Brand Experts - First Financial Bank Announces Changes

First Financial Bancorp Reports First-Quarter 2006 Earnings Monday April 24, 9:05 am ET - First-quarter net earnings of $0.10 per diluted share versus $0.25 in 2005 primarily due to balance-sheet restructure and transition costs - Branch plans and rationalization announced - Jack Henry selected as new core data-processing provider - Cost savings and revenue enhancements announced HAMILTON, Ohio, April 24 /PRNewswire-FirstCall/

-- First Financial Bancorp (Nasdaq: FFBC - News) president and chief executive officer, Claude E. Davis, today announced first-quarter 2006 earnings of $3,967,000 or 10 cents in diluted earnings per share, compared to $10,726,000 or 25 cents in diluted earnings per share for the same period in 2005. Income from continuing operations was $3,967,000 or 10 cents per diluted share and $10,532,000 or 24 cents per diluted share for the first quarter of 2006 and 2005, respectively.

Davis said, "We have made excellent progress this quarter accomplishing some of the final steps in transitioning our company to a new level. Our goal for 2006 is to finish making the major changes that will allow us to fully execute our strategic plan. This earnings report shows that our core operating performance is displaying signs of improvement with a strong increase in net interest margin, good commercial loan growth, and solid core deposit growth.

The report also shows that we need to improve our non-performing asset levels and our overall efficiency ratio. "This news release includes an announcement of significant new initiatives that will better define our company, improve our financial performance, and enable us to provide improved client service." The following items materially impacted performance in the first quarter of 2006: -- Prepayment penalty on long-term borrowings of $4.3 million or 7 cents per share -- Securities impairment charge of $498,000 or 1 cent per share Unless otherwise noted, all amounts discussed are pre-tax except income or loss from continuing operations, net income, and per-share data which is presented after-tax.

Due to the sale of the Fidelity Federal Savings Bank subsidiary in the third quarter of 2005, there was no first-quarter 2006 activity from discontinued operations. In the first quarter of 2005, the earnings from discontinued operations were $194,000 or less than 1 cent per diluted share. Return on average assets for the first quarter of 2006 was 0.45 percent compared to 1.13 percent for the same period in 2005. Return on average shareholders' equity was 5.39 percent for the first quarter of 2006, versus 11.73 percent for the comparable period in 2005.

First Financial's first quarter operating results include the effects of several material items. The previously mentioned effects of the balance-sheet restructure of $4.3 million in prepayment penalties and the $0.5 million in additional impairment charge had a combined effect of 8 cents per share in the quarter. Additionally, other items including losses on property sales, professional services related to the balance-sheet restructure, severance charges, and other expenses amounted to approximately $1.3 million or 2 cents per share.

In addition to the items above, First Financial has had increased recurring expenses related to the execution of its strategic plan of roughly $0.6 million or 1 cent per share in reduced net interest income due to parent company borrowings used in the repurchase of shares in the fourth quarter of 2005. Additionally, the effects of mortgage loan runoff as part of the intended loan mix shift discussed in the strategic plan totaled approximately $0.4 million or 1 cent per share in reduced net interest income. Other recurring items include increased pension expense and the effects of FAS 123R and state franchise taxes of approximately $0.6 million or 1 cent per share. (The preceding overview of First Financial Bancorp's earnings is supplemented with the following detail:) Strategic Plan Update: On March 14, 2005, First Financial announced its new strategic plan for the organization. First Financial has made steady progress toward completing key elements of the plan in 2006. The areas of focus are: -- Organizational restructure -- Balance-sheet restructure -- Growth plan -- Efficiency improvement

The organizational restructure was completed in 2005. The balance-sheet restructure was completed in the first quarter of 2006 and is discussed further in the net interest income section of this release. The growth plan for the company is moving forward. First Financial continues to work with Stealing Share, a branding firm based in Greensboro, North Carolina, to evaluate the company's market position and brand identity in all markets and business lines and to define a brand strategy for the future.

This process should be completed in the first half of 2006 with a subsequent announcement in the third quarter of 2006. The Cincinnati and Dayton market expansions have both been enhanced by the selection of market headquarters.

The Cincinnati market headquarters is located in a very high-demand area of Cincinnati, and the Dayton headquarters is situated to the south of the city on the I-75 corridor. As announced in the strategic plan, First Financial will continue to recruit sales staff, evaluate metropolitan markets for expansion, and consider strategic acquisitions to extend and expand the franchise. In addition, as previously announced, First Financial has launched a Performance Improvement Plan in its effort to become a better, faster, and more efficient organization.

A thorough review of all functional areas has been performed to evaluate staffing levels and processes associated with each area. To-date, these reviews have identified an estimated annualized $9 to $10 million in improvements that are discussed below. Performance Improvement Plan The objective of the Performance Improvement Plan is to maximize revenue and develop the proper cost structure for the consolidated organization to achieve a peer-level efficiency ratio. First Financial has established a long- term target efficiency ratio of between 55-60 percent. Management remains confident that it can achieve this target. Salaries & Employee Benefits The largest component of the improvement is a $7.5 to $8 million planned reduction in salary and benefits through eliminating approximately 200 staff positions.

Over half of the staff changes will occur in the second quarter of 2006 and the remainder will occur before the end of the fourth quarter of 2006. These staff reductions are in addition to the estimated $5 million in consolidation-related staff reductions announced and achieved as part of the strategic plan in March of 2005. Estimated severance charges associated with this staff reduction are $1.3 million and will be recognized when incurred. First Financial also continues to add sales staff in its markets and businesses of focus. This is consistent with our plan to simultaneously reduce core operating expenses and grow revenue.

Revenue Enhancements To date, approximately $1.5 to $2.0 million in revenue enhancements have been identified. Enhancements are associated with better management of internal processes such as cash balances in branches and a planned redeployment in low and non-earning assets. These improvements will occur in the second and third quarters of 2006. Additional reviews are in process, and results will be disclosed in future releases. Branch Plan First Financial has completed its branch evaluation. Listed below are offices that will either be sold or closed, subject to regulatory approval. The evaluation was conducted using a balanced approach that considered both geography and financial performance.

The remaining offices are expected to meet or exceed financial performance goals and are aligned with the strategic intentions of the company. First Financial will continue to concentrate future growth plans and capital investments in larger metropolitan markets, and continuing to operate in smaller markets. Smaller markets have historically provided stable, low-cost funding sources to First Financial and are an important part of the funding plan for the expansion in the commercial lending market. Furthermore, First Financial's historical strength in a number of these markets should enable it to hold market share. First Financial's branch strategy is to serve a combination of metropolitan and non-metropolitan markets in Indiana, Ohio, and Kentucky.

In addition to geographic fit, each market must have growth potential and the ability to meet profit targets. Offices To Be Sold The 7 offices offered for sale are segmented into two distinct market areas: Michigan and Southern Indiana, and were marketed by Sandler O'Neill accordingly. Total deposits and loans for the offered offices are $101.1 million and $101.9 million respectively. The Michigan market area includes 2 offices, Hastings and Gun Lake; and the Southern Indiana market includes 5 offices, Vevay, Vevay Drive-up, East Enterprise, Liberty, and Madison. Details of each transaction will be disclosed in a separate release when agreements are consummated. Offices To Be Closed First Financial will close an additional 12 offices: in Ohio: Willshire, Mariemont, and Montgomery; in Indiana: West College Corner, Carthage, Montpelier, Winchester, Wabash, Warsaw, Ft. Wayne, and Burlington; in Kentucky: Petersburg.

These closures are expected to have a minimal effect on the $72 million in deposits and $84 million in loans that will be serviced by other offices. The timing of the closures will be in the third quarter of 2006 and is subject to regulatory approval. After the branch plan is completed, First Financial will have 87 offices serving 9 distinct markets with an average branch size of approximately $33 million. The operating model for growth includes market presidents managing distinct markets with the authority to make decisions at the point of client contact.

Financial Impact of Branch Sales Proforma financial highlights are presented in the table below based on March 31, 2006, actual results. The proforma balance sheet and margin effects are on sold offices only and the income statement and equity related proforma items exclude the effect of any gain on the sale of the offices. The gain on the sale of offices will be disclosed when the transactions are consummated. Proforma results are based on the exclusion of the financial effects of the sold or closed offices in the first quarter results.

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