
16.05
|
|
|
$
|
16.47
|
|
|
$
|
17.59
|
|
|
Low
|
|
$
|
14.46
|
|
|
$
|
14.52
|
|
|
$
|
14.89
|
|
|
$
|
14.56
|
|
First Financial Bancorp common stock trades on the Nasdaq Stock Market under the symbol FFBC.
First Financial Bancorp
2014 Annual Report
105
Total Return to Shareholders
The following graph compares the five-year cumulative total return to shareholders of First Financial Bancorp common stock with that of companies that comprise the Nasdaq Composite Index and the KBW Regional Bank Index. The KBW Regional Bank Index is comprised of 50 bank holding companies headquartered throughout the country and is used frequently by investors when comparing First Financial Bancorp's stock performance to that of other similarly sized institutions. First Financial Bancorp is included in the KBW Regional Bank Index.
The following table assumes $100 invested on December 31, 2009 in First Financial Bancorp, the Nasdaq Composite Index and the KBW Regional Bank Index, and assumes that dividends are reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG FIRST FINANCIAL BANCORP, NASDAQ COMPOSITE INDEX
AND KBW REGIONAL BANK INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
|
First Financial Bancorp
|
100.00
|
|
129.96
|
|
122.77
|
|
116.24
|
|
147.20
|
|
162.76
|
|
|
Nasdaq Composite Index
|
100.00
|
|
118.14
|
|
117.20
|
|
137.98
|
|
193.39
|
|
222.02
|
|
|
KBW Regional Bank Index
|
100.00
|
|
120.41
|
|
114.18
|
|
129.31
|
|
189.82
|
|
194.41
|
|
106
First Financial Bancorp
2014 Annual Report
Shareholder Informatio
n
2014 Annual Shareholder Meeting
The annual meeting of shareholders will be held on Tuesday, May 26, 2015, at 10:00 a.m. (EDT) at:
255 E. Fifth Street
9th Floor, Room 950
Cincinnati, OH 45202
Common Stock Listing
|
|
|
|
|
First Financial Bancorp’s common stock trades on the Nasdaq Stock Market under the symbol FFBC.
|
Registrar & Transfer Agent
Computershare Shareholder Services serves as the registrar and transfer agent for First Financial Bancorp common stock for registered shareholders. Shareholder account inquiries, including changes of address or ownership, transferring stock, and replacing lost certificates or dividend checks should be directed to Computershare Shareholder Services at:
Transfer Agent
Computershare Shareholder Services
P.O. Box 30170
College Station, TX 77842-3170
(800) 368-5948
Shareholders of record can also access their shareholder account records and request information related to their shareholder account via the internet. To register for online account access, go to: www.computershare.com/investor.
Dividend Reinvestment and Stock Purchase Plan
Shareholders of record holding 25 shares or more are eligible to participate in our Dividend Reinvestment Plan. Shareholders of record may elect to have cash dividends automatically reinvested in additional common shares and can also purchase additional common shares by making optional cash payments. To obtain a prospectus and authorization card to enroll in the plan, please visit the Investor Relations section of our website at www.bankatfirst.com/investor to print the documents or contact Investor Relations.
Investor Relations
Corporate and investor information, including news releases, webcasts, investor presentations, annual reports, proxy statements and SEC filings as well as information on the company’s corporate governance practices is available within the Investor Relations section of our website at www.bankatfirst.com/investor.
Shareholders, analysts and other investment professionals who would like corporate and financial information on First Financial Bancorp should contact:
Eric R. Stables
First Vice President, Investor Relations and Corporate Development
First Financial Bancorp
255 East Fifth Street, Suite 900
Cincinnati, OH 45202
Phone: 513-458-6454
E-mail: eric.stables@bankatfirst.com
Securities & Exchange Commission Filings
All reports filed electronically by First Financial Bancorp with the United States Securities and Exchange Commission (SEC), including the Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current event reports on Form 8-K, as well as any amendments to those reports, are accessible at no cost within the Investor Relations section of our website at www.bankatfirst.com/investor, or by contacting Investor Relations. These filings are also accessible on the SEC’s website at www.sec.gov.
Media Requests
Members of the media should contact:
Adam Kiefaber
First Financial Bancorp
255 East Fifth Street, Suite 700
Cincinnati, OH 45202
Phone: 513-979-5735
E-mail:
adam.kiefaber@bankatfirst.com
First Financial Bancorp
2014 Annual Report
107
First Financial Bancorp First Financial Center 255 East Fifth Street Suite 700, Cincinnati, OH 45202-4248 bankatfirst.com
FIRST I N Y O U R C O M M U N I T Y First Financial Bancorp 2014 Annual Report
Columbus, Ohio Strategic entry into the dynamic Columbus market will provide a strong foundation for future growth. 2014 Performance CONSECUTIVE QUARTERS OF PROFITABILITY INCREASE IN QUARTERLY DIVIDEND TO $.16 PER SHARE 97 6.7% 16% 12% 8% 4% 0% 5% 4% 1% 0% 2% 3% 5% 4% 1% 0% 2% 3% 1.25% 1.0% .25% 0% .5% .75% 0% 2% 4% 6% 8% 10% Return on Average Assets* F o r Fu l l Ye a r 2014 0. 96 % 1. 05 % 1. 03 % 16% 12% 8% 4% 0% 5% 4% 1% 0% 2% 3% 5% 4% 1% 0% 2% 3% 1.25% 1.0% .25% 0% .5% .75% 0% 2% 4% 6% 8% 10% 16 12 8 4 0 5 4 1 0 2 3 5 4 1 0 2 3 1.25 1.0 .25 0 .5 .75 0 2 4 6 8 10 16% 12% 8% 4% 0% 5% 4% 1% 0% 2% 3% 5% 4% 1% 0% 2% 3% 1.25% 1.0% .25% 0% .5% .75% 0% 2% 4% 6% 8% 10% 16% 12% 8% 4% 0% 5% 4% 1% 0% 2% 3% 5% 4% 1% 0% 2% 3% 1.25% 1.0% .25% 0% .5% .75% 0% 2% 4% 6% 8% 10% Return on Average Shareholders’ Equity F o r Fu l l Ye a r 2014 For Fu l l Ye a r 2014 At D e c e m b e r 31, 2014 8. 94 % 3. 76 % 9. 02 % 12 .6 9% 13 .7 1% 3. 44 % 8. 77 %9. 72 % 3. 56 % 8. 61 % 12 .7 4% 14 .0 5% 2. 42 % Net Interest Margin^ Dividend Yield Capital Ratios First Financial Tangible Common Equity Ratio First Financial Tier 1 Capital Ratio First Financial Total Capital Ratio KBW Regional Bank Index Components - Median Value KEY FINANCIAL RESULTS AND TRENDS First Financial, as reported First Financial, as adjusted* KBW Regional Bank Index Components - Median Value * Adjusted to exclude certain non-recurring income items and acquisition/efficiency related expenses ^ Fully taxable equivalent
