Edgar Filing: FIRST FINANCIAL BANCORP /OH/

8K 3Q14 Earnings release Ex 99.1

EXHIBIT 99.1

First Financial Bancorp Reports Third Quarter 2014

Financial Results and Announces Dividend Increase

Cincinnati, Ohio - October 30, 2014 - First Financial Bancorp (Nasdaq: FFBC) (“First Financial” or the “Company”) announced today financial and operational results for the third quarter 2014.

Third quarter net income was $15.3 million and earnings per diluted common share were $0.26. This compares with second quarter net income of $16.0 million and earnings per diluted common share of $0.28 and third quarter 2013 net income of $14.9 million and earnings per diluted common share of $0.26.


▪	Continued solid quarterly performance


•	Quarterly results included several acquisition-related items and other items not expected to recur which reduced pre-tax income by $5.1 million or approximately $0.05 per diluted share after taxes


•	Return on average assets of 0.88%; 1.07% as adjusted for acquisition-related and other items


•	Return on average tangible common equity of 10.15%; 12.39% as adjusted for acquisition-related and other items


▪	Board of directors announces 6.7% increase in the quarterly dividend to $0.16 per share


•	Earnings consistency provides capacity to support higher payout


•	Robust capital levels still allow ability to take advantage of strategic opportunities


•	Begins with next regularly scheduled dividend, payable on January 2, 2015 to shareholders of record as of November 28, 2014


▪	Entered the attractive Columbus, Ohio market


•	Completed acquisitions of The First Bexley Bank, Insight Bank and The Guernsey Bank


•	5 acquired banking centers


•	Total acquired loans of $606.3 million, net of estimated fair value marks


•	Total acquired deposits of $568.6 million, net of estimated fair value marks


▪	Annualized total loan growth, excluding loans acquired during the quarter, of 14.6% on a period-end basis


•	Strong performance in specialty finance, traditional C&I / owner occupied CRE and franchise lending


▪	Quarterly net interest margin of 3.66%, a decline of 4 bps compared to the linked quarter


•	Negative impact of covered loan balance decline partially offset by the positive impact from acquired loans, improved loan yields and fee income

Claude Davis, President and Chief Executive Officer, commented, “It was an exciting quarter for First Financial as we expanded into the attractive Columbus, Ohio market through the completion of The First

Bexley Bank, Insight Bank and The Guernsey Bank acquisitions, adding $606.3 million of loans and $568.6 million of deposits to our balance sheet. We were pleased to welcome our new associates and new clients from those institutions during the quarter and we continue to be extremely excited about the opportunity to introduce the First Financial brand of community banking to Central Ohio.

"Our financial results for the third quarter reflect continued solid organic loan growth during the period as well as the benefits of our expansion into the Columbus market. While reported earnings were impacted by acquisition-related expenses as well as costs associated with our ongoing efficiency plans and other items not expected to recur, we continued to execute on our community bank business model and leverage our diversified credit suite to generate consistent earning asset growth.

"We were very pleased with our asset generation this quarter as period-end loans, excluding loans acquired during the period, increased $147.7 million, or 14.6% on an annualized basis, compared to the linked quarter. Almost all lending areas of the Company contributed to the quarterly growth, led by strong performance in our specialty finance and traditional C&I / owner occupied CRE portfolios.

“And finally, the close of the third quarter brought about the expiration of the five-year loss sharing coverage period on commercial assets acquired in our 2009 FDIC-assisted transactions. While loss sharing coverage has certainly provided us with an added layer of loss protection over the past five years, we remain pleased with our covered asset resolution efforts and feel we are well-positioned to manage the risk associated with the remaining commercial assets post loss sharing protection."

NET INTEREST INCOME AND NET INTEREST MARGIN

Net interest income for the third quarter was $58.4 million as compared to $54.3 million for the second quarter 2014 and $55.8 million for the third quarter 2013. Compared to the linked quarter, total interest income increased $4.7 million, or 7.9%, while total interest expense increased $0.6 million, or 13.7%. Net interest margin was 3.66% for the third quarter, compared to 3.70% for the second quarter 2014 and 3.91% for the third quarter 2013.

Interest income earned on loans increased $4.8 million, or 9.9%, compared to the prior quarter. The increase in interest income earned on loans was driven by a $408.3 million, or 11.3%, increase in average uncovered loan balances as a result of the Columbus acquisitions as well as strong, organic loan growth during the period. Additionally, the yield on the uncovered portfolio during the quarter was approximately 4.35%, a 9 bp increase compared to the linked quarter. The impact on net interest income from the growth in average uncovered loans, as well as modestly higher loan fees, was partially offset by a $36.7 million, or 9.5%, decline in average covered loan balances during the quarter.

Interest income earned from investment securities was essentially unchanged compared to the prior quarter as an increase in average balances of $54.1 million, or 3.0%, was offset by a 10 bp decline in the yield earned on the portfolio to 2.37%.

The increase in total interest expense was due to a $209.0 million, or 5.5%, increase in average interest-bearing deposits as well as a 3 bp increase in the related cost of funds on interest-bearing deposits to 41 bps as a result of funding strategies and the Columbus acquisitions during the quarter. Average borrowed funds increased $150.3 million, or 20.2%, compared to the linked quarter and the related cost of funds was 36 bps.

NONINTEREST INCOME

The following table presents noninterest income for the three months ended September 30, 2014 and for the trailing four quarters, adjusted to exclude the impact of covered loan activity and other select items on the Company's reported balance.




Table I
	For the Three Months Ended
	September 30,			June 30,		March 31,			December 31,			September 30,
(Dollars in thousands)	2014			2014		2014			2013			2013

Total noninterest income	$	16,511		$	16,337	$	14,175		$	13,043		$	22,291
Selected components of noninterest income
Accelerated discount on covered loans¹	789			621		1,015			1,572			1,711
FDIC loss sharing income	(192		)	1,108		(508		)	(3,385		)	5,555
Gain on sale of investment securities	—			—		50			—			—
Other items not expected to recur	97			—		—			—			—
Total noninterest income excluding items noted above	$	15,817		$	14,608	$	13,618		$	14,856		$	15,025

¹ Net of the related valuation adjustment on the FDIC indemnification asset

Excluding the items highlighted in Table I, noninterest income earned in the third quarter was $15.8 million compared to $14.6 million in the second quarter 2014 and $15.0 million in the third quarter 2013. The $1.2 million increase compared to the linked quarter was driven by a $0.9 million, or 125.2%, increase in net gains on sales of loans as well as a $0.2 million increase in other noninterest income during the period. The increase in net gains on sales of loans during the third quarter was driven by a 119.4% increase in the amount of residential mortgage loans sold as compared to the linked quarter, reflecting strong mortgage origination activity as well as the impact of Columbus loan origination and sale

activity during the period. The increase in other noninterest income during the third quarter was driven primarily by an increase in fee income related to the Company's client derivative program.

NONINTEREST EXPENSE

The following table presents noninterest expense for the three months ended September 30, 2014 and for the trailing four quarters, adjusted to exclude the impact of covered asset activity and other select items on the Company's reported balance.




Table II
	For the Three Months Ended
	September 30,			June 30,			March 31,		December 31,		September 30,
(Dollars in thousands)	2014			2014			2014		2013		2013

Total noninterest expense	$	51,419		$	47,111		$	47,842	$	70,285	$	48,801
Selected components of noninterest expense
Loss (gain) - covered real estate owned	(1,433		)	398			33		946		204
Loss sharing expense	1,002			1,465			1,569		1,495		1,724
Pension settlement charges	—			—			—		462		1,396
Expenses associated with efficiency initiative	309			(59		)	350		1,450		1,051
FDIC indemnification asset valuation adjustment	—			—			—		22,417		—
Acquisition-related expenses	4,182			517			620		284		—
Other items not expected to recur	728			—			465		—		—
Total noninterest expense excluding items noted above	$	46,631		$	44,790		$	44,805	$	43,231	$	44,426

FDIC loss share support ¹	$	662		$	630		$	862	$	844	$	841


¹ Represents direct expenses associated with credit management and loan administration related to covered assets as well as compliance with FDIC loss sharing agreements; included in total noninterest expense excluding the items noted above and comprised of several noninterest expense line items

Excluding the items highlighted in Table II, noninterest expense was $46.6 million in the third quarter of 2014, $44.8 million in the second quarter of 2014 and $44.4 million in the third quarter 2013. The $1.8 million increase compared to the linked quarter was primarily due to the addition of the Columbus, Ohio operations during the quarter. Higher compensation and employee benefit costs, as well as OREO-related expenses, were partially offset by lower occupancy costs during the third quarter. OREO-related costs primarily resulted from valuation adjustments during the period. Lower occupancy costs are a result of the Company's ongoing efficiency efforts.

Acquisition-related expenses during the period included $1.8 million of personnel costs, $1.6 million of data processing related expenses, $0.5 million of professional services expenses, $0.2 million of equipment and other miscellaneous expenses. Other items not expected to recur from the third quarter 2014 consist of $0.4 million of office relocation expenses as well as a $0.4 million wealth management settlement.

INCOME TAXES

For the third quarter, income tax expense was $7.2 million, resulting in an effective tax rate of 32.0%, compared with income tax expense of $8.0 million and an effective tax rate of 33.3% during the second quarter 2014 and income tax expense of $7.6 million and an effective tax rate of 33.9% during the third quarter 2013. While the effective tax rate may fluctuate from quarter to quarter due to tax jurisdiction changes and the level of tax-enhanced assets, the overall effective tax rate for the full year is expected to be in the range of approximately 32.0% - 34.0%.

CREDIT QUALITY - EXCLUDING COVERED ASSETS

The following table presents certain credit quality metrics related to the Company's uncovered loan portfolio as of September 30, 2014 and the trailing four quarters.




Table III
	As of or for the Three Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(Dollars in thousands)	2014			2014			2014			2013			2013

Total nonaccrual loans ¹	$	41,646		$	32,418		$	35,334		$	37,605		$	57,926
Troubled debt restructurings - accruing	13,369			12,607			13,400			15,094			16,278
Total nonperforming loans	55,015			45,025			48,734			52,699			74,204
Total nonperforming assets	66,331			58,395			61,477			72,505			86,008
Nonperforming assets as a % of:
Period-end loans plus OREO	1.49		%	1.59		%	1.70		%	2.06		%	2.50		%
Total assets	0.90		%	0.89		%	0.95		%	1.13		%	1.38		%
Nonperforming assets ex. accruing TDRs as a % of:
Period-end loans plus OREO	1.19		%	1.25		%	1.33		%	1.63		%	2.03		%
Total assets	0.72		%	0.70		%	0.74		%	0.89		%	1.12		%
Nonperforming loans as a % of total loans	1.24		%	1.23		%	1.35		%	1.50		%	2.16		%
Provision for loan and lease losses - uncovered	$	1,093		$	29		$	1,159		$	1,851		$	1,413
Allowance for uncovered loan & lease losses	$	42,454		$	42,027		$	43,023		$	43,829		$	45,514
Allowance for loan & lease losses as a % of:
Total loans	0.95		%	1.15		%	1.19		%	1.25		%	1.33		%
Nonaccrual loans	101.9		%	129.6		%	121.8		%	116.6		%	78.6		%
Nonperforming loans	77.2		%	93.3		%	88.3		%	83.2		%	61.3		%
Total net charge-offs	$	666		$	1,025		$	1,965		$	3,536		$	2,946
Annualized net-charge-offs as a % of average
loans & leases	0.07		%	0.11		%	0.23		%	0.41		%	0.34		%

¹Includes nonaccrual troubled debt restructurings

Net Charge-offs

For the third quarter, net charge-offs totaled $0.7 million, a decline of $0.4 million, or 35.0%, compared to the linked quarter.

Nonperforming Assets

Nonaccrual loans, including nonaccrual troubled debt restructurings, increased $9.2 million, or 28.5%, to $41.6 million as of September 30, 2014 from $32.4 million as of June 30, 2014. Contributing to the increase was a single commercial real estate relationship totaling $6.6 million as well as $4.3 million of nonperforming loans, net of estimated fair value marks, from the Columbus acquisitions during the period.

Accruing troubled debt restructurings increased $0.8 million, or 6.0%, to $13.4 million as of September 30, 2014 from $12.6 million as of June 30, 2014. The increase in accruing troubled debt restructurings during the third quarter was primarily related to the addition of five commercial credits totaling $0.8 million.

OREO declined $2.1 million, or 15.4%, to $11.3 million during the third quarter as $2.3 million of sales and $0.8 million of valuation adjustments were partially offset by $1.1 million of additions during the period, including $0.5 million of additions from the Columbus acquisitions.

Classified assets increased $2.1 million, or 2.0%, to $105.9 million as of September 30, 2014 from $103.8 million as of June 30, 2014 due to $7.8 million of additions from the Columbus acquisitions during

the period, net of estimated fair value marks. Classified assets are defined by the Company as nonperforming assets plus performing loans internally rated substandard or worse.

Delinquent Loans

As of September 30, 2014, loans 30-to-89 days past due totaled $12.1 million, or 0.27% of period-end loans, compared to $5.7 million, or 0.16%, as of June 30, 2014 and $10.4 million, or 0.30%, as of September 30, 2013. The $6.3 million, or 110.2%, increase during the third quarter was driven primarily by a $5.4 million increase in delinquent commercial and commercial real estate loans during the period, including $0.7 million from the Columbus acquisitions.

Provision for Loan & Lease Losses

Third quarter provision expense related to uncovered loans and leases was $1.1 million as compared to $29 thousand for the linked quarter and $1.4 million for the third quarter 2013. Provision expense is a result of the Company’s modeling efforts to estimate the period-end allowance for loan and lease losses. The allowance for loan and lease losses as a percentage of period-end loans was 0.95% as of September 30, 2014, compared to 1.15% as of June 30, 2014. Excluding loans acquired during the period, as those loans are recorded at their estimated fair value through purchase accounting and have no associated allowance, the allowance for loan and lease losses as a percentage of period-end loans would have been more consistent with the linked quarter.

LOANS

The following table presents the loan portfolio as of September 30, 2014, June 30, 2014 and September 30, 2013.




Table IV
	As of
	September 30, 2014				June 30, 2014				September 30, 2013
			Percent				Percent				Percent
(Dollars in thousands)	Balance		of Total		Balance		of Total		Balance		of Total

Commercial	$	1,304,782	29.3	%	$	1,143,693	31.2	%	$	960,016	28.0	%
Real estate - construction	193,776		4.4	%	113,682		3.1	%	90,089		2.6	%
Real estate - commercial	1,952,055		43.9	%	1,491,731		40.7	%	1,493,969		43.5	%
Real estate - residential	426,558		9.6	%	372,601		10.2	%	352,830		10.3	%
Installment	47,561		1.1	%	43,338		1.2	%	49,273		1.4	%
Home equity	416,099		9.4	%	380,746		10.4	%	373,839		10.9	%
Credit card	35,925		0.8	%	35,656		1.0	%	34,285		1.0	%
Lease financing	73,216		1.6	%	81,212		2.2	%	76,615		2.2	%
Total loans, excluding covered loans	$	4,449,972	100.0	%	$	3,662,659	100.0	%	$	3,430,916	100.0	%

Covered Loans	$	332,265			$	365,603			$	518,524
Total loans	$	4,782,237			$	4,028,262			$	3,949,440

Total loans were $4.8 billion as of September 30, 2014, increasing $754.0 million, or 18.7%, compared to the linked quarter and $832.8 million, or 21.1%, compared to September 30, 2013. The increase relative to the linked quarter was driven by the addition of $606.3 million of loan balances, net of estimated fair value marks, from the Columbus acquisitions that closed in August as well as strong loan origination activity during the third quarter. Excluding loans acquired during the quarter, loans balances increased $147.7 million, or 14.6% on an annualized basis, compared to the linked quarter.

Covered loans totaled $332.3 million as of September 30, 2014, declining $33.3 million, or 9.1%, compared to the linked quarter and $186.3 million, or 35.9%, compared to September 30, 2013. The

Company’s loss sharing indemnification from the FDIC related to non-single-family loans expired effective October 1, 2014 and, as a result, approximately $190.3 million, or 57.3%, of the Company's $332.3 million covered loan portfolio were no longer covered by FDIC loss sharing effective that date. The loss sharing protection related to the remaining single-family portfolio of approximately $142.0 million will expire in the third quarter 2019.

INVESTMENTS

The following table presents a summary of the total investment portfolio at September 30, 2014.




Table V
	As of September 30, 2014
	Held-to-		Available-for-						Percent
(Dollars in thousands)	Maturity		Sale		Other		Total		of Portfolio

Debt obligations of the U.S. Government	$	—	$	20,207	$	—	$	20,207	1.1	%
Debt obligations of U.S. Government Agency	17,917		12,270		—		30,187		1.6	%
Residential Mortgage Backed Securities
Pass-through securities:
Agency fixed rate	77,000		95,964		—		172,964		9.2	%
Agency adjustable rate	146,845		38,186		—		185,031		9.8	%
Non-Agency fixed rate			8,917		—		8,917		0.5	%
Collateralized mortgage obligations:
Agency fixed rate	334,700		256,862		—		591,562		31.4	%
Agency variable rate			110,378		—		110,378		5.9	%
Agency collateralized and insured municipal securities	84,986		108,513		—		193,499		10.3	%
Commercial mortgage backed securities	231,810		121,655		—		353,465		18.8	%
Municipal bond securities	2,467		21,677		—		24,144		1.3	%
Corporate securities	4,796		69,809		—		74,605		4.0	%
Asset-backed securities	—		56,882		—		56,882		3.0	%
Regulatory stock	—				45,025		45,025		2.4	%
Other	—		8,274		4,961		13,235		0.7	%
	$	900,521	$	929,594	$	49,986	$	1,880,101	100.0	%

The investment portfolio increased $35.2 million, or 1.9%, to $1.9 billion during the third quarter as $61.0 million of purchases and $30.8 million of securities acquired in the Columbus acquisitions were partially offset by amortizations and other portfolio reductions. As of September 30, 2014, the overall duration of the investment portfolio decreased to 3.7 years compared to 3.9 years as of June 30, 2014. The yield earned on the portfolio during the quarter decreased 10 bps to 2.37% from 2.47% for the linked quarter, driven by lower reinvestment rates, higher prepayment speeds on mortgage-related assets and other duration management actions. The net unrealized loss included in accumulated other comprehensive loss related to the investment portfolio was relatively unchanged during the quarter, increasing from $6.0 million as of June 30, 2014 to $6.2 million as of September 30, 2014.

DEPOSITS

Total deposits were $5.5 billion as of September 30, 2014, increasing $657.9 million, or 13.5%, compared to the linked quarter. Average total deposits were $5.2 billion as of September 30, 2014, increasing $277.5 million, or 5.6%, compared to the linked quarter. The increases in period-end and average deposits were driven by $568.6 million of deposits, net of estimated fair value marks, from the Columbus acquisitions as well as strong growth in interest-bearing demand deposits during the quarter.

Non-time deposit balances totaled $4.3 billion as of September 30, 2014, increasing $383.7 million, or 9.8%, compared to the linked quarter. The average balance of non-time deposits totaled $4.1 billion as of September 30, 2014, increasing $114.2 million, or 2.9%, compared to the linked quarter.

Time deposit balances increased $274.2 million, or 28.2%, to $1.2 billion as of September 30, 2014. Average time deposit balances totaled $1.1 billion as of September 30, 2014, increasing $163.2 million, or 17.0%, compared to the linked quarter.

The Company’s total cost of deposit funding, inclusive of noninterest-bearing balances, was 32 bps for the quarter, representing an increase of 3 bps compared to the prior quarter and 8 bps compared to the third quarter 2013.

CAPITAL MANAGEMENT

The following table presents First Financial's regulatory and other capital ratios as of September 30, 2014, June 30, 2014 and September 30, 2013.




Table VI
	As of
	September 30,			June 30,			September 30,
	2014			2014			2013

Leverage Ratio	9.70		%	9.99		%	10.29		%
Tier 1 Capital Ratio	12.74		%	14.34		%	15.26		%
Total Risk-Based Capital Ratio	13.80		%	15.59		%	16.53		%
Ending tangible shareholders' equity
to ending tangible assets	8.71		%	9.39		%	9.60		%
Ending tangible common shareholders'
equity to ending tangible assets	8.71		%	9.39		%	9.60		%

Tangible book value per share	$	10.23		$	10.49		$	10.24

Shareholders’ equity increased $68.1 million during the quarter as a result of stock issued in conjunction with the Columbus acquisitions and net income for the quarter, 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 acquisitions during the period as well as uncovered loan growth. The Company’s tangible common equity ratio declined during the quarter due to the impact from acquisitions as the increase in tangible assets outweighed the increase in tangible common equity from the common shares issued in conjunction with the acquisitions. The Company's leverage ratio decreased primarily as a result of the overall growth in the balance sheet during the quarter. Regulatory capital ratios as of September 30, 2014 are considered preliminary pending the filing of the Company’s regulatory reports.

Teleconference / Webcast Information

First Financial’s executive management will host a conference call to discuss the Company’s financial and operating results on Friday, October 31, 2014 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 through November 17, 2014 at (877) 344-7529 (U.S. toll free), (855) 669-9658 (Canada toll free) and +1 (412) 317-0088 (International); conference number 10045038. The webcast will be archived on the Investor Relations section of the Company’s website through October 31, 2015.

Press Release and Additional Information on Website

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

About First Financial Bancorp

First Financial Bancorp is a Cincinnati, Ohio based bank holding company. As of September 30, 2014, the Company had $7.4 billion in assets, $4.8 billion in loans, $5.5 billion in deposits and $774 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 September 30, 2014. The Company’s strategic operating markets are located in Ohio, Indiana and Kentucky where it operates 106 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, 2013, 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.

Contact Information

Investors/Analysts Media

John Gavigan Jenny Keighley

Corporate Controller and Investor Relations Assistant Vice President, Media Relations Manager

(513) 979-5813 (513) 979-5582

john.gavigan@bankatfirst.com jennifer.keighley@bankatfirst.com

Selected Financial Information

September 30, 2014

(unaudited)



Contents	Page
Consolidated Financial Highlights	2
Consolidated Statements of Income	3
Consolidated Quarterly Statements of Income	4 - 5
Consolidated Statements of Condition	6
Average Consolidated Statements of Condition	7
Net Interest Margin Rate / Volume Analysis	8 - 9
Credit Quality	10
Capital Adequacy	11
Supplemental Information on Covered Assets	12 - 14



FIRST FINANCIAL BANCORP.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data)
(Unaudited)

	Three Months Ended,															Nine months ended,
	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,			Sep. 30,
	2014			2014			2014			2013			2013			2014			2013
RESULTS OF OPERATIONS
Net income	$	15,344		$	15,953		$	15,104		$	3,785		$	14,911		$	46,401		$	44,564
Net earnings per share - basic	$	0.26		$	0.28		$	0.26		$	0.07		$	0.26		$	0.80		$	0.78
Net earnings per share - diluted	$	0.26		$	0.28		$	0.26		$	0.07		$	0.26		$	0.79		$	0.77
Dividends declared per share	$	0.15		$	0.15		$	0.15		$	0.15		$	0.27		$	0.45		$	0.79

KEY FINANCIAL RATIOS
Return on average assets	0.88		%	0.99		%	0.96		%	0.24		%	0.96		%	0.94		%	0.95		%
Return on average shareholders' equity	8.16		%	9.19		%	8.95		%	2.15		%	8.53		%	8.75		%	8.49		%
Return on average tangible shareholders' equity	10.15		%	10.73		%	10.49		%	2.51		%	10.00		%	11.02		%	9.92		%

Net interest margin	3.66		%	3.70		%	3.82		%	3.90		%	3.91		%	3.73		%	3.99		%
Net interest margin (fully tax equivalent) ⁽¹⁾	3.71		%	3.76		%	3.87		%	3.94		%	3.95		%	3.78		%	4.03		%

Ending shareholders' equity as a percent of ending assets	10.52		%	10.78		%	10.64		%	10.63		%	11.07		%	10.52		%	11.07		%
Ending tangible shareholders' equity as a percent of:
Ending tangible assets	8.71		%	9.39		%	9.23		%	9.20		%	9.60		%	8.71		%	9.60		%
Risk-weighted assets	12.07		%	13.56		%	13.50		%	13.59		%	14.27		%	12.06		%	14.27		%

Average shareholders' equity as a percent of average assets	10.75		%	10.79		%	10.69		%	11.23		%	11.19		%	10.75		%	11.15		%
Average tangible shareholders' equity as a percent of
average tangible assets	8.83		%	9.38		%	9.27		%	9.77		%	9.71		%	8.73		%	9.69		%

Book value per share	$	12.61		$	12.23		$	11.98		$	11.86		$	11.99		$	12.61		$	11.99
Tangible book value per share	$	10.23		$	10.49		$	10.24		$	10.10		$	10.24		$	10.23		$	10.24

Tier 1 Ratio ⁽²⁾	12.74		%	14.34		%	14.42		%	14.61		%	15.26		%	12.74		%	15.26		%
Total Capital Ratio ⁽²⁾	13.80		%	15.59		%	15.67		%	15.88		%	16.53		%	13.80		%	16.53		%
Leverage Ratio ⁽²⁾	9.70		%	9.99		%	9.94		%	10.11		%	10.29		%	9.70		%	10.29		%

AVERAGE BALANCE SHEET ITEMS
Loans ⁽³⁾	$	4,052,697		$	3,637,458		$	3,532,311		$	3,450,069		$	3,410,102		$	3,742,728		$	3,310,619
Covered loans and FDIC indemnification asset	378,944			421,603			478,326			568,385			655,654			425,927			750,897
Investment securities	1,865,241			1,811,175			1,807,571			1,654,374			1,589,666			1,828,207			1,710,310
Interest-bearing deposits with other banks	29,433			10,697			2,922			4,906			4,010			14,448			6,989
Total earning assets	$	6,326,315		$	5,880,933		$	5,821,130		$	5,677,734		$	5,659,432		$	6,011,310		$	5,778,815
Total assets	$	6,937,283		$	6,454,252		$	6,399,235		$	6,232,971		$	6,193,722		$	6,598,894		$	6,297,735
Noninterest-bearing deposits	$	1,179,207		$	1,110,697		$	1,096,509		$	1,129,097		$	1,072,259		$	1,129,107		$	1,061,850
Interest-bearing deposits	4,041,255			3,832,295			3,695,177			3,720,809			3,654,311			3,857,510			3,743,721
Total deposits	$	5,220,462		$	4,942,992		$	4,791,686		$	4,849,906		$	4,726,570		$	4,986,617		$	4,805,571
Borrowings	$	896,328		$	745,990		$	842,479		$	583,522		$	667,706		$	828,463		$	682,116
Shareholders' equity	$	745,729		$	696,609		$	684,332		$	700,063		$	693,158		$	709,115		$	701,884

CREDIT QUALITY RATIOS (excluding covered assets)
Allowance to ending loans	0.95		%	1.15		%	1.19		%	1.25		%	1.33		%	0.95		%	1.33		%
Allowance to nonaccrual loans	101.94		%	129.64		%	121.76		%	116.55		%	78.57		%	101.94		%	78.57		%
Allowance to nonperforming loans	77.17		%	93.34		%	88.28		%	83.17		%	61.34		%	77.17		%	61.34		%
Nonperforming loans to total loans	1.24		%	1.23		%	1.35		%	1.50		%	2.16		%	1.24		%	2.16		%
Nonperforming assets to ending loans, plus OREO	1.49		%	1.59		%	1.70		%	2.06		%	2.50		%	1.49		%	2.50		%
Nonperforming assets to total assets	0.90		%	0.89		%	0.95		%	1.13		%	1.38		%	0.90		%	1.38		%
Net charge-offs to average loans (annualized)	0.07		%	0.11		%	0.23		%	0.41		%	0.34		%	0.13		%	0.37		%

(1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provide useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons.

(2) September 30, 2014 regulatory capital ratios are preliminary.

(3) Includes loans held for sale.



FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

	Three months ended,								Nine months ended,
	Sep. 30,								Sep. 30,
	2014			2013			% Change		2014			2013			% Change
Interest income
Loans, including fees	$	53,725		$	52,908		1.5	%	$	151,749		$	163,955		(7.4	)%
Investment securities
Taxable	10,227			8,267			23.7	%	31,019			24,938			24.4	%
Tax-exempt	894			541			65.2	%	2,500			1,681			48.7	%
Total investment securities interest	11,121			8,808			26.3	%	33,519			26,619			25.9	%
Other earning assets	(1,455		)	(2,185		)	(33.4	)%	(4,162		)	(5,213		)	(20.2	)%
Total interest income	63,391			59,531			6.5	%	181,106			185,361			(2.3	)%

Interest expense
Deposits	4,218			2,856			47.7	%	11,140			10,000			11.4	%
Short-term borrowings	354			286			23.8	%	975			920			6.0	%
Long-term borrowings	456			617			(26.1	)%	1,505			1,925			(21.8	)%
Total interest expense	5,028			3,759			33.8	%	13,620			12,845			6.0	%
Net interest income	58,363			55,772			4.6	%	167,486			172,516			(2.9	)%
Provision for loan and lease losses - uncovered	1,093			1,413			(22.6	)%	2,281			6,863			(66.8	)%
Provision for loan and lease losses - covered	(200		)	5,293			(103.8	)%	(2,805		)	6,052			(146.3	)%
Net interest income after provision for loan and lease losses	57,470			49,066			17.1	%	168,010			159,601			5.3	%

Noninterest income
Service charges on deposit accounts	5,263			5,447			(3.4	)%	15,172			15,369			(1.3	)%
Trust and wealth management fees	3,207			3,366			(4.7	)%	10,258			10,813			(5.1	)%
Bankcard income	2,859			2,637			8.4	%	8,101			8,215			(1.4	)%
Net gains from sales of loans	1,660			751			121.0	%	2,793			2,546			9.7	%
Gain on sale of investment securities	0			0			N/M		50			1,724			(97.1	)%
FDIC loss sharing income	(192		)	5,555			103.5	%	408			7,105			(94.3	)%
Accelerated discount on covered loans	789			1,711			(53.9	)%	2,425			5,581			(56.5	)%
Other	2,925			2,824			3.6	%	7,816			9,251			(15.5	)%
Total noninterest income	16,511			22,291			(25.9	)%	47,023			60,604			(22.4	)%

Noninterest expenses
Salaries and employee benefits	28,686			23,834			20.4	%	79,562			77,379			2.8	%
Pension settlement charges	0			1,396			(100.0	)%	0			5,712			(100.0	)%
Net occupancy	4,577			5,101			(10.3	)%	14,381			16,650			(13.6	)%
Furniture and equipment	2,265			2,213			2.3	%	6,325			6,834			(7.4	)%
Data processing	4,393			2,584			70.0	%	10,021			7,612			31.6	%
Marketing	939			1,192			(21.2	)%	2,555			3,271			(21.9	)%
Communication	541			865			(37.5	)%	1,726			2,479			(30.4	)%
Professional services	1,568			1,528			2.6	%	4,741			5,095			(6.9	)%
State intangible tax	648			1,010			(35.8	)%	1,936			3,028			(36.1	)%
FDIC assessments	1,126			1,107			1.7	%	3,334			3,380			(1.4	)%
Loss (gain) - other real estate owned	844			184			358.7	%	1,575			902			74.6	%
Loss (gain) - covered other real estate owned	(1,433		)	204			(802.5	)%	(1,002		)	(2,165		)	(53.7	)%
Loss sharing expense	1,002			1,724			(41.9	)%	4,036			5,588			(27.8	)%
Other	6,263			5,859			6.9	%	17,182			19,425			(11.5	)%
Total noninterest expenses	51,419			48,801			5.4	%	146,372			155,190			(5.7	)%
Income before income taxes	22,562			22,556			0.0	%	68,661			65,015			5.6	%
Income tax expense	7,218			7,645			(5.6	)%	22,260			20,451			8.8	%
Net income	$	15,344		$	14,911		2.9	%	$	46,401		$	44,564		4.1	%

ADDITIONAL DATA
Net earnings per share - basic	$	0.26		$	0.26				$	0.80		$	0.78
Net earnings per share - diluted	$	0.26		$	0.26				$	0.79		$	0.77
Dividends declared per share	$	0.15		$	0.27				$	0.45		$	0.79

Return on average assets	0.88		%	0.96		%			0.94		%	0.95		%
Return on average shareholders' equity	8.16		%	8.53		%			8.75		%	8.49		%

Interest income	$	63,391		$	59,531		6.5	%	$	181,106		$	185,361		(2.3	)%
Tax equivalent adjustment	818			516			58.5	%	2,278			1,507			51.2	%
Interest income - tax equivalent	64,209			60,047			6.9	%	183,384			186,868			(1.9	)%
Interest expense	5,028			3,759			33.8	%	13,620			12,845			6.0	%
Net interest income - tax equivalent	$	59,181		$	56,288		5.1	%	$	169,764		$	174,023		(2.4	)%

Net interest margin	3.66		%	3.91		%			3.73		%	3.99		%
Net interest margin (fully tax equivalent) ⁽¹⁾	3.71		%	3.95		%			3.78		%	4.03		%

Full-time equivalent employees	1,395			1,292

(1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons.
N/M = Not meaningful.



FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

	2014
	Third			Second			First						% Change
	Quarter			Quarter			Quarter			YTD			Linked Qtr.
Interest income
Loans, including fees	$	53,725		$	48,877		$	49,147		$	151,749		9.9	%
Investment securities
Taxable	10,227			10,355			10,437			31,019			(1.2	)%
Tax-exempt	894			796			810			2,500			12.3	%
Total investment securities interest	11,121			11,151			11,247			33,519			(0.3	)%
Other earning assets	(1,455		)	(1,301		)	(1,406		)	(4,162		)	11.8	%
Total interest income	63,391			58,727			58,988			181,106			7.9	%

Interest expense
Deposits	4,218			3,606			3,316			11,140			17.0	%
Short-term borrowings	354			292			329			975			21.2	%
Long-term borrowings	456			525			524			1,505			(13.1	)%
Total interest expense	5,028			4,423			4,169			13,620			13.7	%
Net interest income	58,363			54,304			54,819			167,486			7.5	%
Provision for loan and lease losses - uncovered	1,093			29			1,159			2,281			3,669.0	%
Provision for loan and lease losses - covered	(200		)	(413		)	(2,192		)	(2,805		)	(51.6	)%
Net interest income after provision for loan and lease losses	57,470			54,688			55,852			168,010			5.1	%

Noninterest income
Service charges on deposit accounts	5,263			5,137			4,772			15,172			2.5	%
Trust and wealth management fees	3,207			3,305			3,746			10,258			(3.0	)%
Bankcard income	2,859			2,809			2,433			8,101			1.8	%
Net gains from sales of loans	1,660			737			396			2,793			125.2	%
Gain on sale of investment securities	0			0			50			50			N/M
FDIC loss sharing income	(192		)	1,108			(508		)	408			(117.3	)%
Accelerated discount on covered loans	789			621			1,015			2,425			27.1	%
Other	2,925			2,620			2,271			7,816			11.6	%
Total noninterest income	16,511			16,337			14,175			47,023			1.1	%

Noninterest expenses
Salaries and employee benefits	28,686			25,615			25,261			79,562			12.0	%
Net occupancy	4,577			4,505			5,299			14,381			1.6	%
Furniture and equipment	2,265			1,983			2,077			6,325			14.2	%
Data processing	4,393			2,770			2,858			10,021			58.6	%
Marketing	939			830			786			2,555			13.1	%
Communication	541			562			623			1,726			(3.7	)%
Professional services	1,568			1,449			1,724			4,741			8.2	%
State intangible tax	648			644			644			1,936			0.6	%
FDIC assessments	1,126			1,074			1,134			3,334			4.8	%
Loss (gain) - other real estate owned	844			313			418			1,575			169.6	%
Loss (gain) - covered other real estate owned	(1,433		)	398			33			(1,002		)	(460.1	)%
Loss sharing expense	1,002			1,465			1,569			4,036			(31.6	)%
Other	6,263			5,503			5,416			17,182			13.8	%
Total noninterest expenses	51,419			47,111			47,842			146,372			9.1	%
Income before income taxes	22,562			23,914			22,185			68,661			(5.7	)%
Income tax expense	7,218			7,961			7,081			22,260			(9.3	)%
Net income	$	15,344		$	15,953		$	15,104		$	46,401		(3.8	)%

ADDITIONAL DATA
Net earnings per share - basic	$	0.26		$	0.28		$	0.26		$	0.80
Net earnings per share - diluted	$	0.26		$	0.28		$	0.26		$	0.79
Dividends declared per share	$	0.15		$	0.15		$	0.15		$	0.45

Return on average assets	0.88		%	0.99		%	0.96		%	0.94		%
Return on average shareholders' equity	8.16		%	9.19		%	8.95		%	8.75		%

Interest income	$	63,391		$	58,727		$	58,988		$	181,106		7.9	%
Tax equivalent adjustment	818			758			702			2,278			7.9	%
Interest income - tax equivalent	64,209			59,485			59,690			183,384			7.9	%
Interest expense	5,028			4,423			4,169			13,620			13.7	%
Net interest income - tax equivalent	$	59,181		$	55,062		$	55,521		$	169,764		7.5	%

Net interest margin	3.66		%	3.70		%	3.82		%	3.73		%
Net interest margin (fully tax equivalent)⁽¹⁾	3.71		%	3.76		%	3.87		%	3.78		%

Full-time equivalent employees	1,395			1,296			1,286

(1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons.
N/M = Not meaningful.



FIRST FINANCIAL BANCORP.
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)

	2013
	Fourth			Third			Second			First			Full
	Quarter			Quarter			Quarter			Quarter			Year
Interest income
Loans, including fees	$	52,351		$	52,908		$	55,022		$	56,025		$	216,306
Investment securities
Taxable	9,209			8,267			8,295			8,376			34,147
Tax-exempt	719			541			560			580			2,400
Total investment securities interest	9,928			8,808			8,855			8,956			36,547
Other earning assets	(2,432		)	(2,185		)	(1,556		)	(1,472		)	(7,645		)
Total interest income	59,847			59,531			62,321			63,509			245,208

Interest expense
Deposits	3,247			2,856			3,284			3,860			13,247
Short-term borrowings	257			286			305			329			1,177
Long-term borrowings	539			617			654			654			2,464
Total interest expense	4,043			3,759			4,243			4,843			16,888
Net interest income	55,804			55,772			58,078			58,666			228,320
Provision for loan and lease losses - uncovered	1,851			1,413			2,409			3,041			8,714
Provision for loan and lease losses - covered	(5,857		)	5,293			(8,283		)	9,042			195
Net interest income after provision for loan and lease losses	59,810			49,066			63,952			46,583			219,411

Noninterest income
Service charges on deposit accounts	5,226			5,447			5,205			4,717			20,595
Trust and wealth management fees	3,506			3,366			3,497			3,950			14,319
Bankcard income	2,699			2,637			3,145			2,433			10,914
Net gains from sales of loans	604			751			1,089			706			3,150
Gain on sale of investment securities	0			0			188			1,536			1,724
FDIC loss sharing income	(3,385		)	5,555			(7,384		)	8,934			3,720
Accelerated discount on covered loans	1,572			1,711			1,935			1,935			7,153
Other	2,821			2,824			3,940			2,487			12,072
Total noninterest income	13,043			22,291			11,615			26,698			73,647

Noninterest expenses
Salaries and employee benefits	24,023			23,834			26,216			27,329			101,402
Pension settlement charges	462			1,396			4,316			0			6,174
Net occupancy	4,557			5,101			5,384			6,165			21,207
Furniture and equipment	2,136			2,213			2,250			2,371			8,970
Data processing	2,617			2,584			2,559			2,469			10,229
Marketing	999			1,192			1,182			897			4,270
Communication	728			865			781			833			3,207
Professional services	1,781			1,528			1,764			1,803			6,876
State intangible tax	901			1,010			1,004			1,014			3,929
FDIC assessments	1,121			1,107			1,148			1,125			4,501
Loss (gain) - other real estate owned	348			184			216			502			1,250
Loss (gain) - covered other real estate owned	946			204			(2,212		)	(157		)	(1,219		)
Loss sharing expense	1,495			1,724			1,578			2,286			7,083
FDIC indemnification impairment	22,417			0			0			0			22,417
Other	5,754			5,859			7,097			6,469			25,179
Total noninterest expenses	70,285			48,801			53,283			53,106			225,475
Income before income taxes	2,568			22,556			22,284			20,175			67,583
Income tax expense	(1,217		)	7,645			6,455			6,351			19,234
Net income	$	3,785		$	14,911		$	15,829		$	13,824		$	48,349

ADDITIONAL DATA
Net earnings per share - basic	$	0.07		$	0.26		$	0.28		$	0.24		$	0.84
Net earnings per share - diluted	$	0.07		$	0.26		$	0.27		$	0.24		$	0.83
Dividends declared per share	$	0.15		$	0.27		$	0.24		$	0.28		$	0.94

Return on average assets	0.24		%	0.96		%	1.01		%	0.88		%	0.77		%
Return on average shareholders' equity	2.15		%	8.53		%	9.02		%	7.91		%	6.89		%

Interest income	$	59,847		$	59,531		$	62,321		$	63,509		$	245,208
Tax equivalent adjustment	635			516			514			477			2,142
Interest income - tax equivalent	60,482			60,047			62,835			63,986			247,350
Interest expense	4,043			3,759			4,243			4,843			16,888
Net interest income - tax equivalent	$	56,439		$	56,288		$	58,592		$	59,143		$	230,462

Net interest margin	3.90		%	3.91		%	4.02		%	4.04		%	3.97		%
Net interest margin (fully tax equivalent)⁽¹⁾	3.94		%	3.95		%	4.06		%	4.07		%	4.01		%

Full-time equivalent employees	1,306			1,292			1,338			1,385

(1) The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest income on a fully tax equivalent basis. Therefore, management believes, these measures provided useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons.



FIRST FINANCIAL BANCORP.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)

	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,			% Change		% Change
	2014			2014			2014			2013			2013			Linked Qtr.		Comparable Qtr.
ASSETS
Cash and due from banks	$	121,360		$	123,160		$	161,515		$	117,620		$	177,698		(1.5	)%	(31.7	)%
Interest-bearing deposits with other banks	22,365			39,237			9,681			25,830			10,414			(43.0	)%	114.8	%
Investment securities available-for-sale	929,594			897,715			862,526			913,601			854,747			3.6	%	8.8	%
Investment securities held-to-maturity	900,521			899,502			890,806			837,272			669,093			0.1	%	34.6	%
Other investments	49,986			47,640			47,659			47,427			75,945			4.9	%	(34.2	)%
Loans held for sale	16,816			13,108			6,171			8,114			10,704			28.3	%	57.1	%
Loans
Commercial	1,304,782			1,143,693			1,118,057			1,035,668			960,016			14.1	%	35.9	%
Real estate - construction	193,776			113,682			87,996			80,741			90,089			70.5	%	115.1	%
Real estate - commercial	1,952,055			1,491,731			1,513,891			1,496,987			1,493,969			30.9	%	30.7	%
Real estate - residential	426,558			372,601			360,671			352,931			352,830			14.5	%	20.9	%
Installment	47,561			43,338			44,911			47,133			49,273			9.7	%	(3.5	)%
Home equity	416,099			380,746			374,427			376,454			373,839			9.3	%	11.3	%
Credit card	35,925			35,656			34,458			35,592			34,285			0.8	%	4.8	%
Lease financing	73,216			81,212			79,792			80,135			76,615			(9.8	)%	(4.4	)%
Total loans, excluding covered loans	4,449,972			3,662,659			3,614,203			3,505,641			3,430,916			21.5	%	29.7	%
Less
Allowance for loan and lease losses	42,454			42,027			43,023			43,829			45,514			1.0	%	(6.7	)%
Net loans - uncovered	4,407,518			3,620,632			3,571,180			3,461,812			3,385,402			21.7	%	30.2	%
Covered loans	332,265			365,603			409,405			457,873			518,524			(9.1	)%	(35.9	)%
Less
Allowance for loan and lease losses	11,535			12,425			10,573			18,901			23,259			(7.2	)%	(50.4	)%
Net loans - covered	320,730			353,178			398,832			438,972			495,265			(9.2	)%	(35.2	)%
Net loans	4,728,248			3,973,810			3,970,012			3,900,784			3,880,667			19.0	%	21.8	%
Premises and equipment	141,851			133,418			135,105			137,110			139,125			6.3	%	2.0	%
Goodwill	137,458			95,050			95,050			95,050			95,050			44.6	%	44.6	%
Other intangibles	8,542			5,344			5,566			5,924			6,249			59.8	%	36.7	%
FDIC indemnification asset	24,160			30,420			39,003			45,091			78,132			(20.6	)%	(69.1	)%
Accrued interest and other assets	272,568			287,340			275,995			283,390			255,617			(5.1	)%	6.6	%
Total Assets	$	7,353,469		$	6,545,744		$	6,499,089		$	6,417,213		$	6,253,441		12.3	%	17.6	%

LIABILITIES
Deposits
Interest-bearing demand	$	1,214,726		$	1,105,031		$	1,102,029		$	1,125,723		$	1,068,067		9.9	%	13.7	%
Savings	1,827,590			1,656,798			1,639,495			1,612,005			1,593,895			10.3	%	14.7	%
Time	1,247,334			973,100			956,049			952,327			926,029			28.2	%	34.7	%
Total interest-bearing deposits	4,289,650			3,734,929			3,697,573			3,690,055			3,587,991			14.9	%	19.6	%
Noninterest-bearing	1,243,367			1,140,198			1,122,816			1,147,452			1,141,016			9.0	%	9.0	%
Total deposits	5,533,017			4,875,127			4,820,389			4,837,507			4,729,007			13.5	%	17.0	%
Federal funds purchased and securities sold
under agreements to repurchase	113,303			128,013			112,293			94,749			105,472			(11.5	)%	7.4	%
FHLB short-term borrowings	806,000			686,300			722,800			654,000			518,200			17.4	%	55.5	%
Total short-term borrowings	919,303			814,313			835,093			748,749			623,672			12.9	%	47.4	%
Long-term debt	52,656			59,693			60,163			60,780			61,088			(11.8	)%	(13.8	)%
Total borrowed funds	971,959			874,006			895,256			809,529			684,760			11.2	%	41.9	%
Accrued interest and other liabilities	74,581			90,780			92,097			88,016			147,635			(17.8	)%	(49.5	)%
Total Liabilities	6,579,557			5,839,913			5,807,742			5,735,052			5,561,402			12.7	%	18.3	%

SHAREHOLDERS' EQUITY
Common stock	574,209			574,206			573,243			577,076			577,429			0.0	%	(0.6	)%
Retained earnings	344,118			337,971			330,672			324,192			328,993			1.8	%	4.6	%
Accumulated other comprehensive loss	(20,888		)	(21,569		)	(27,648		)	(31,281		)	(29,294		)	(3.2	)%	(28.7	)%
Treasury stock, at cost	(123,527		)	(184,777		)	(184,920		)	(187,826		)	(185,089		)	(33.1	)%	(33.3	)%
Total Shareholders' Equity	773,912			705,831			691,347			682,161			692,039			9.6	%	11.8	%
Total Liabilities and Shareholders' Equity	$	7,353,469		$	6,545,744		$	6,499,089		$	6,417,213		$	6,253,441		12.3	%	17.6	%



FIRST FINANCIAL BANCORP.
AVERAGE CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)

	Quarterly Averages															Year-to-Date Averages
	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,			Sep. 30,
	2014			2014			2014			2013			2013			2014			2013
ASSETS
Cash and due from banks	$	125,528		$	118,947		$	123,583		$	110,246		$	120,154		$	122,693		$	117,252
Federal funds sold	8,795			0			0			0			0			2,964			0
Interest-bearing deposits with other banks	20,638			10,697			2,922			4,906			4,010			11,484			6,989
Investment securities	1,865,241			1,811,175			1,807,571			1,654,374			1,589,666			1,828,207			1,710,310
Loans held for sale	15,357			8,464			4,924			7,990			13,349			9,620			18,027
Loans
Commercial	1,196,075			1,117,483			1,062,225			986,438			937,939			1,125,751			902,071
Real estate - construction	152,359			97,052			83,095			79,194			93,103			111,089			89,406
Real estate - commercial	1,728,627			1,511,769			1,491,569			1,489,858			1,488,047			1,578,190			1,448,760
Real estate - residential	401,706			365,118			355,593			351,929			347,110			374,308			335,262
Installment	46,015			43,786			45,642			47,733			50,130			45,149			52,359
Home equity	399,922			378,010			374,503			374,919			371,072			384,238			368,036
Credit card	36,151			35,321			34,663			35,673			34,176			35,384			33,757
Lease financing	76,485			80,455			80,097			76,335			75,176			78,999			62,941
Total loans, excluding covered loans	4,037,340			3,628,994			3,527,387			3,442,079			3,396,753			3,733,108			3,292,592
Less
Allowance for loan and lease losses	42,611			43,559			44,273			46,531			49,451			43,475			49,677
Net loans - uncovered	3,994,729			3,585,435			3,483,114			3,395,548			3,347,302			3,689,633			3,242,915
Covered loans	350,894			387,616			434,527			490,072			573,243			390,706			650,105
Less
Allowance for loan and lease losses	13,086			11,590			17,629			21,733			31,208			14,085			39,670
Net loans - covered	337,808			376,026			416,898			468,339			542,035			376,621			610,435
Net loans	4,332,537			3,961,461			3,900,012			3,863,887			3,889,337			4,066,254			3,853,350
Premises and equipment	136,956			134,522			136,624			138,644			141,498			136,035			144,516
Goodwill	118,756			95,050			95,050			95,050			95,050			103,039			95,050
Other intangibles	7,138			5,445			5,723			6,075			6,428			6,107			6,865
FDIC indemnification asset	28,050			33,987			43,799			78,313			82,411			35,221			100,792
Accrued interest and other assets	278,287			274,504			279,027			273,486			251,819			277,270			244,584
Total Assets	$	6,937,283		$	6,454,252		$	6,399,235		$	6,232,971		$	6,193,722		$	6,598,894		$	6,297,735

LIABILITIES
Deposits
Interest-bearing demand	$	1,135,126		$	1,169,350		$	1,107,844		$	1,150,275		$	1,098,524		$	1,137,540		$	1,117,600
Savings	1,782,472			1,702,521			1,633,910			1,637,657			1,608,351			1,706,845			1,622,105
Time	1,123,657			960,424			953,423			932,877			947,436			1,013,125			1,004,016
Total interest-bearing deposits	4,041,255			3,832,295			3,695,177			3,720,809			3,654,311			3,857,510			3,743,721
Noninterest-bearing	1,179,207			1,110,697			1,096,509			1,129,097			1,072,259			1,129,107			1,061,850
Total deposits	5,220,462			4,942,992			4,791,686			4,849,906			4,726,570			4,986,617			4,805,571
Federal funds purchased and securities sold
under agreements to repurchase	125,094			123,682			110,533			107,738			114,505			119,823			118,097
FHLB short-term borrowings	710,879			562,466			671,579			414,892			483,937			648,452			491,328
Total short-term borrowings	835,973			686,148			782,112			522,630			598,442			768,275			609,425
Long-term debt	60,355			59,842			60,367			60,892			69,264			60,188			72,691
Total borrowed funds	896,328			745,990			842,479			583,522			667,706			828,463			682,116
Accrued interest and other liabilities	74,764			68,661			80,738			99,480			106,288			74,699			108,164
Total Liabilities	6,191,554			5,757,643			5,714,903			5,532,908			5,500,564			5,889,779			5,595,851

SHAREHOLDERS' EQUITY
Common stock	574,187			573,716			575,828			577,851			576,953			574,572			577,260
Retained earnings	340,680			332,944			324,875			337,034			329,518			332,891			330,059
Accumulated other comprehensive loss	(20,966		)	(25,189		)	(29,251		)	(28,380		)	(28,232		)	(25,106		)	(22,369		)
Treasury stock, at cost	(148,172		)	(184,862		)	(187,120		)	(186,442		)	(185,081		)	(173,242		)	(183,066		)
Total Shareholders' Equity	745,729			696,609			684,332			700,063			693,158			709,115			701,884
Total Liabilities and Shareholders' Equity	$	6,937,283		$	6,454,252		$	6,399,235		$	6,232,971		$	6,193,722		$	6,598,894		$	6,297,735



FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS ⁽¹⁾
(Dollars in thousands)
(Unaudited)

	Quarterly Averages															Year-to-Date Averages
	Sep. 30, 2014					Jun. 30, 2014					Sep. 30, 2013					Sep. 30, 2014					Sep. 30, 2013
	Balance			Yield		Balance			Yield		Balance			Yield		Balance			Yield		Balance			Yield
Earning assets
Investments:
Investment securities	$	1,865,241		2.37	%	$	1,811,175		2.47	%	$	1,589,666		2.20	%	$	1,828,207		2.45	%	$	1,710,310		2.08	%
Interest-bearing deposits with other banks	29,433			0.42	%	10,697			0.45	%	4,010			0.49	%	14,448			0.49	%	6,989			0.38	%
Gross loans ⁽²⁾	4,431,641			4.68	%	4,059,061			4.70	%	4,065,756			4.95	%	4,168,655			4.73	%	4,061,516			5.22	%
Total earning assets	6,326,315			3.98	%	5,880,933			4.01	%	5,659,432			4.17	%	6,011,310			4.03	%	5,778,815			4.29	%

Nonearning assets
Allowance for loan and lease losses	(55,697		)			(55,149		)			(80,659		)			(57,560		)			(89,347		)
Cash and due from banks	125,528					118,947					120,154					122,693					117,252
Accrued interest and other assets	541,137					509,521					494,795					522,451					491,015
Total assets	$	6,937,283				$	6,454,252				$	6,193,722				$	6,598,894				$	6,297,735

Interest-bearing liabilities
Deposits:
Interest-bearing demand	$	1,135,126		0.11	%	$	1,169,350		0.11	%	$	1,098,524		0.12	%	$	1,137,540		0.11	%	$	1,117,600		0.11	%
Savings	1,782,472			0.26	%	1,702,521			0.23	%	1,608,351			0.09	%	1,706,845			0.23	%	1,622,105			0.10	%
Time	1,123,657			0.97	%	960,424			0.98	%	947,436			0.90	%	1,013,125			0.96	%	1,004,016			1.05	%
Total interest-bearing deposits	4,041,255			0.41	%	3,832,295			0.38	%	3,654,311			0.31	%	3,857,510			0.39	%	3,743,721			0.36	%
Borrowed funds
Short-term borrowings	835,973			0.17	%	686,148			0.17	%	598,442			0.19	%	768,275			0.17	%	609,425			0.20	%
Long-term debt	60,355			3.00	%	59,842			3.52	%	69,264			3.53	%	60,188			3.34	%	72,691			3.54	%
Total borrowed funds	896,328			0.36	%	745,990			0.44	%	667,706			0.54	%	828,463			0.40	%	682,116			0.56	%
Total interest-bearing liabilities	4,937,583			0.40	%	4,578,285			0.39	%	4,322,017			0.35	%	4,685,973			0.39	%	4,425,837			0.39	%

Noninterest-bearing liabilities
Noninterest-bearing demand deposits	1,179,207					1,110,697					1,072,259					1,129,107					1,061,850
Other liabilities	74,764					68,661					106,288					74,699					108,164
Shareholders' equity	745,729					696,609					693,158					709,115					701,884
Total liabilities & shareholders' equity	$	6,937,283				$	6,454,252				$	6,193,722				$	6,598,894				$	6,297,735

Net interest income ⁽¹⁾	$	58,363				$	54,304				$	55,772				$	167,486				$	172,516
Net interest spread ⁽¹⁾				3.58	%				3.62	%				3.82	%				3.64	%				3.90	%
Net interest margin ⁽¹⁾				3.66	%				3.70	%				3.91	%				3.73	%				3.99	%


⁽¹⁾ Not tax equivalent.
⁽²⁾ Loans held for sale, nonaccrual loans, covered loans, and indemnification asset are included in gross loans.



FIRST FINANCIAL BANCORP.
NET INTEREST MARGIN RATE/VOLUME ANALYSIS ⁽¹⁾
(Dollars in thousands)
(Unaudited)


	Linked Qtr. Income Variance								Comparable Qtr. Income Variance									Year-to-Date Income Variance
	Rate			Volume		Total			Rate			Volume			Total			Rate			Volume			Total
Earning assets
Investment securities	$	(470	)	$	440	$	(30	)	$	670		$	1,643		$	2,313		$	4,738		$	2,162		$	6,900
Interest-bearing deposits with other banks	(1		)	20		19			(1		)	27			26			6			27			33
Gross loans ⁽²⁾	(237		)	4,912		4,675			(2,792		)	4,313			1,521			(14,980		)	3,792			(11,188		)
Total earning assets	(708		)	5,372		4,664			(2,123		)	5,983			3,860			(10,236		)	5,981			(4,255		)

Interest-bearing liabilities
Total interest-bearing deposits	$	350		$	262	$	612		$	958		$	404		$	1,362		$	811		$	329		$	1,140
Borrowed funds
Short-term borrowings	(5		)	67		62			(33		)	101			68			(147		)	202			55
Long-term debt	(78		)	9		(69		)	(94		)	(67		)	(161		)	(107		)	(313		)	(420		)
Total borrowed funds	(83		)	76		(7		)	(127		)	34			(93		)	(254		)	(111		)	(365		)
Total interest-bearing liabilities	267			338		605			831			438			1,269			557			218			775
Net interest income ⁽¹⁾	$	(975	)	$	5,034	$	4,059		$	(2,954	)	$	5,545		$	2,591		$	(10,793	)	$	5,763		$	(5,030	)


⁽¹⁾ Not tax equivalent.
⁽²⁾ Loans held for sale, nonaccrual loans, covered loans, and indemnification asset are included in gross loans.



FIRST FINANCIAL BANCORP.
CREDIT QUALITY
(excluding covered assets)
(Dollars in thousands)
(Unaudited)
																Nine months ended,
	Sep. 30,			Jun. 30,			Mar 31,			Dec. 31,			Sep. 30,			Sep. 30,			Sep. 30,
	2014			2014			2014			2013			2013			2014			2013

ALLOWANCE FOR LOAN AND LEASE LOSS ACTIVITY
Balance at beginning of period	$	42,027		$	43,023		$	43,829		$	45,514		$	47,047		$	43,829		$	47,777
Provision for uncovered loan and lease losses	1,093			29			1,159			1,851			1,413			2,281			6,863
Gross charge-offs
Commercial	83			571			656			293			1,482			1,310			3,122
Real estate - construction	0			0			0			1			0			0			0
Real estate - commercial	702			699			543			3,113			2,174			1,944			5,213
Real estate - residential	161			283			257			218			249			701			798
Installment	63			14			128			39			99			205			296
Home equity	469			383			544			706			411			1,396			1,703
Other	338			237			296			398			696			871			1,383
Total gross charge-offs	1,816			2,187			2,424			4,768			5,111			6,427			12,515
Recoveries
Commercial	566			580			39			194			92			1,185			478
Real estate - construction	0			0			0			46			490			0			626
Real estate - commercial	323			334			114			634			1,264			771			1,360
Real estate - residential	34			100			27			96			98			161			107
Installment	46			50			77			66			57			173			244
Home equity	46			37			103			136			95			186			372
Other	135			61			99			60			69			295			202
Total recoveries	1,150			1,162			459			1,232			2,165			2,771			3,389
Total net charge-offs	666			1,025			1,965			3,536			2,946			3,656			9,126
Ending allowance for uncovered loan and lease losses	$	42,454		$	42,027		$	43,023		$	43,829		$	45,514		$	42,454		$	45,514

NET CHARGE-OFFS TO AVERAGE LOANS AND LEASES (ANNUALIZED)
Commercial	(0.16		)%	0.00		%	0.24		%	0.04		%	0.59		%	0.01		%	0.39		%
Real estate - construction	0.00		%	0.00		%	0.00		%	(0.23		)%	(2.09		)%	0.00		%	(0.94		)%
Real estate - commercial	0.09		%	0.10		%	0.12		%	0.66		%	0.24		%	0.10		%	0.36		%
Real estate - residential	0.13		%	0.20		%	0.26		%	0.14		%	0.17		%	0.19		%	0.28		%
Installment	0.15		%	(0.33		)%	0.45		%	(0.22		)%	0.33		%	0.09		%	0.13		%
Home equity	0.42		%	0.37		%	0.48		%	0.60		%	0.34		%	0.42		%	0.48		%
Other	0.72		%	0.61		%	0.70		%	1.20		%	2.27		%	0.67		%	1.63		%
Total net charge-offs	0.07		%	0.11		%	0.23		%	0.41		%	0.34		%	0.13		%	0.37		%

COMPONENTS OF NONPERFORMING LOANS, NONPERFORMING ASSETS, AND UNDERPERFORMING ASSETS
Nonaccrual loans ⁽¹⁾
Commercial	$	6,486		$	7,077		$	7,097		$	7,934		$	8,554		$	6,486		$	8,554
Real estate - construction	223			223			223			223			1,099			223			1,099
Real estate - commercial	25,262			15,288			16,758			17,286			35,549			25,262			35,549
Real estate - residential	6,696			6,806			8,157			8,606			9,346			6,696			9,346
Installment	398			459			399			574			421			398			421
Home equity	2,581			2,565			2,700			2,982			2,871			2,581			2,871
Lease financing	0			0			0			0			86			0			86
Nonaccrual loans	41,646			32,418			35,334			37,605			57,926			41,646			57,926
Accruing troubled debt restructurings (TDRs)	13,369			12,607			13,400			15,094			16,278			13,369			16,278
Total nonperforming loans	55,015			45,025			48,734			52,699			74,204			55,015			74,204
Other real estate owned (OREO)	11,316			13,370			12,743			19,806			11,804			11,316			11,804
Total nonperforming assets	66,331			58,395			61,477			72,505			86,008			66,331			86,008
Accruing loans past due 90 days or more	249			256			208			218			265			249			265
Total underperforming assets	$	66,580		$	58,651		$	61,685		$	72,723		$	86,273		$	66,580		$	86,273
Total classified assets	$	105,914		$	103,799		$	103,471		$	110,509		$	120,423		$	105,914		120,423

CREDIT QUALITY RATIOS (excluding covered assets)
Allowance for loan and lease losses to
Nonaccrual loans	101.94		%	129.64		%	121.76		%	116.55		%	78.57		%	101.94		%	78.57		%
Nonperforming loans	77.17		%	93.34		%	88.28		%	83.17		%	61.34		%	77.17		%	61.34		%
Total ending loans	0.95		%	1.15		%	1.19		%	1.25		%	1.33		%	0.95		%	1.33		%
Nonperforming loans to total loans	1.24		%	1.23		%	1.35		%	1.50		%	2.16		%	1.24		%	2.16		%
Nonperforming assets to
Ending loans, plus OREO	1.49		%	1.59		%	1.70		%	2.06		%	2.50		%	1.49		%	2.50		%
Total assets	0.90		%	0.89		%	0.95		%	1.13		%	1.38		%	0.90		%	1.38		%
Nonperforming assets, excluding accruing TDRs to
Ending loans, plus OREO	1.19		%	1.25		%	1.33		%	1.63		%	2.03		%	1.19		%	2.03		%
Total assets	0.72		%	0.70		%	0.74		%	0.89		%	1.12		%	0.72		%	1.12		%

(1) Nonaccrual loans include nonaccrual TDRs of $13.2 million, $11.0 million, $14.6 million, $13.0 million, and $13.0 million, as of September 30, 2014, June 30, 2014, March 31, 2014, December 31, 2013, and September 30, 2013, respectively.



FIRST FINANCIAL BANCORP.
CAPITAL ADEQUACY
(Dollars in thousands, except per share data)
(Unaudited)
																Nine months ended,
	Sep. 30,			Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,			Sep. 30,			Sep. 30,
	2014			2014			2014			2013			2013			2014			2013
PER COMMON SHARE
Market Price
High	$	17.66		$	18.43		$	18.20		$	17.59		$	16.47		$	18.43		$	16.47
Low	$	15.83		$	15.51		$	15.98		$	14.56		$	14.89		$	15.51		$	14.46
Close	$	15.83		$	17.21		$	17.98		$	17.43		$	15.17		$	15.83		$	15.17

Average shares outstanding - basic	59,403,109			57,201,494			57,091,604			57,152,425			57,201,390			57,907,203			57,309,934
Average shares outstanding - diluted	60,112,932			57,951,636			57,828,179			57,863,433			58,012,588			58,639,394			58,143,372
Ending shares outstanding	61,368,473			57,718,317			57,709,937			57,533,046			57,702,444			61,368,473			57,702,444

REGULATORY CAPITAL	Preliminary															Preliminary
Tier 1 Capital	$	662,608		$	640,237		$	631,099		$	624,850		$	631,846		$	662,608		$	631,846
Tier 1 Ratio	12.74		%	14.34		%	14.42		%	14.61		%	15.26		%	12.74		%	15.26		%
Total Capital	$	717,823		$	696,014		$	685,926		$	679,074		$	684,363		$	717,823		$	684,363
Total Capital Ratio	13.80		%	15.59		%	15.67		%	15.88		%	16.53		%	13.80		%	16.53		%
Total Capital in excess of minimum
requirement	$	301,653		$	338,848		$	335,806		$	336,982		$	353,118		$	301,653		$	353,118
Total Risk-Weighted Assets	$	5,202,123		$	4,464,578		$	4,376,505		$	4,276,152		$	4,140,561		$	5,202,123		$	4,140,561
Leverage Ratio	9.70		%	9.99		%	9.94		%	10.11		%	10.29		%	9.70		%	10.29		%

OTHER CAPITAL RATIOS
Ending shareholders' equity to ending assets	10.52		%	10.78		%	10.64		%	10.63		%	11.07		%	10.52		%	11.07		%
Ending tangible shareholders' equity to ending tangible assets	8.71		%	9.39		%	9.23		%	9.20		%	9.60		%	8.71		%	9.60		%
Average shareholders' equity to average assets	10.75		%	10.79		%	10.69		%	11.23		%	11.19		%	10.75		%	11.15		%
Average tangible shareholders' equity to average tangible assets	8.83		%	9.38		%	9.27		%	9.77		%	9.71		%	8.73		%	9.69		%

REPURCHASE PROGRAM ⁽¹⁾
Shares repurchased	0			0			40,255			209,745			0			40,255			540,400
Average share repurchase price	N/A			N/A			$	17.32		$	16.39		N/A			$	17.32		$	15.43
Total cost of shares repurchased	N/A			N/A			$	697		$	3,438		N/A			$	697		$	8,339

(1) Represents share repurchases as part of publicly announced plans.
N/A=Not applicable

SUPPLEMENTAL INFORMATION ON COVERED ASSETS

ACCELERATED DISCOUNT ON LOAN PREPAYMENTS AND DISPOSITIONS

During the third quarter, First Financial recognized approximately $0.8 million in accelerated discount on covered loans, net of the related adjustment on the FDIC indemnification asset. Accelerated discount is recognized when covered loans, which are recorded on the Company’s balance sheet at an amount less than the unpaid principal balance, prepay at an amount greater than their recorded book value. Prepayments can occur through either customer payments before the maturity date or loan sales. The amount of discount recognized is generally offset by a related reduction in the FDIC indemnification asset.

NET INTEREST MARGIN IMPACT

Net interest margin is affected by certain activity related to the covered loan portfolio. The majority of these loans are accounted for under FASB ASC Topic 310-30 and, as such, the Company is required to periodically update its forecast of expected cash flows from these loans. Impairment, as a result of a decrease in expected cash flows, is recognized as provision expense in the period it is measured and has no impact on net interest margin. Improvements in expected cash flows, in excess of any prior impairment, are recognized on a prospective basis through an upward adjustment to the yield earned on the portfolio. Impairment and improvement are both partially offset by the impact of changes in the value of the FDIC indemnification asset. Impairment is partially offset by an increase to the FDIC indemnification asset as a result of FDIC loss sharing income. Improvement, which is reflected as a higher yield, is partially offset by a lower yield earned on the FDIC indemnification asset until the next periodic valuation of the loans and the indemnification asset. The weighted average yield of the acquired loan portfolio may also be subject to change as loans with higher yields pay down more quickly or slowly than loans with lower yields.

The following table shows the estimated yield earned by the Company on its covered and uncovered loan portfolios and the FDIC indemnification asset for the three months ended September 30, 2014.




Table VII
	For the Three Months Ended September 30, 2014
	Average
(Dollars in thousands)	Balance		Yield

Loans, excluding covered loans ¹	$	4,052,697	4.35%
Covered loan portfolio accounted for under ASC Topic 310-30 ²	298,884		10.14%
Covered loan portfolio accounted for under ASC Topic 310-20 ³	52,010		12.83%
FDIC indemnification asset ²	28,050		(21.00)%
Total	$	4,431,641	4.68%

Yield earned on total covered loans			10.54%
Yield earned on total covered loans and FDIC indemnification asset			8.21%

¹Includes loans with loss share coverage removed
² Future yield adjustments subject to change based on required, periodic valuation procedures
³ Includes loans with revolving privileges which are scoped out of ASC Topic 310-30 and certain loans which the
Company elected to treat under the cost recovery method of accounting

COVERED ASSETS

The following table presents the covered loan portfolio as of September 30, 2014, June 30, 2014 and September 30, 2013.




Table VIII
	As of
	September 30, 2014				June 30, 2014				September 30, 2013
			Percent				Percent				Percent
(Dollars in thousands)	Balance		of Total		Balance		of Total		Balance		of Total
Commercial	$	23,744	7.1	%	$	27,488	7.5	%	$	52,276	10.1	%
Real estate - construction	1,748		0.5	%	2,021		0.6	%	8,692		1.7	%
Real estate - commercial	183,912		55.4	%	208,338		57.0	%	312,798		60.3	%
Real estate - residential	72,315		21.8	%	74,960		20.5	%	84,418		16.3	%
Installment	3,570		1.1	%	4,415		1.2	%	6,135		1.2	%
Home equity	44,859		13.5	%	46,100		12.6	%	51,692		10.0	%
Other	2,117		0.6	%	2,281		0.6	%	2,513		0.5	%
Total	$	332,265	100.0	%	$	365,603	100.0	%	$	518,524	100.0	%

As of September 30, 2014, 6.9% of the Company’s total loans were covered loans. During the third quarter, the total balance of covered loans decreased $33.3 million, or 9.1%, compared to the prior quarter. Included in the decrease in covered loan balances during the third quarter was a $16.4 million, or 25.0%, decline in the balance of covered loans classified as likely to exit resulting from the continued successful execution of resolution strategies.

Covered OREO decreased $8.3 million, or 42.5%, during the third quarter to $11.2 million as of September 30, 2014, as additions of $0.1 million were offset by resolutions and valuation adjustments of $8.4 million. The Company recognized a $1.4 million net gain on sales of covered OREO during the quarter, which was offset by a corresponding decrease in FDIC loss sharing income of approximately 80% of the net gain recognized.

As required under the loss sharing agreements, First Financial must file quarterly certifications with the FDIC on all covered loans. The payment of claims is subject to the FDIC’s review for compliance with the loss sharing agreements and to date, all certifications have been filed in a timely manner and without significant issues.

ALLOWANCE FOR LOAN AND LEASE LOSSES - COVERED

Under the applicable accounting guidance, the allowance for loan losses related to covered loans is a result of impairment identified in ongoing valuation procedures and is generally recognized in the current period as provision expense. However, if improvement is noted in a loan pool that had previously experienced impairment, the amount of improvement is recognized as a reduction to the applicable period’s provision expense. Additional improvement beyond previously recorded impairment is reflected as a yield adjustment on a prospective basis. The timing inherent in this accounting treatment may result in earnings volatility in future periods.

The following table presents activity in the allowance for loan losses related to covered loans for the three months ended September 30, 2014 and for the trailing three quarters.




Table IX

	As of or for the Three Months Ended
	September 30,			June 30,			March 31,			December 31,
(Dollars in thousands)	2014			2014			2014			2013
Balance at beginning of period	$	12,425		$	10,573		$	18,901		$	23,259
Provision for loan and lease losses - covered	(200		)	(413		)	(2,192		)	(5,857		)
Total gross charge-offs	(3,053		)	(3,485		)	(7,240		)	(3,850		)
Total recoveries	2,363			5,750			1,104			5,349
Total net (charge-offs) / recoveries	(690		)	2,265			(6,136		)	1,499
Ending allowance for loan and lease losses - covered	$	11,535		$	12,425		$	10,573		$	18,901

As a percentage of total covered loans, the allowance for loan losses totaled 3.47% as of September 30, 2014 compared to 3.40% as of June 30, 2014.

Net charge offs on covered loans during the third quarter were $0.7 million compared to net recoveries of $2.3 million for the second quarter 2014. During the third quarter, the Company recognized negative provision expense related to covered loans of $0.2 million compared to negative provision expense of $0.4 million for the linked quarter. The difference between provision expense and net charge-offs / recoveries primarily relates to the quarterly re-estimation of cash flow expectations required under FASB ASC Topic 310-30.

In addition to negative covered provision expense, the Company also incurred $1.0 million of loss sharing expense and realized $1.4 million of net gains on dispositions of covered OREO during the third quarter. Loss sharing expense consists primarily of credit and collection-related expenses. The related offset to covered provision expense, loss sharing expenses and net gains on covered OREO for reimbursements due to the FDIC under loss sharing agreements was recorded as negative FDIC loss sharing income of $0.2 million for the quarter.