FFBC First Financial Bancorp

CINCINNATI, April 30, 2015 /PRNewswire/ -- First Financial Bancorp (Nasdaq: FFBC) ("First Financial" or the "Company") announced today financial and operational results for the first quarter 2015.

First quarter net income was $17.6 million and earnings per diluted common share were $0.29.  This compares with fourth quarter net income of $18.6 million and earnings per diluted common share of $0.30 and first quarter 2014 net income of $15.1 million and earnings per diluted common share of $0.26.

• Continued solid quarterly performance
  • Return on average assets of 0.99%
  • Return on average shareholders' equity of 9.06%
  • Return on average tangible common equity of 11.12%
  • Net interest margin of 3.67% on a fully tax equivalent basis
• Strong fee income growth as noninterest income increased  $0.7 million, or 4.0%, compared to the linked quarter
• Diligent expense management as noninterest expenses decreased $1.6 million, or 3.2%, compared to the linked quarter
• First quarter average loans increased $800.2 million, or 20.2%, over the same period last year
• Robust real estate construction lending during the first quarter.  New commitments of $121.1 million during the quarter; the bulk of which has not yet funded
• First quarter average deposits increased $855.9 million, or 17.9%, over the same period last year

The board of directors has authorized a quarterly dividend of $0.16 per common share for the next regularly scheduled dividend, payable on July 1, 2015 to shareholders of record as of May 29, 2015.

Claude Davis, Chief Executive Officer, commented, "We are pleased with our solid earnings for the first quarter.  Although the prolonged low interest rate environment continues to produce headwinds, we remain encouraged by the growth opportunities throughout the markets we serve."

"While loan growth during the first quarter fell short of our expectations, quarterly loan production included a significant amount of construction lending that has yet to fund.  We expect to see the benefit of those new originations throughout the year as those projects begin to develop."

"Our ability to successfully grow low-cost deposits continues to provide competitive advantage as we compete for new business.  Likewise, we continue to enjoy the benefits of our disciplined and deliberate approach to fee income growth and expense management which creates positive operating leverage."

"As we look forward to the rest of 2015 and beyond, our focus remains centered on serving the financial needs of our commercial, small business, consumer and wealth management clients.  We will continue to listen to our clients, be responsive to their needs and will be innovative in our approach to serving them."

NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income for the first quarter was $58.6 million as compared to $61.1 million for the fourth quarter 2014 and $54.8 million for the first quarter 2014.  Compared to the linked quarter, total interest income decreased $2.7 million, or 4.1%, while total interest expense decreased $0.2 million, or 3.4%.  Net interest margin was 3.67%, on a fully tax equivalent basis, for the first quarter compared to 3.72% for the fourth quarter 2014 and 3.87% for the first quarter 2014.  Excluding $0.4 million of interest income related to loans that returned to accrual status during the period, net interest margin, on a fully tax equivalent basis, was 3.70% for the fourth quarter 2014.

Interest income earned on loans decreased $2.6 million, or 4.6%, compared to the prior quarter.  This decrease was driven by two fewer days, lower loan fees and lower interest income recapture from loans returning to accrual status compared to the linked quarter.  These factors were partially offset by a $15.5 million, or 0.3%, increase in average loan balances during the period.

Interest income earned from investment securities decreased by $0.2 million compared to the prior quarter as average balances declined $49.3 million, or 2.7%.  The decline in investment securities balances was partially offset by a 7 bps increase in the yield earned on the portfolio to 2.47%.  The overall duration of the Company's investment portfolio declined to 3.1 years, as of March 31, 2015, from 3.4 years, as of December 31, 2014 and 4.2 years, as of March 31, 2014, as the Company implemented strategies in preparation for a rising interest rate environment.

The decrease in total interest expense was due to an $11.0 million, or 0.3%, decrease in average interest-bearing deposits related to seasonal outflow of public fund and commercial deposits.  The cost of interest-bearing deposits was 45 bps for the first quarter and was unchanged from the prior quarter.  Average borrowed funds decreased $42.7 million, or 5.8%, compared to the linked quarter and the related cost of funds increased by 3 bps from 32 bps to 35 bps.

NONINTEREST INCOME
The following table presents noninterest income for the three months ended March 31, 2015 and for the trailing four quarters, adjusted to exclude the impact of covered and formerly covered loan activity and other select items.

Excluding the items highlighted in Table I, noninterest income earned in the first quarter was $16.6 million compared to $15.2 million in the fourth quarter 2014 and $13.6 million in the first quarter 2014.  The $1.4 million increase compared to the linked quarter was driven primarily by a $0.7 million increase in fee income related to the Company's client derivative program and $0.7 million related to the recapture of a previously accrued liability due to the favorable resolution of a former Irwin subsidiary matter.  Also contributing to the increase in noninterest income were a $0.2 million increase in income distributions from SBIC investment funds and a $0.3 million increase in fees related to the Company's trust & wealth management business, partially offset by a $0.6 million seasonal decline in deposit service charges.

NONINTEREST EXPENSE
The following table presents noninterest expense for the three months ended March 31, 2015 and for the trailing four quarters, adjusted to exclude the impact of covered and formerly covered asset activity and other select items.

Excluding the items highlighted in Table II, noninterest expense was $47.2 million in the first quarter of 2015, $47.6 million in the fourth quarter of 2014 and $44.8 million in the first quarter 2014.  The $0.4 million decrease compared to the linked quarter was primarily due to a $1.0 million decrease in health care related expenses, a $0.7 million decrease in incentive compensation and a $0.5 million decrease in loan origination expenses partially offset by seasonal payroll tax increases of $1.0 million.  Additionally, the Company experienced an increase of $0.5 million in professional services expenses compared to the linked quarter primarily related to a seasonal increase in tax preparation expenses related to our Trust & Wealth Management business.  Acquisition-related expenses during the period of $0.4 million included $0.2 million of personnel costs, $0.1 million of lease termination expenses and $0.1 million of other miscellaneous expenses.

INCOME TAXES
For the first quarter, income tax expense was $8.5 million, resulting in an effective tax rate of 32.4%, compared with income tax expense of $7.8 million and an effective tax rate of 29.5% during the fourth quarter 2014 and income tax expense of $7.1 million and an effective tax rate of 31.9% during the first quarter 2014. While the effective tax rate may fluctuate from quarter to quarter due to tax jurisdiction changes and the level of tax-enhanced assets, the normalized effective tax rate in future periods is expected to be in the range of 32.0% - 34.0%.

CREDIT QUALITY
Table III below and the paragraphs that follow present certain credit quality metrics related to the Company's loan portfolio.  Effective October 1, 2014, the five-year loss sharing coverage period for non-single family assets expired and the majority of the Company's formerly covered assets were no longer subject to FDIC loss sharing protection.  As a result, credit quality metrics for the three months ended March 31, 2015 and December 31, 2014 have been updated to include those formerly covered assets, as well as the assets that remain subject to FDIC loss sharing protection.  Credit quality metrics for the preceding three quarters exclude covered assets due to the associated FDIC loss sharing protection in effect during those periods.

Net Charge-offs
For the first quarter net charge-offs totaled $1.8 million, a decrease of $1.3 million, or 42.1% compared to the linked quarter, and was 16 bps, as a percentage of loans on an annualized basis, compared to 27 bps as of December 31, 2014.  Charge-offs on commercial loans increased $1.4 million during the quarter driven by the $0.5 million charge-off of a single credit relationship.  Offsetting the increase in commercial charge-offs was a $2.4 million, or 55.6%, decline in charge-offs on covered / formerly covered loans during the period from $4.3 million for the fourth quarter to $1.9 million for the first quarter.

Nonperforming Assets
Nonaccrual loans increased $0.7 million, or 1.4%, to $49.2 million as of March 31, 2015 from $48.5 million as of December 31, 2014.  The increase in nonaccrual loans was primarily related to increases in the commercial and commercial real estate portfolios, including the additions of a single commercial relationship totaling $1.0 million and a single commercial real estate relationship totaling $2.2 million during the period.  These increases were partially offset by lower retail real estate and home equity nonaccrual loan balances as of March 31, 2015.

Accruing troubled debt restructurings decreased $0.5 million, or 3.1%, to $15.4 million as of March 31, 2015 from $15.9 million as of December 31, 2014.

OREO decreased $1.8 million, or 7.8%, to $20.9 million during the first quarter as $3.2 million of additions were offset by $4.6 million of sales and $0.4 million of valuation adjustments during the period.

Total classified assets decreased $1.0 million, or 0.6%, to $153.8 million as of March 31, 2015 from $154.8 million as of December 31, 2014 primarily due to a $1.0 million, or 2.1% decrease in covered / formerly covered classified assets.  Classified assets are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse.

Delinquent Loans
As of March 31, 2015, loans 30-to-89 days past due totaled $17.0 million, or 0.36% of period-end loans, compared to $18.2 million, or 0.38%, as of December 31, 2014.  The decrease in loans 30-to-89 days past due was driven primarily by a $2.0 million decrease in delinquent commercial loans and a $0.8 million decrease in delinquent credit card loans, partially offset by a $2.4 million increase in commercial real estate delinquencies during the period. 

Delinquent loans exclude purchased impaired loans, even though they may be contractually past due, as any nonpayment of contractual principal or interest is considered in the periodic re-estimation of cash flows and is included in the resulting recognition of loan loss provision or prospective yield adjustments on covered and formerly covered loans.

Provision for Loan & Lease Losses
First quarter provision expense was $2.1 million and the total allowance for loan and lease losses as of March 31, 2015 was $53.1 million compared to $52.9 million as of December 31, 2014.  The allowance as a percentage of period-end loans was 1.11% at the end of the first quarter, which was unchanged from the fourth quarter.  The balance of the Company's total allowance and loan marks, net of the indemnification asset, was 1.43% of total loans and leases as of March 31, 2015 compared to 1.51% as of December 31, 2014.

LOANS
The following table presents the loan portfolio as of March 31, 2015, December 31, 2014 and March 31, 2014.

Total loans were $4.8 billion as of March 31, 2015, decreasing $13.7 million, or 0.3%, compared to the linked quarter and increasing $739.9 million, or 18.4%, compared to March 31, 2014.  Average total loans for the first quarter increased by $15.5 million, or 0.3%, compared to the fourth quarter primarily due to originated loan volume during the fourth quarter.  Total loans decreased modestly during the quarter as new loan fundings were offset by runoff during the period.  Additionally, new loan originations during the first quarter included approximately $98.5 million of real estate construction loans that have yet to fund.

INVESTMENTS
The following table presents a summary of the total investment portfolio at March 31, 2015.

The investment portfolio increased $24.1 million, or 1.4%, to $1.8 billion during the first quarter as $71.3 million of purchases were offset by $47.2 million in principal runoff, amortization and other portfolio reductions. The overall duration of the Company's investment portfolio declined to 3.1 years, as of March 31, 2015, from 3.4 years, as of December 31, 2014 and 4.2 years, as of March 31, 2014, as the Company implemented strategies in preparation for a rising interest rate environment.  The yield earned on the portfolio during the quarter increased 7 bps to 2.47% from 2.40% for the linked quarter.  The net unrealized gain/(loss) related to the investment portfolio, which is included in accumulated other comprehensive loss, increased from an unrealized loss of $2.5 million as of December 31, 2014 to an unrealized gain of $2.5 million as of March 31, 2015 due primarily to the decline in interest rates during the quarter.

DEPOSITS
Total deposits were $5.7 billion as of March 31, 2015, increasing $58.8 million, or 1.0%, compared to the linked quarter.  Average total deposits were $5.6 billion as of March 31, 2015, decreasing $15.7 million, or 0.3%, compared to the linked quarter.  The increase in period-end balances was driven by a $14.1 million, or 4.4% annualized, increase in noninterest-bearing deposits and a $44.8 million increase, or 4.2% annualized, increase in interest-bearing deposits.

Non-time deposit balances totaled $4.4 billion as of March 31, 2015, increasing $36.9 million, or 0.8%, compared to the linked quarter.  The average balance of non-time deposits totaled $4.4 billion as of March 31, 2015, decreasing $36.1 million, or 0.8%, compared to the linked quarter. 

Time deposit balances increased $21.9 million, or 1.7%, to $1.3 billion as of March 31, 2015.  Average time deposit balances totaled $1.3 billion as of March 31, 2015, increasing $20.4 million, or 1.6%, compared to the linked quarter.

The Company's total cost of deposit funding, inclusive of noninterest-bearing balances, was 35 bps for the quarter, unchanged compared to the prior quarter.

CAPITAL MANAGEMENT
The following table presents First Financial's regulatory and other capital ratios as of March 31, 2015, December 31, 2014 and March 31, 2014.

Shareholders' equity increased $11.7 million during the quarter due primarily to net income for the quarter which was partially offset by declared dividends. 

The Company's Tier I and total risk-based capital ratios declined during the quarter due primarily to an increase in risk-weighted assets resulting from the implementation of Basel III capital rules that became fully effective on January 1, 2015.  The Basel III standards apply higher risk weightings to unfunded commitments, certain types of commercial real estate lending and non-accrual loans.  The Company's tangible equity ratio increased during the quarter due to higher tangible equity partially offset by higher tangible assets.  The Company's leverage ratio increased primarily as a result of higher Tier 1 Capital and lower average assets.

Regulatory capital ratios as of March 31, 2015 are considered preliminary pending the filing of the Company's regulatory reports.

Teleconference / Webcast Information
First Financial's executive management will host a conference call to discuss the Company's financial and operating results on Friday, May 1, 2015 at 8:30 a.m. Eastern Time.  Members of the public who would like to listen to the conference call should dial (877) 506-6873 (U.S. toll free), (855) 669-9657 (Canada toll free) or +1 (412) 380-2003 (International) (no passcode required).  The number should be dialed five to ten minutes prior to the start of the conference call.  The conference call will also be accessible as an audio webcast via the Investor Relations section of the Company's website at www.bankatfirst.com.  A replay of the conference call will be available beginning one hour after the completion of the live call at (877) 344-7529 (U.S. toll free), (855) 669-9658 (Canada toll free) and +1 (412) 317-0088 (International); conference number 10064241.  The webcast will be archived on the Investor Relations section of the Company's website through May 1, 2016.

Press Release and Additional Information on Website
This press release as well as supplemental information and any non-GAAP reconciliations related to this release is available to the public through the Investor Relations section of First Financial's website at www.bankatfirst.com.

About First Financial Bancorp
First Financial Bancorp is a Cincinnati, Ohio based bank holding company.  As of March 31, 2015, the Company had $7.2 billion in assets, $4.8 billion in loans, $5.7 billion in deposits and $796 million in shareholders' equity.  The Company's subsidiary, First Financial Bank, N.A., founded in 1863, provides banking and financial services products through its four lines of business: commercial, consumer, wealth management and mortgage.  The commercial, consumer and mortgage units provide traditional banking services to business and retail clients.  First Financial Wealth Management provides wealth planning, portfolio management, trust and estate, brokerage and retirement plan services and had approximately $2.4 billion in assets under management as of March 31, 2015.  The Company's strategic operating markets are located in Ohio, Indiana and Kentucky where it operates 107 banking centers.  Additional information about the Company, including its products, services and banking locations is available at www.bankatfirst.com.

Forward-Looking Statement
Certain statements contained in this release which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act.  Examples of forward-looking statements include, but are not limited to, projections of revenues, income or loss, earnings or loss per share, the payment or non-payment of dividends, capital structure and other financial items, statements of plans and objectives of First Financial or its management or board of directors and statements of future economic performances and statements of assumptions underlying such statements.  Words such as ''believes,'' ''anticipates,'' "likely," "expected," ''intends,'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.  Management's analysis contains forward-looking statements that are provided to assist in the understanding of anticipated future financial performance.  However, such performance involves risks and uncertainties that may cause actual results to differ materially.  These factors include, but are not limited to: economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company's business; the effect of and changes in policies and laws or regulatory agencies (notably the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act); management's ability to effectively execute its business plan; mergers and acquisitions, including costs or difficulties related to the integration of acquired companies; the Company's ability to comply with the terms of loss sharing agreements with the FDIC; the effect of changes in accounting policies and practices; and the costs and effects of litigation and of unexpected or adverse outcomes in such litigation.  Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2014, as well as its other filings with the SEC, for a more detailed discussion of these risks, uncertainties and other factors that could cause actual results to differ from those discussed in the forward-looking statements.  Such forward-looking statements are meaningful only on the date when such statements are made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such a statement is made to reflect the occurrence of unanticipated events.