Unassociated Document

Report Of Independent Registered Public Accounting Firm

Report On Internal Control Over Financial Reporting

The Board of Directors and Shareholders of First Financial Bancorp

We have audited First Financial Bancorp’s Internal Control Over Financial Reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). First Financial Bancorp’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment about the effectiveness of internal control over financial reporting included in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, First Financial Bancorp maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of First Financial Bancorp as of December 31, 2009, and 2008, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009, of First Financial Bancorp and our report dated March 16, 2010 expressed an unqualified opinion thereon.

Cincinnati, Ohio

March 16, 2010

Report Of Independent Registered Public Accounting Firm

Report On Consolidated Financial Statements

The Board of Directors and Shareholders of First Financial Bancorp

We have audited the accompanying consolidated balance sheets of First Financial Bancorp and subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of First Financial Bancorp’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Financial Bancorp and subsidiaries at December 31, 2009, and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), First Financial Bancorp’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 16, 2010 expressed an unqualified opinion thereon.

Cincinnati, Ohio

March 16, 2010

First Financial Bancorp 2009 Annual Report 29

Consolidated Balance Sheets

	December 31,
(Dollars in thousands)	2009			2008
Assets
Cash and due from banks	$	344,150		$	100,935
Interest-bearing deposits with other banks		262,017			0
Investment securities held-to-maturity
(market value of $18,590 at December 31, 2009; $5,135 at December 31, 2008)		18,115			4,966
Investment securities available-for-sale, at market value
(cost of $454,953 at December 31, 2009; $648,845 at December 31, 2008)		471,002			659,756
Investment securities trading		200			61
Other investments		89,830			27,976
Loans held for sale		8,052			3,854
Loans
Commercial		798,622			807,720
Real estate – construction		253,223			232,989
Real estate – commercial		1,079,628			846,673
Real estate – residential		321,047			383,599
Installment		82,989			98,581
Home equity		328,940			286,110
Credit card		29,027			27,538
Lease financing		14			50
Total loans, excluding covered loans		2,893,490			2,683,260
Covered loans		1,929,549			0
Total loans		4,823,039			2,683,260
Less
Allowance for loan and lease losses		59,311			35,873
Net loans		4,763,728			2,647,387
Premises and equipment		107,351			84,105
Goodwill		51,908			28,261
Other intangibles		7,461			1,002
FDIC indemnification asset		316,040			0
Accrued interest and other assets		241,269			140,839
Total assets	$	6,681,123		$	3,699,142

Liabilities
Deposits
Interest-bearing	$	1,356,249		$	636,945
Savings		1,010,469			583,081
Time		2,229,400			1,150,208
Total interest-bearing deposits		4,596,118			2,370,234
Noninterest-bearing		754,522			413,283
Total deposits		5,350,640			2,783,517
Short-term borrowings
Federal funds purchased and securities sold under agreements to repurchase		37,430			147,533
Federal Home Loan Bank		0			150,000
Other		0			57,000
Total short-term borrowings		37,430			354,533
Long-term debt		404,716			148,164
Other long-term debt		20,620			20,620
Accrued interest and other liabilities		192,550			43,981
Total liabilities		6,005,956			3,350,815

Shareholders’ equity
Preferred stock – $1,000 par value
Authorized – 80,000 shares
Outstanding – 80,000 shares in 2009 and 2008		79,195			78,019
Common stock – no par value
Authorized – 160,000,000 shares
Issued – 62,358,614 in 2009 and 48,558,614 shares in 2008		490,532			394,169
Retained earnings		301,328			76,339
Accumulated other comprehensive loss		(10,487	)		(11,905	)
Treasury stock, at cost, 10,924,793 shares in 2009 and 11,077,413 shares in 2008		(185,401	)		(188,295	)
Total shareholders’ equity		675,167			348,327
Total liabilities and shareholders’ equity	$	6,681,123		$	3,699,142

See Notes to Consolidated Financial Statements.

30 First Financial Bancorp 2009 Annual Report

Consolidated Statements Of Income

	Year ended December 31,
(Dollars in thousands except per share data)	2009		2008			2007
Interest income
Loans, including fees	$	195,917	$	159,985		$	182,670
Investment securities
Taxable		29,376		19,954			14,961
Tax-exempt		1,492		2,733			3,542
Total investment securities interest		30,868		22,687			18,503
Other earning assets		6,443		633			5,269
Total interest income		233,228		183,305			206,442
Interest expense
Deposits		47,580		57,997			79,184
Short-term borrowings		1,318		4,828			4,232
Long-term borrowings		7,145		2,892			2,099
Subordinated debentures and capital securities		1,202		1,386			2,427
Total interest expense		57,245		67,103			87,942
Net interest income		175,983		116,202			118,500
Provision for loan and lease losses		56,084		19,410			7,652
Net interest income after provision for loan and lease losses		119,899		96,792			110,848

Noninterest income
Service charges on deposit accounts		19,662		19,658			20,766
Trust and wealth management fees		13,465		17,411			18,396
Bankcard income		5,961		5,653			5,251
Net gains from sales of loans		1,196		1,104			844
Gain on sale of merchant payment processing portfolio		0		0			5,501
Gain on sale of mortgage servicing rights		0		0			1,061
Gains on sales of investment securities		3,349		1,585			367
Gains on acquisition		379,086		0			0
Income (loss) on preferred securities		139		(3,738	)		0
Other		18,449		10,076			11,402
Total noninterest income		441,307		51,749			63,588

Noninterest expenses
Salaries and employee benefits		86,068		66,862			69,891
Pension settlement charges		0		0			2,222
Net occupancy		16,202		10,635			10,861
Furniture and equipment		8,054		6,708			6,761
Data processing		3,475		3,238			3,498
Marketing		3,494		2,548			2,441
Communication		3,246		2,859			3,230
Professional services		6,032		3,463			4,142
State intangible tax		2,508		2,506			2,070
FDIC expense		6,847		363			330
Other		34,712		15,994			15,301
Total noninterest expenses		170,638		115,176			120,747

Income before income tax expense		390,568		33,365			53,689
Income tax expense		144,022		10,403			18,008
Net income		246,546		22,962			35,681

Dividends on preferred stock		3,578		0			0
Income available to common shareholders	$	242,968	$	22,962		$	35,681

Earnings per common share:
Basic	$	5.40	$	0.62		$	0.93
Diluted	$	5.33	$	0.61		$	0.93
Average common shares outstanding – basic		45,028,640		37,112,065			38,455,084
Average common shares outstanding – diluted		45,556,868		37,484,198			38,459,138

See Notes to Consolidated Financial Statements.

First Financial Bancorp 2009 Annual Report 31

Consolidated Statements Of Cash Flows

	Year ended December 31,
(Dollars in thousands)	2009			2008			2007
Operating activities
Net income	$	246,546		$	22,962		$	35,681
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan and lease losses		56,084			19,410			7,652
Provision for depreciation and amortization		8,626			6,677			7,949
Stock-based compensation expense		2,799			2,444			1,384
Pension expense		914			1,390			4,541
Net amortization of premiums and accretion of discounts on investment securities		1,148			179			131
Deferred income taxes		127,995			(4,210	)		(3,338	)
Gains on sales of investment securities		(3,349	)		(1,585	)		(367	)
(Income) losses on trading securities		(139	)		3,738			0
Gain on acquisition		(379,086	)		0			0
Originations of loans held for sale		(141,697	)		(84,199	)		(68,027	)
Net gains from sales of loans held for sale		(1,197	)		(1,104	)		(844	)
Proceeds from sale of loans held for sale		138,633			82,553			76,564
Increase in cash surrender value of life insurance		(3,586	)		(3,598	)		(4,105	)
(Increase) decrease in interest receivable		(7,424	)		4,297			(869	)
(Increase) decrease in prepaid expenses		(17,721	)		240			(435	)
Increase (decrease) in accrued expenses		25,974			(3,134	)		706
(Decrease) increase in interest payable		(1,274	)		(2,642	)		1,920
Contribution to pension plan		(30,800	)		0			0
Other		17,007			(1,764	)		15,023
Net cash provided by operating activities		39,453			41,654			73,566
Investing activities
Proceeds from sales of investment securities available-for-sale		152,751			1,124			392
Proceeds from calls, paydowns, and maturities of investment securities available-for-sale		185,308			109,557			59,657
Purchases of investment securities available-for-sale		(113,151	)		(368,147	)		(41,303	)
Proceeds from calls, paydowns, and maturities of investment securities held-to-maturity		708			673			3,290
Purchases of investment securities held-to-maturity		(248	)		0			(934	)
Net increase in interest-bearing deposits with other banks		(262,017	)		0			0
Net decrease (increase) in federal funds sold		0			106,990			(4,990	)
Net increase in loans and leases, excluding covered loans		(214,531	)		(189,420	)		(127,922	)
Net decrease in covered loans		150,185			0			0
Proceeds from surrender of life insurance		0			0			12,941
Proceeds from disposal of other real estate owned		5,665			1,785			1,734
Purchases of premises and equipment		(13,180	)		(11,886	)		(7,578	)
Net cash acquired from acquisitions		285,562			0			0
Net cash proceeds received in FDIC-assisted acquisition		967,391			0			0
Net cash provided by (used in) investing activities		1,144,443			(349,324	)		(104,713	)
Financing activities
Net (decrease) increase in total deposits		(536,669	)		(110,674	)		96,233
Net (decrease) increase in short-term borrowings		(372,103	)		256,244			1,588
Payments on long-term borrowings		(107,103	)		(12,732	)		(17,866	)
Proceeds on long-term borrowings		0			115,000			0
Redemption of other long-term debt		0			0			(10,000	)
Cash dividends paid on common stock		(19,024	)		(25,443	)		(24,845	)
Cash dividends paid on preferred stock		(3,578	)		0			0
Proceeds from issuance of preferred stock and warrants		0			80,000			0
Issuance of common stock		97,985			0			0
Treasury stock purchase		0			0			(27,297	)
Proceeds from exercise of stock options		0			0			82
Excess tax (liability) benefit on share-based compensation		(189	)		(14	)		69
Net cash (used in) provided by financing activities		(940,681	)		302,381			17,964
Cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents		243,215			(5,289	)		(13,183	)
Cash and cash equivalents at beginning of year		100,935			106,224			119,407
Cash and cash equivalents at end of year	$	344,150		$	100,935		$	106,224
Supplemental disclosures
Interest paid	$	58,519		$	69,746		$	86,022
Income taxes paid	$	16,485		$	15,050		$	14,445
Acquisition of other real estate owned through foreclosure	$	6,136		$	3,650		$	2,198
Issuance of restricted stock awards	$	2,418		$	1,638		$	2,254
Mortgage loans exchanged for mortgage-backed securities	$	0		$	89,003		$	0
Supplemental schedule for investing activities
Acquisitions
Assets acquired – branch acquisition	$	79,101		$	0		$	0
Liabilities assumed – branch acquisition		84,641			0			0
Goodwill	$	5,540		$	0		$	0
Assets acquired – Peoples	$	566,555		$	0		$	0
Liabilities assumed – Peoples		584,661			0			0
Goodwill	$	18,106		$	0		$	0
Assets acquired – Irwin	$	3,265,289		$	0		$	0
Liabilities assumed – Irwin		2,886,203			0			0
Bargain purchase gain	$	379,086		$	0		$	0

See Notes to Consolidated Financial Statements.

32 First Financial Bancorp 2009 Annual Report

Consolidated Statements Of Changes In Shareholders’ Equity

													Accumulated			Treasury stock
	Preferred		Preferred		Common		Common						other
(Dollars in thousands,	stock		stock		stock		stock			Retained			comprehensive
except share amounts)	shares		amount		shares		amount			earnings			income (loss)			Shares			Amount			Total
Balances at January 1, 2007		0	$	0		48,558,614	$	392,736		$	71,320		$	(13,375	)		(9,313,207	)	$	(165,202	)	$	285,479
Net income											35,681												35,681
Unrealized holding gains on securities available for sale arising during the period														748									748
Change in retirement obligation														5,500									5,500
Total comprehensive income																							41,929
Cash dividends declared ($0.65 per share)											(24,908	)											(24,908	)
Purchase of common stock																	(2,000,000	)		(27,297	)		(27,297	)
Tax benefit on stock option exercise								69															69
Exercise of stock options, net of shares purchased								(57	)								8,474			139			82
Restricted stock awards, net								(2,170	)								113,927			2,015			(155	)
Share-based compensation expense								1,384															1,384
Balances at December 31, 2007		0		0		48,558,614		391,962			82,093			(7,127	)		(11,190,806	)		(190,345	)		276,583

Cumulative adjustment for accounting changes:
Fair value option											(750	)		750									0
Split dollar life insurance											(2,499	)											(2,499	)
Net income											22,962												22,962
Unrealized holding gains on securities available for sale arising during the period														5,861									5,861
Change in retirement obligation														(12,158	)								(12,158	)
Unrealized gain on derivatives														769									769
Total comprehensive income																							17,434
Issuance of preferred stock and warrant		80,000		78,019				1,981															80,000
Cash dividends declared:
Common stock at $0.68 per share											(25,467	)											(25,467	)
Tax liability on stock option exercise								(14	)														(14	)
Restricted stock awards, net								(2,204	)								113,393			2,050			(154	)
Share-based compensation expense								2,444															2,444
Balances at December 31, 2008		80,000		78,019		48,558,614		394,169			76,339			(11,905	)		(11,077,413	)		(188,295	)		348,327

Net income											246,546												246,546
Unrealized holding gains on securities available for sale arising during the period														3,285									3,285
Change in retirement obligation														(2,148	)								(2,148	)
Unrealized loss on derivatives – Prime Swap														(474	)								(474	)
Unrealized gain on derivatives – Trust Preferred Swap														636									636
Foreign currency exchange														119									119
Total comprehensive income																							247,964
Issuance of common stock						13,800,000		97,985															97,985
Cash dividends declared:
Common stock at $0.40 per share											(17,794	)											(17,794	)
Preferred stock											(3,578	)											(3,578	)
Warrant reduction				826				(991	)		165												0
Discount on preferred stock				350							(350	)											0
Excess tax liability on share-based compensation								(189	)														(189	)
Restricted stock awards, net								(3,241	)								152,620			2,894			(347	)
Share-based compensation expense								2,799															2,799
Balances at December 31, 2009		80,000	$	79,195		62,358,614	$	490,532		$	301,328		$	(10,487	)		(10,924,743	)	$	(185,401	)	$	675,167

See Notes to Consolidated Financial Statements.

First Financial Bancorp 2009 Annual Report 33

Notes To Consolidated Financial Statements

1. Summary Of Significant Accounting Policies

Basis of presentation: The Consolidated Financial Statements of First Financial Bancorp. (First Financial), a bank holding company, principally serving Ohio, Indiana, Kentucky and Michigan, include the accounts and operations of First Financial and its wholly owned subsidiaries - First Financial Bank, N.A. and First Financial Capital Advisors LLC, a registered investment advisor. All significant intercompany transactions and accounts have been eliminated in consolidation. Certain reclassifications of prior years’ amounts have been made to conform to current year presentation. Such reclassifications had no effect on net earnings.

The preparation of Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates, assumptions, and judgments that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. Actual realized amounts could differ materially from those estimates.

Interest income and interest expense on all interest-earning assets and interest-bearing liabilities is recognized on the accrual basis.

All dollar amounts, except per share data, are expressed in thousands of dollars.

The Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) became effective July 1, 2009. At that date, the ASC became the FASB’s officially recognized source of authoritative GAAP applicable to all public and non-public nongovernmental entities, superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Tax Force, and related literature. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. All other accounting literature is considered non-authoritative. The change to ASC affects the way companies refer to GAAP in financial statements and accounting policies. Citing particular content in the ASC involves specifying the unique numeric path to the content through the Topic, Subtopic, Section, and Paragraph structure.

Investment securities: First Financial can classify debt and equity securities in three categories: trading, held-to-maturity, and available-for-sale.

Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when First Financial has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost. Debt securities not classified as held-to-maturity are classified as available-for-sale. Available-for-sale securities are stated at aggregate fair value, with the unrealized gains and losses, net of tax, reported as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity.

Securities classified as trading are held principally for resale in the near term and are recorded at fair value. Gains or losses, either unrealized or realized, are reported in noninterest income. Quoted market prices are used to determine the fair value of trading securities.

The amortized cost of debt securities classified as either held-to-maturity or available-for-sale is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization is included in interest income from investments. Interest and dividends are included in interest income from investments. Realized gains and losses are based on amortized cost of the security sold using the specific identification method. Available-for-sale and held-to-maturity securities are reviewed quarterly for impairment in fair value. In performing this review, management considers the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value. If the fair value of a security is less than the amortized cost and the impairment is determined to be other-than-temporary, the security is written down, establishing a reduced cost basis. The related charge is recorded in the Consolidated Statements of Income as an impairment on investment securities.

Other investments include Federal Reserve Bank (FRB) stock and Federal Home Loan Bank (FHLB) stock. FRB and FHLB stock is carried at cost.

Loans and leases: Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount amortized as an adjustment to the related loan’s yield. The accrual of interest income is discontinued when the collection of a loan or interest, in whole or in part, is doubtful. This applies generally to all loans, including impaired loans. When interest accruals are suspended, interest income accrued in the current year is reversed and interest accrued from the prior year is charged to the allowance for loan and lease losses. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans held for sale may come from two sources: residential real estate loans newly originated for sale and in certain circumstances, previously originated loans that have been specifically identified by management for sale based on predetermined criteria. Loans originated for sale are placed immediately into that category upon origination and are considered to be at fair market value due to the commitment to sell in a short timeframe. Loans transferred to held for sale status are done at the lower of cost or fair value with any difference charged to the allowance for loan and lease losses. Any subsequent change in carrying value, not to exceed original cost, is recorded in the Consolidated Statements of Income.

Allowance for loan and lease losses: The level of the allowance for loan and lease losses (allowance) is based upon management’s evaluation of the loan and lease portfolios, past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, and other pertinent factors. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be received on impaired loans that may be susceptible to significant change. Loans are charged off when management believes that the ultimate collectibility of the loan is unlikely. Allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, is deemed to be uncollectible.

Management’s determination of the adequacy of the allowance is based on an assessment of the inherent loss potential in the loan portfolio given the conditions at the time. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. The allowance for commercial loans, including time and demand notes, tax-exempt loans, commercial real estate, and commercial capital leases begins with a process of estimating the probable losses inherent in the portfolio. The estimates for these commercial loans are established by category and based on First Financial’s internal system of credit risk ratings and historical loss data.

The estimate of losses inherent in the commercial portfolio may then be adjusted for management’s estimate of probable losses on specific exposures as well as trends in delinquent and nonaccrual loans and other factors such as prevailing economic conditions, lending strategies, and other influencing factors. In the commercial portfolio, certain loans, typically larger-balance non-homogeneous exposures, may have a specific allowance established based on the borrower’s overall financial condition, resources and payment record, support from guarantors, and the realizable value of any collateral.

The allowance for consumer loans which includes residential real estate, installment, home equity, credit card, and overdrafts is established for each of the categories by estimating losses inherent in that particular category of consumer loans. The estimate of losses is primarily based on historical loss rates. Consumer loans are evaluated as an asset type within a category (i.e., residential real estate, installment, etc.), as these loans are smaller and more homogeneous.

Larger balance commercial and commercial real estate loans are considered impaired when, based on current information and events, it is probable that First Financial will be unable to collect all principal and interest amounts due according to the contractual terms of the loan agreement.

An impairment loss is recognized if the present value of expected future cash flows from the loan is less than the recorded investment in the loan (recorded investment in the loan is the principal balance plus any accrued interest, net deferred loan fees or costs, and unamortized premium or discount, and does not reflect any direct write-down of the investment), as defined by FASB ASC Topic 310-10-35-4, Loan Impairment. The impairment loss is recognized through the allowance for loan and lease losses. Loans that are impaired are recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate or if the loan is collateral dependent, impairment measurement is based on the fair value of the collateral. Income recognition on impaired loans is recorded on the cash basis method.

Covered loans: Loans acquired in Federal Deposit Insurance Corporation (FDIC)-assisted transactions are covered under loss sharing agreements and are referred to as covered loans. Pursuant to the terms of the loss sharing agreements, covered loans are subject to a stated loss thresholds whereby the FDIC will reimburse First Financial for 80% of losses of up to the stated loss thresholds, and 95% of losses in excess of these amounts. First Financial will reimburse the FDIC for its share of recoveries with respect to losses for which the FDIC paid First Financial a reimbursement under the loss sharing agreement. The FDIC’s obligation to reimburse First Financial for losses with respect to covered loan begins with the first dollar of loss incurred.

Covered loans were recorded at fair value at the time of acquisition. Fair values for covered loans are based on a discounted cash flow methodology that considered various factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and a discount rate reflecting the Company’s assessment of risk inherent in the cash flow estimates. Covered loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. Losses on covered loans are not charged to the allowance for loan and lease losses.

34 First Financial Bancorp 2009 Annual Report

FDIC indemnification asset: FDIC indemnification assets result from the loss share agreements in the FDIC-assisted transactions and are measured separately from the related covered assets as they are not contractually embedded in the assets and are not transferable with the assets should First Financial choose to dispose of them. The FDIC indemnification assets represent the estimated fair value of expected reimbursements from the FDIC for losses on covered loans. Pursuant to the terms of the loss sharing agreements, covered loans are subject to a stated loss threshold whereby the FDIC will reimburse First Financial for 80% of losses up to the stated loss thresholds, and 95% of losses in excess of these amounts. Fair value is estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses and the applicable loss sharing percentages. These expected reimbursements do not include reimbursable amounts related to future covered expenditures. These cash flows are discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC.

Premises and equipment: Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed principally on the straight-line method over the estimated useful lives of the assets. Useful lives generally range from ten to 40 years for building and building improvement; three to ten years for furniture, fixtures, and equipment; and three to five years for software, hardware, and data handling equipment. Land improvements are depreciated over 20 years and leasehold improvements are depreciated over the lesser of the base term of the respective lease or the asset useful life. Maintenance and repairs are charged to operations as incurred.

Goodwill and other intangible assets: Under accounting for business combinations, the net assets of entities acquired by First Financial are recorded at their estimated fair value at the date of acquisition. The excess cost of the acquisition over the fair value of net assets acquired is recorded as goodwill. The excess fair value of net assets acquired over the cost of the acquisition is considered a bargain purchase gain and is recorded as noninterest income. Goodwill and intangible assets deemed to have indefinite lives, if any, are not amortized, but are subject to annual impairment tests.

Core deposit intangibles (CDIs): CDIs represent the value of acquired relationships with deposit customers. The fair value of CDIs are estimated based on a discounted cash flow methodology that gives appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits. CDIs are amortized on an accelerated basis over their useful lives.

Mortgage servicing assets (MSRs): MSRs are recognized as separate assets when loans are sold into the secondary market or securitized, servicing retained. Upon sale, the mortgage servicing right is established, which represents the then current market value of future net cash flows expected to be realized for performing the servicing activities. The market value of the mortgage servicing rights are estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and other economic factors, which are determined based on current market conditions. The expected and actual rates of mortgage loan prepayments are the most significant factors driving the value of mortgage servicing rights. Increases in mortgage loan prepayments reduce estimated future net servicing cash flows because the life of the underlying loan is reduced. In determining the market value of the mortgage servicing rights, mortgage interest rates are used to determine prepayment and discount rates, and are held constant over the estimated life of the portfolio.

Other real estate owned: Other real estate owned represents properties primarily acquired by First Financial’s bank subsidiary through loan defaults by clients. The property is recorded at the lower of cost or fair value minus estimated costs to sell at the date acquired. Subsequently, the property is valued at the lower of the amount recorded when the property was placed into other real estate owned or fair value minus estimated costs to sell based on periodic valuations performed by management. Any gains or losses realized at the time of disposal are reflected in income.

Other real estate owned covered by loss share: Other real estate owned covered by loss share represents properties primarily acquired by First Financial’s bank subsidiary through loan defaults by clients on covered loans. Pursuant to the terms of the loss sharing agreements, covered assets are subject to a stated loss threshold whereby the FDIC will reimburse First Financial for 80% of losses of up to the stated loss threshold, and 95% of losses in excess of these amounts. The property is recorded at the lower of cost or fair value minus estimated costs to sell at the date acquired. Subsequently, the property is valued at the lower of the amount recorded when the property was placed into other real estate owned or fair value minus estimated costs to sell based on periodic valuations performed by management. Any gains or losses realized at the time of disposal are partially offset by the FDIC reflected in income.

Deferred income taxes: Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

First Financial and its subsidiaries file a consolidated federal income tax return. Each subsidiary provides for income taxes on a separate return basis, and remits to First Financial amounts determined to be currently payable.

Capital: On June 8, 2009, First Financial completed a public offering of 13,800,000 shares of its common stock adding approximately $97,985 of additional common equity, after offering related costs. Subsequently, on February 2, 2010, First Financial completed an additional public offering of 6,372,117 shares of its common stock adding approximately $91,192 of additional common equity, after offering related costs.

In December 2008, First Financial completed the sale of $80,000 in perpetual preferred securities to the U.S. Treasury (Treasury) under its Capital Purchase Program (CPP), as a component of its Troubled Asset Relief Program (TARP). This represented approximately 3.00% of its risk-weighted assets as of September 30, 2008. The preferred shares pay a cumulative dividend of 5.00% per year for the first five years and reset to a rate of 9.00% per year thereafter. The dividends are payable quarterly in arrears. The preferred shares are non-voting, other than class voting rights on certain matters that could adversely affect the Senior Preferred Shares. They are also callable by First Financial at the par value of $1,000 per share, subject to consultation with First Financial’s primary regulator, the Office of the Comptroller of the Currency and with the approval of the Treasury. The Treasury may also transfer the Senior Preferred Shares to a third party at any time.

In conjunction with the purchase of the preferred shares, the Treasury received a warrant to purchase 930,233 common shares at an exercise price of $12.90 per share. The warrant has a term of 10 years. The Treasury agreed not to exercise voting power with respect to the common shares that it acquires upon exercise of the warrants. As a result of the common equity raised during the second quarter of 2009, the number of common shares eligible for purchase under the warrant agreement was reduced by 50% to 465,117 shares. On February 24, 2010, First Financial Bancorp redeemed all of the $80,000 of senior preferred shares issued to the Treasury in December 2008 under the CPP. First Financial does not intend to repurchase the warrant at this time.

Comprehensive income (loss): Comprehensive income (loss) is defined as the change in equity of a business enterprise during the period from transactions and other events and circumstances from nonowner sources. Accumulated other comprehensive income (loss) includes the unrealized holding gains and losses from available-for-sale securities arising during the period. First Financial recorded net unrealized holding gains of $10,224 at December 31, 2009 and $6,939 at December 31, 2008. While there was no income tax expense or benefit, there was a deferred tax liability associated with available-for-sale securities of $5,825 at December 31, 2009 and $3,972 at December 31, 2008.

Accumulated other comprehensive income (loss) also includes the unrealized gain on derivatives (cash flow hedges). First Financial recorded a net unrealized gain of $931 and $769 as of December 31, 2009 and 2008, respectively. No income tax expense is recorded. Deferred tax liabilities of $529 and $440 associated with this type of derivative instrument were recorded as of December 31, 2009 and 2008, respectively. Prior to 2008, First Financial did not participate in any cash flow hedges required to be reported under FASB ASC Topic 815, Derivatives and Hedging.

Accumulated other comprehensive income (loss) also includes a net unfunded pension obligation of $21,761 and $19,613 as of December 31, 2009 and 2008, respectively. There was a net deferred tax asset recorded to reflect the funded status of the postretirement benefit plans of $12,388 and $11,226 as of December 31, 2009 and 2008, respectively.

Pension: First Financial sponsors a non-contributory defined benefit pension plan covering substantially all employees. The measurement of the accrued benefit liability and the annual pension expense involves actuarial and economic assumptions. The assumptions used in pension accounting relate to the discount rates, the expected return on plan assets, and the rate of compensation increase. First Financial adopted the recognition and disclosure provisions of FASB ASC Topic 715, Compensation – Retirement Benefits.

Derivative instruments: First Financial accounts for its derivative financial instruments in accordance with FASB ASC Topic 815, Derivatives and Hedging. FASB ASC Topic 815 requires all derivative instruments to be carried at fair value on the balance sheet. First Financial designates derivative instruments used to manage interest-rate risk as hedge relationships with certain assets or liabilities being hedged.

First Financial has entered into derivative transactions, primarily interest rate swaps, to mitigate exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, and under the provisions of FASB ASC Topic 815, are considered to be fair value hedges. Because the critical terms of the hedged financial instruments and the derivative instruments coincide, the changes in the fair value of the hedged financial instruments and the derivative instruments offset and the hedges are considered to be highly effective. For a fair value hedge, the fair value of the interest rate swap is recognized on the Consolidated Balance Sheets as either a freestanding asset or liability with a corresponding adjustment to the hedged financial instrument. Subsequent adjustments due to changes in the fair value of a derivative that qualifies as a fair value hedge are offset in current period earnings. Under the fair value method, any derivative gains or losses not effective in hedging the change in fair value of the hedged item would be recognized in the Consolidated Statements of Income.

First Financial Bancorp 2009 Annual Report 35

Notes To Consolidated Financial Statements

First Financial utilizes interest rate swaps designated as cash flow hedges to manage the variability of cash flows, primarily net interest income, attributable to changes in interest rates. The net interest receivable or payable on an interest rate swap designated as a cash flow hedge is accrued and recognized as an adjustment to interest income or interest expense. The fair value of the interest rate swaps is included within accrued interest and other assets on the Consolidated Balance Sheets. Changes in the fair value of the interest rate swap are included in accumulated comprehensive income (loss). Derivative gains and losses not considered effective in hedging the cash flows related to the underlying loans, if any, would be recognized immediately in income. All of First Financial’s cash flow hedges are considered effective.

Stock-based compensation: First Financial grants stock-based awards, including restricted stock and options to purchase common stock. Stock option grants are for a fixed number of shares to employees and directors with an exercise price equal to the fair value of the shares at the date of grant. Stock-based compensation for awards is recognized in the Consolidated Statements of Income on a straight-line basis over the vesting period. The amortization of stock-based compensation reflects estimated forfeitures adjusted for actual forfeiture experience. As compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from exercise. At the time stock-based awards are exercised, cancelled, or expire, First Financial may be required to recognize an adjustment to tax expense.

Earnings per share: Basic net income per common share is computed by dividing net income applicable to common stock by the weighted average number of shares of common stock outstanding during the period. Diluted net income per common share is computed by dividing net income applicable to common stock by the weighted average number of shares, nonvested stock, and dilutive common stock equivalents outstanding during the period. Common stock equivalents consist of common stock issuable under the assumed exercise of stock options granted under First Financial’s stock plans and the assumed conversion of common stock warrants, using the treasury stock method.

Cash flow information: For purposes of the Consolidated Statements of Cash Flows, First Financial considers cash and due from banks as cash and cash equivalents.

Segments and related information: In 2009, management continued to review operating performance and make decisions as one banking segment in contiguous geographic markets.

2. Recently Adopted and Issued Accounting Standards

Effective January 1, 2009, First Financial adopted FASB ASC Topic 805, Business Combinations. This topic significantly changes how business acquisitions are accounted for, continuing the transition to fair value measurement, and will impact financial statements both on the acquisition date and in subsequent periods. This topic requires the acquirer to recognize assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at their respective fair values as of the acquisition date. The Business Combinations topic changes the treatment of acquisition-related costs, restructuring costs related to an acquisition that the acquirer expects but is not obligated to incur, contingent consideration associated with the purchase price, and preacquisition contingencies associated with acquired assets and liabilities. In addition, this topic requires enhanced disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination.

Effective June 30, 2009, First Financial adopted the amended guidance on the initial recognition and measurement, subsequent measurements and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination in FASB ASC Topic 805. This guidance is effective for all acquisitions of assets and liabilities arising from contingencies in a business combination with closing dates after January 1, 2009. The guidance in FASB ASC Topic 805 was considered in the accounting for First Financial’s business combinations during the third quarter of 2009. For further detail, see Note 3 – Business Combinations.

Effective January 1, 2009, First Financial adopted the requirements of FASB ASC Topic 810 on Noncontrolling Interests in Consolidated Financial Statements. This guidance changes the accounting and reporting for minority interests, which are recharacterized as noncontrolling interests and classified as a component of shareholders’ equity. The Noncontrolling Interests topic requires retroactive adoption of the presentation and disclosure requirements for existing consolidated minority interests. All other requirements of this topic are required to be applied prospectively. First Financial has no existing consolidated minority interests and management does not anticipate this will occur in the future; therefore, this guidance did not have a material impact on First Financial’s Consolidated Financial Statements.

In June of 2009, the FASB amended the consolidation guidance on variable interest entities in FASB ASC Topic 810. This guidance affects all entities and enterprises currently within its scope, as well as qualifying special purpose entities that were previously outside of its scope, and is effective for fiscal years beginning after November 15, 2009, with early adoption prohibited. First Financial is evaluating the revised guidance and does not anticipate a material impact on the Consolidated Financial Statements.

Effective January 1, 2009, First Financial adopted the requirements of FASB ASC Topic 815, Derivatives and Hedging. This guidance is intended to help investors better understand how derivative instruments and hedging activities impact an entity’s financial condition, financial performance, and cash flows through enhanced disclosure requirements. For further detail on First Financial’s derivative instruments and hedging activities, see Note 8 – Derivatives.

Effective January 1, 2009, First Financial adopted the requirements of the FASB ASC Topic 860, Transfers and Servicing. This topic applies to repurchase financing, which is a repurchase agreement that relates to a previously transferred financial asset between the same counterparties that is entered into contemporaneously with the initial transfer. This topic presumes that an initial transfer of a financial asset and a repurchase financing are considered part of the same arrangement, known as a linked transaction. However, if certain criteria are met, the initial transfer and repurchase financing may not be evaluated as a linked transaction and must be evaluated separately. The adoption of this guidance did not have a material impact on First Financial’s Consolidated Financial Statements.

Effective June 30, 2009, First Financial adopted the requirements of FASB ASC Topic 320, Investments – Debt and Equity Securities. This topic revised the guidance for determining whether an impairment is other than temporary for debt securities, requires bifurcation of any other than temporary impairment between the amount representing credit loss and the amount related to all other factors and requires additional disclosures on other than temporary impairment of debt and equity securities. The adoption of this guidance did not have a material impact on First Financial’s Consolidated Financial Statements.

Effective June 30, 2009, First Financial adopted the requirements of FASB ASC Topic 820, Fair Value Measurements and Disclosures. This topic provides additional guidance on estimating fair value when the volume and level of activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability, provides guidance on circumstances that may indicate that a transaction is not orderly and requires additional disclosures about fair value measurements in annual and interim reporting periods. The adoption of this guidance did not have a material impact on First Financial’s Consolidated Financial Statements.

Effective June 30, 2009, First Financial adopted the requirements of FASB ASC Topic 825, Financial Instruments. This topic extends the original disclosure requirements about the fair value of financial instruments to interim financial statements of publicly traded companies. For further detail on First Financial’s fair value disclosures, see Note 21 – Fair Value Disclosures.

Effective June 30, 2009, First Financial adopted the requirements of FASB ASC Topic 855, Subsequent Events. This topic represents the inclusion of guidance on subsequent events in accounting literature and provides guidance on management’s assessment of subsequent events. Historically, management had relied on U.S. auditing literature for guidance on assessing and disclosing subsequent events. The Subsequent Events topic clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date “through the date that the financial statements are issued or are available to be issued.” Management must perform its assessment for both interim and annual financial reporting periods. For further detail on First Financial’s assessment of subsequent events, see Note 23 – Subsequent Events.

In June of 2009, the FASB amended the derecognition guidance on transfers of financial assets in FASB ASC Topic 860, Transfers and Servicing. This guidance removes the concept of a qualifying special-purpose entity and removes the exception from applying FASB ASC Topic 810, Consolidations, to qualifying special-purpose entities. This guidance applies prospectively to transfers of financial assets occurring on or after the effective date and is effective for fiscal years beginning after November 15, 2009, with early adoption prohibited. First Financial is evaluating the revised guidance included in this topic and does not anticipate a material impact on the Consolidated Financial Statements.

Effective September 30, 2009, First Financial adopted additional guidance clarifying the appropriate techniques for measuring the fair value of liabilities in FASB ASC Topic 820. This guidance was effective for the first reporting period, including interim periods, after issuance. The adoption of this guidance did not have a material impact on First Financial’s Consolidated Financial Statements.

Effective December 31, 2009, First Financial adopted additional guidance from the FASB on ASC Topic 715, Compensation -Retirement Benefits - Defined Benefits. This guidance requires additional disclosures about plan assets in an employer’s defined benefit pension and other postretirement plans including disclosure of the fair value of each major asset category, consideration of whether additional categories or further disaggregation should be disclosed, disclosure of the level within the fair value hierarchy in which each major category of plan assets falls, and reconciliation of beginning and ending balances of plan assets with fair values measured using significant unobservable inputs. This guidance is effective for fiscal years ending after December 15, 2009 with early adoption permitted. For further detail on First Financial’s postretirement benefit plans, see Note 17 – Employee Benefit Plans.

36 First Financial Bancorp 2009 Annual Report

3. Business Combinations

On July 31, 2009, First Financial Bank, N.A. (First Financial Bank), a wholly owned subsidiary of First Financial Bancorp, entered into a purchase and assumption agreement (Peoples Agreement) with the Federal Deposit Insurance Corporation (FDIC), as receiver, pursuant to which First Financial acquired certain assets and assumed substantially all of the deposits and certain liabilities of Peoples Community Bank (Peoples).

Prior to the acquisition, Peoples operated 19 banking centers in the Cincinnati, Ohio metropolitan area. Excluding the effects of purchase accounting adjustments, First Financial acquired $579,628 in assets and assumed approximately $520,779 of the deposits of Peoples.

In connection with the Peoples acquisition, First Financial Bank entered into a loss sharing agreement with the FDIC that covers $449,674 of assets, based upon seller’s records, including single family residential mortgage loans, commercial real estate and commercial and industrial loans, and OREO (collectively, covered assets). First Financial acquired other Peoples assets that are not covered by the loss sharing agreement with the FDIC including investment securities purchased at fair market value and other tangible assets. Pursuant to the terms of the loss sharing agreement, the covered assets are subject to a stated loss threshold of $190,000 whereby the FDIC will reimburse First Financial for 80% of losses of up to $190,000, and 95% of losses in excess of this amount. First Financial will reimburse the FDIC for its share of recoveries with respect to losses for which the FDIC paid First Financial a reimbursement under the loss sharing agreement. The FDIC’s obligation to reimburse First Financial for losses with respect to covered assets begins with the first dollar of loss incurred.

On September 18, 2009, First Financial Bank, N.A, entered into separate purchase and assumption agreements (Irwin Agreements) with the FDIC, as receiver, pursuant to which First Financial acquired certain assets and assumed substantially all of the deposits and certain liabilities of Irwin Union Bank and Trust Company (Irwin Union Bank) and Irwin Union Bank, F.S.B. (Irwin FSB). Irwin Union Bank and Irwin FSB are collectively referred to herein as Irwin.

Prior to the acquisition, Irwin operated 27 banking centers primarily located in Indiana, with banking centers also located in Michigan, Nevada, Arizona, California, Kentucky, Missouri, New Mexico and Utah. Excluding the effects of purchase accounting adjustments, First Financial acquired $2,573,513 in assets and assumed approximately $2,498,447 of the deposits of Irwin.

In connection with the Irwin acquisitions, First Financial Bank entered into loss sharing agreements with the FDIC that collectively cover approximately $2,237,954 of assets, based upon seller’s records, which include single family residential mortgage loans, commercial real estate and commercial and industrial loans (covered assets). First Financial acquired other Irwin assets that are not covered by loss sharing agreements with the FDIC including investment securities purchased at fair market value and other tangible assets. Pursuant to the terms of the loss sharing agreements, the covered assets of Irwin Union Bank are subject to a stated loss threshold of $526,000 whereby the FDIC will reimburse First Financial for 80% of losses of up to $526,000, and 95% of losses in excess of this amount. Also pursuant to the terms of the loss sharing agreements, the covered assets of Irwin FSB are subject to a stated loss threshold of $110,000 whereby the FDIC will reimburse First Financial for 80% of losses of up to $110,000, and 95% of losses in excess of this amount. First Financial will reimburse the FDIC for its share of recoveries with respect to losses for which the FDIC paid First Financial a reimbursement under the loss sharing agreements. The FDIC’s obligation to reimburse First Financial for losses with respect to covered assets begins with the first dollar of loss incurred.

The amounts covered by the loss sharing agreements are the pre-acquisition book values of the underlying covered assets, the contractual balance of unfunded commitments that were acquired, and certain future net direct costs. The loss sharing agreements applicable to single family residential mortgage loans provide for FDIC loss sharing and First Financial reimbursement to the FDIC, in each case as described above, for ten years. The loss sharing agreements applicable to all other covered assets provide for FDIC loss sharing for five years and First Financial reimbursement of recoveries to the FDIC for eight years, in each case as described above.

The loss sharing agreements are subject to certain servicing procedures as specified in agreements with the FDIC. The expected reimbursements under the loss sharing agreements were recorded as indemnification assets at their estimated fair values of $69,657 and $247,016 for the Peoples Agreement and the Irwin Agreements, respectively, on the acquisition dates. The indemnification assets reflect the present value of the expected net cash reimbursement related to the loss sharing agreements described above.

First Financial has determined that the acquisitions of the net assets of Peoples and Irwin constitute business combinations as defined by the FASB ASC Topic 805, Business Combinations. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of FASB ASC Topic 820, Fair Value Measurements. In many cases the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. These fair value estimates are considered preliminary, and are subject to change for up to one year after the closing dates of the acquisitions as additional information relative to closing date fair values becomes available. First Financial and the FDIC are engaged in on-going discussions that may impact which assets and liabilities are ultimately acquired or assumed by First Financial and/or the purchase prices. In addition, the tax treatment of FDIC assisted acquisitions is complex and subject to interpretations that may result in future adjustments of deferred taxes as of the acquisition dates.

The table below presents a summary of the assets and liabilities purchased in the Peoples and Irwin acquisitions recorded at estimated fair value.

	Peoples							Irwin
	As Recorded		Fair Value			As Recorded		As Recorded		Fair Value			As Recorded
(Dollars in thousands)	by FDIC		Adjustments			by FFB		by FDIC		Adjustments			by FFB
Assets
Cash and interest-bearing deposits	$	87,158	$	0		$	87,158	$	158,786	$	0		$	158,786
Investment securities		37,681		0			37,681		70,700		0			70,700
Covered Loans		431,217		(106,751	)		324,466		2,237,158		(481,891	)		1,755,267
Total loans		431,217		(106,751	)		324,466		2,237,158		(481,891	)		1,755,267
Goodwill (Bargain Purchase)		0		18,106			18,106		0		(379,086	)		(379,086	)
Core deposits intangible		0		1,820			1,820		0		3,326			3,326
Covered other real estate owned		18,457		(7,728	)		10,729		796		0			796
FDIC indemnification asset		0		69,657			69,657		0		247,016			247,016
Other assets		5,115		(4,695	)		420		106,073		(9,488	)		96,585
Total assest acquired	$	579,628	$	(29,591	)	$	550,037	$	2,573,513	$	(620,123	)	$	1,953,390

Liabilities
Deposits
Noninterest-bearing deposit accounts	$	49,424	$	0		$	49,424	$	300,859	$	0		$	300,859
Interest-bearing deposit accounts		0		0			0		741,525		0			741,525
Savings deposits		168,220		0			168,220		79,987		0			79,987
Time deposits		303,135		0			303,135		1,376,076		0			1,376,076
Total deposits		520,779		0			520,779		2,498,447		0			2,498,447
Advances from Federal Home Loan Banks		58,940		4,598			63,538		337,433		17,685			355,118
Accrued expenses and other liabilities		344		0			344		32,638		0			32,638
Total liabilities assumed	$	580,063	$	4,598		$	584,661	$	2,868,518	$	17,685		$	2,886,203
Due from FDIC for net liabilities assumed	$	435	$	34,189		$	34,624	$	295,005	$	637,808		$	932,813

First Financial Bancorp 2009 Annual Report 37

Notes To Consolidated Financial Statements

Generally the determination of the estimated fair value of the loans resulted in a significant write-down in the value of the loans, which was assigned to an accretable or nonaccretable balance, with the accretable balance being recognized as interest income over the remaining term of the loan. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all covered loans. First Financial recognized $51,753 of loan discount accretion in interest income in 2009. The nonaccretable portion of the write-down in the value of the loans represents expected credit impairment on the loans and is only recognized in income if the payments on the loan exceed the recorded fair value of the loan.

The estimated fair value of liabilities assumed exceeded the estimated fair value of assets acquired in the Peoples acquisition, resulting in the recognition of goodwill in the amount of approximately $18,106. In the Irwin acquisition, the estimated fair value of assets acquired exceeded the estimated fair value of liabilities assumed, resulting in a bargain purchase gain of $379,086 and the recognition of a $238,369 after-tax gain.

The operating results of First Financial for the period ended December 31, 2009 include the operating results produced by the acquired assets and assumed liabilities for the period of July 31, 2009 to December 31, 2009 and September 18, 2009 to December 31, 2009, for Peoples and Irwin, respectively. Due primarily to First Financial acquiring only certain assets and liabilities in the Peoples and Irwin acquisitions, the significant amount of fair value adjustments, the loss sharing agreements with the FDIC, and on-going discussions with the FDIC that may impact which assets and liabilities are ultimately acquired or assumed by First Financial, historical results from Peoples and Irwin are not meaningful to First Financial’s results, and thus no 2008 and 2009 pro forma information is presented. For these same reasons, the impact of the Peoples and Irwin acquisitions on First Financial’s results of operations for 2009 is not meaningful and is not presented.

First Financial did not acquire the real estate, banking facilities, furniture and equipment of Peoples as part of the purchase and assumption agreement but has the option to purchase these assets at fair market value from the FDIC. This purchase option expires 90 days after acquisition date, but was extended by the FDIC. First Financial completed a review of the former Peoples locations and notified the FDIC during the first quarter of 2010 of the company’s intent to purchase certain properties for a combined purchase price of $7,939. The acquisition date for these properties has not been determined at this time.

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above.

Cash and due from banks and interest-bearing deposits in banks and the Federal Reserve – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment Securities – Investment securities were acquired from the FDIC at fair market value.

Loans – Fair values for loans were based on a discounted cash flow methodology that considered various factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows.

Core deposit intangible – This intangible asset represents the value of the relationships that Peoples and Irwin had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits.

Other real estate owned – OREO is presented at the estimated present value that management expects to receive when the property is sold, net of related costs of disposal. Pursuant to the terms of the loss sharing agreements, covered assets are subject to a stated loss threshold whereby the FDIC will reimburse First Financial for 80% of losses of up to the stated loss threshold, and 95% of losses in excess of these amounts.

FDIC indemnification asset – This loss sharing asset is measured separately from the related covered assets as it is not contractually embedded in the covered assets and is not transferable with the covered assets should First Financial choose to dispose of them. Fair value was estimated using projected cash flows related to the loss sharing agreements based on the expected reimbursements for losses and the applicable loss sharing percentages. These cash flows were discounted to reflect the uncertainty of the timing and receipt of the loss sharing reimbursement from the FDIC.

Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. No fair value adjustment was applied for time deposits as First Financial was provided with the option, upon acquisition, to reset deposit rates to market rates currently offered.

Advances from Federal Home Loan Banks – The fair values of Federal Home Loan Bank (FHLB) advances were based on contractual pre-payment penalties that are determined by the FHLB.

Other Acquisitions

In a separate and unrelated transaction, First Financial completed the purchase of 3 Indiana banking centers from Irwin Union Bank on August 28, 2009. First Financial purchased $41,146 of performing loans and assumed $84,566 of deposits. Loans were acquired at par value and there was no premium paid on assumed liabilities. Assets acquired in this transaction are not subject to a loss share agreement. The acquisition was accounted for under the purchase method of accounting in accordance with FASB ASC Topic 805. The purchased assets and assumed liabilities were recorded at their estimated fair values. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition, as information relative to closing date fair values becomes available.

Loans purchased in conjunction with the 3 banking centers were evaluated for impairment in accordance with FASB ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. These loans were determined not to be impaired and will be accounted for under FASB ASC Topic 310, Receivables.

4. Goodwill and Other Intangible Assets

Goodwill

Changes in the net carrying amount of goodwill for the year ended December 31, 2009 are shown below. No changes to goodwill were recorded during 2008.

(Dollars in thousands)
Balance at December 31, 2008	$	28,261
Goodwill acquired:
Peoples Community Bank		18,107
Branch acquisition		5,540
Balance at December 31, 2009	$	51,908

Assets and liabilities of acquired entities are recorded at their estimated fair values as of the acquisition date and are subject to refinement for up to one year as information relative to the fair values of that data becomes available. The change in the goodwill for 2009 was a result of the purchase accounting adjustments related to the FDIC-assisted transaction in July of 2009 for Peoples Community Bank and the August of 2009 purchase of three branches, and related loans and deposits, from Irwin Union Bank and Trust Company. First Financial expects all the goodwill resulting from the acquisitions described above to be deductible for tax purposes.

Goodwill is not amortized, but is measured for impairment on an annual basis as of October 1 of each year or whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. First Financial performed its annual impairment test as of October 1, 2009, and determined that no impairment was indicated.

Other intangible assets

Other intangible assets consist of mortgage servicing rights, core deposit intangibles, insurance covenants, and insurance expirations. Intangible assets, excluding servicing rights, are primarily amortized on an accelerated basis over their estimated useful lives and have an estimated weighted average life of 9.3 years.

38 First Financial Bancorp 2009 Annual Report

January 2009 Entered the year with a strong	February 2009 Expanded our Cincinnati
loan loss reserve to prepare for continuing	market with the opening of a new prototype
economic stress that was expected in 2009. This	banking center in the suburb of Madeira. Visual
prudent action helped manage credit risk and	merchandising as well as engaging retail graphics
protect the company.	“take the client on a journey” that reminds them of
	defining moments of success in their lives.

2 First Financial Bancorp 2009 Annual Report

December 31, 2008
Banking Centers‡		81
Associates		1,061
Total Loans	$2.7 billion
Total Deposits	$2.8 billion
Total Assets	$3.7 billion

December 31, 2009
Banking Centers#		118
Associates		1,390
Total Loans	$4.8 billion
Total Deposits	$5.4 billion
Total Assets	$6.7 billion

March 2009 Completed the first quarter of	April 2009 First Financial Bancorp was honored with
2009 profitably and with strong loan and deposit	Ernst & Young’s Entrepreneur of the Year award in the
growth.	financial services category. The annual awards recognize
	the best innovators and visionary thinkers in South
	Central Ohio and Kentucky. An independent panel
	judges candidates on financial performance, creativity,
	community involvement, and capacity for overcoming
	obstacles.

	First Financial Bancorp 2009 Annual Report 3

May 2009 Began a public offering of 13.8 million	June 2009 Purchased $145 million in performing
common shares at $7.50 per share resulting in net	commercial loans with strategic client relationships
proceeds of $98 million. This additional capital	from Irwin Union Bank and Trust Company. We
positioned us to continue to take advantage of	also announced the purchase of three banking
market opportunities.	centers from Irwin – a move that significantly
	expanded First Financial’s presence in strategic
	locations in central and southeastern Indiana.

4 First Financial Bancorp 2009 Annual Report

July 2009 Purchased 19 banking centers, $521	August 2009 Completed the conversion of
million in deposits and $335 million in loans and	client accounts from the three Indiana banking
other assets from Peoples Community Bank in	centers acquired from Irwin Union Bank and Trust
an FDIC-assisted transaction. This significantly	Company, which included total deposits of $85
strengthened First Financial’s base in Greater	million and total loans of $41 million. This was
Cincinnati.	accomplished in record time with the extreme
	dedication and hard work of associates across
	the company.

	First Financial Bancorp 2009 Annual Report 5

September 2009 Purchased 27 banking centers,	October 2009 Reported record earnings for the
$2.5 billion in deposits and $1.8 billion in loans	third quarter. Net income was $225.6 million and
from Irwin Union Bank and Trust Company and	earnings per diluted common share were $4.36.
Irwin Union Bank, F.S.B. in an FDIC-assisted
transaction. The purchase expanded First
Financial’s banking center network to 49 locations
in Indiana.

6 First Financial Bancorp 2009 Annual Report

November 2009 Expanded our Northern	December 2009 In order to focus on our
Kentucky Market with the opening of a prototype	strategic markets, we began a series of closings
banking center in Edgewood, Kentucky.	of the Western states locations obtained in the
	acquisition of Irwin Union Bank, F.S.B. These
	locations do not fit the company’s strategy of
	Midwestern community banking.

	First Financial Bancorp 2009 Annual Report 7

Board of Directors		Senior Management

Murph Knapke		Claude E. Davis
Chairman of the Board,		President and
First Financial Bancorp;		Chief Executive Officer
Owner,
Knapke Law Office,		C. Douglas Lefferson
Attorney-at-Law		Executive Vice President and
		Chief Operating Officer
J. Wickliffe Ach
President and		J. Franklin Hall
Chief Executive Officer,		Executive Vice President and
Hixson, Inc.		Chief Financial Officer

Donald M. Cisle, Sr.		Samuel J. Munafo
President,		Executive Vice President and
Seward-Murphy, Inc.		Chief Commercial Banking Officer

Mark A. Collar		Richard Barbercheck
Partner,		Senior Vice President and
Triathlon Medical Ventures;		Chief Credit Officer
Retired President,
Global Pharmaceuticals &		Michael J. Cassani
Personal Health,		Senior Vice President and
Procter & Gamble Company		Wealth Resource Group Chief
		Administrative Officer
Claude E. Davis
President and		Gregory A. Gehlmann
Chief Executive Officer,		Senior Vice President,
First Financial Bancorp;		General Counsel
Chairman of the Board, President,
and Chief Executive Officer,		Kevin T. Langford
First Financial Bank, N.A.		Senior Vice President and
		Chief Information Officer
Corinne R. Finnerty
Partner,		Alisa E. Poe
McConnell Finnerty Waggoner PC		Senior Vice President and
		Chief Human Resources Officer
Susan L. Knust
Managing Partner,		Al Roszczyk
K.P. Properties and		Senior Vice President for the
Omega Warehouse Services		Commercial Banking Regions

William J. Kramer		John J. Sabath
Vice President of Operations,		Senior Vice President and
Valco Companies, Inc.		Chief Risk Officer

Richard E. Olszewski		Jill A. Stanton
Owner,		Senior Vice President and
7 Eleven Food Stores		Co-Chief Retail Banking Officer

		Anthony M. Stollings
		Senior Vice President, Controller, and
Internal Audit		Chief Accounting Officer
James W. Manning
Senior Vice President and		Jill L. Wyman
Chief Internal Auditor		Senior Vice President and
		Co-Chief Retail Banking Officer

(Dollars in thousands, except per share data)	2009			2008			% Change
Earnings
Net interest income	$	175,983		$	116,202			51.45	%
Net income		246,546			22,962			973.71	%
Income available to common shareholders		242,968			22,962			958.13	%

Per Share
Net income per common share–basic	$	5.40		$	0.62			770.97	%
Net income per common share–diluted		5.33			0.61			773.77	%
Cash dividends declared per common share		0.40			0.68			(41.18	)%
Book value per common share (end of year)		11.59			7.21			60.75	%
Market price (end of year)		14.56			12.39			17.51	%

Average
Total assets	$	4,741,514		$	3,426,275			38.39	%
Deposits		3,710,832			2,797,403			32.65	%
Loans, including covered loans		3,432,463			2,661,546			28.97	%
Investment securities		667,843			452,921			47.45	%
Shareholders’ equity		473,793			279,709			69.39	%

Ratios
Return on average assets		5.20	%		0.67	%		676.12	%
Return on average shareholders’ equity		52.04	%		8.21	%		533.86	%
Average shareholders’ equity to average assets		9.99	%		8.16	%		22.43	%
Net interest margin		4.05	%		3.71	%		9.16	%
Net interest margin (fully tax equivalent)		4.08	%		3.77	%		8.22	%

	2009 change from 2008 due to									2008 change from 2007 due to
(Dollars in thousands)	VOLUME			RATE			TOTAL			VOLUME			RATE			TOTAL
Interest income
Loans (2)	$	8,121		$	(24,089	)	$	(15,968	)	$	6,906		$	(29,629	)	$	(22,723	)
Covered loans and indemnification asset		58,271			0			58,271			N/M			N/M			N/M
Investment securities (3)
Taxable		10,934			(1,512	)		9,422			5,739			(746	)		4,993
Tax-exempt		(1,787	)		(133	)		(1,920	)		(1,634	)		390			(1,244	)
Total investment securities interest (3)		9,147			(1,645	)		7,502			4,105			(356	)		3,749
Interest-bearing deposits with other banks		208			0			208			N/M			N/M			N/M
Federal funds sold		(633	)		0			(633	)		(2,911	)		(1,725	)		(4,636	)
Total		75,114			(25,734	)		49,380			8,100			(31,710	)		(23,610	)

Interest expense
Interest-bearing demand deposits		912			(2,890	)		(1,978	)		(120	)		(7,318	)		(7,438	)
Savings deposits		720			(2,888	)		(2,168	)		298			(5,685	)		(5,387	)
Time deposits		9,525			(15,796	)		(6,271	)		(1,953	)		(6,409	)		(8,362	)
Short-term borrowings		118			(3,628	)		(3,510	)		2,813			(2,217	)		596
Long-term debt		4,638			(385	)		4,253			783			10			793
Other long-term debt		0			(184	)		(184	)		(509	)		(532	)		(1,041	)
Total		15,913			(25,771	)		(9,858	)		1,312			(22,151	)		(20,839	)
Net interest income	$	59,201		$	37		$	59,238		$	6,788		$	(9,559	)	$	(2,771	)

	December 31, 2009
	Maturity
			After one
	Within		but within		After
(Dollars in thousands)	one year		five years		five years		Total
Commercial	$	442,361	$	296,759	$	59,502	$	798,622
Real estate – construction		180,754		60,380		12,089		253,223
Total	$	623,115	$	357,139	$	71,591	$	1,051,845

	Sensitivity to changes in interest rates
	Predetermined		Variable
(Dollars in thousands)	rate		rate
Due after one year but within five years	$	138,927	$	218,212
Due after five years		13,926		57,665
Total	$	152,853	$	275,877

						Maturing
	Within one year					After one but within five years					After five but within ten years					After ten years
(Dollars in thousands)	Amount		Yield(1)			Amount		Yield(1)			Amount		Yield(1)			Amount		Yield(1)
Held-to-Maturity
U.S. Treasuries	$	6,984		2.85	%	$	6,873		2.32	%	$	0		0.00	%	$	0		0.00	%
Mortgage-backed securities		11		13.14	%		138		4.73	%		0		0.00	%		0		0.00	%
Obligations of state and other political subdivisions		286		6.06	%		2,390		7.00	%		456		7.20	%		977		7.82	%
Total	$	7,281		2.99	%	$	9,401		3.54	%	$	456		7.20	%	$	977		7.82	%

Available-for-Sale
Securities of other U.S. government agencies and corporations	$	0		0.00	%	$	50		6.41	%	$	20,571		5.50	%	$	0		0.00	%
Mortgage-backed securities		8,508		4.34	%		310,892		4.67	%		69,318		4.45	%		33,541		5.18	%
Obligations of state and other
political subdivisions		1,331		7.40	%		10,985		7.66	%		5,551		6.86	%		255		7.80	%
Other securities		241		6.20	%		121		6.13	%		0		0.00	%		9,638		4.33	%
Total	$	10,080		4.79	%	$	322,048		4.78	%	$	95,440		4.82	%	$	43,434		5.01	%

	2009					2008
			Percent of					Percent of
(Dollars in thousands)	Amount		Portfolio			Amount		Portfolio
U.S. Treasuries	$	13,857		2.83	%	$	0		0.00	%
Securities of U.S. Government agencies and corporations		20,621		4.21	%		46,682		7.02	%
Mortgage-backed securities		422,408		86.34	%		572,706		86.15	%
Obligations of state and other political subdivisions		22,231		4.54	%		40,928		6.16	%
Other securities		10,200		2.08	%		4,467		0.67	%
Total	$	489,317		100.00	%	$	664,783		100.00	%

	December 31,
(Dollars in thousands)	2009			2008			2007			2006			2005
Nonaccrual loans	$	71,657		$	17,981		$	14,113		$	10,236		$	24,961
Restructured loans		6,125			204			567			596			3,408
Other real estate owned (OREO)		4,145			4,028			2,636			2,334			3,162
Total nonperforming assets	$	81,927		$	22,213		$	17,316		$	13,166		$	31,531

Nonperforming assets as a percent of total loans plus OREO		2.83	%		0.83	%		0.67	%		0.53	%		1.20	%

Accruing loans past due 90 days or more	$	417		$	138		$	313		$	185		$	1,359

	December 31,
	2009					2008					2007					2006					2005
			Percent of					Percent of					Percent of					Percent of					Percent of
			Loans to					Loans to					Loans to					Loans to					Loans to
(Dollars in thousands)	Allowance		Total Loans			Allowance		Total Loans			Allowance		Total Loans			Allowance		Total Loans			Allowance		Total Loans
Balance at End of Period
Applicable to:
Commercial	$	18,590		27.60	%	$	12,107		30.10	%	$	10,166		30.21	%	$	10,415		27.16	%	$	17,667		22.17	%
Real estate – construction		8,143		8.75	%		2,086		8.68	%		955		5.83	%		1,142		4.10	%		411		3.27	%
Real estate – commercial		15,190		37.31	%		8,454		31.56	%		7,799		27.18	%		5,257		25.14	%		14,874		24.59	%
Real estate – residential		5,308		11.10	%		3,715		14.30	%		4,382		20.75	%		4,660		25.35	%		4,313		29.40	%
Installment, home equity
& credit card		12,079		15.24	%		9,508		15.36	%		5,747		16.02	%		5,830		18.21	%		4,788		20.48	%
Lease financing		1		0.00	%		3		0.00	%		8		0.01	%		82		0.04	%		432		0.09	%
Total	$	59,311		100.00	%	$	35,873		100.00	%	$	29,057		100.00	%	$	27,386		100.00	%	$	42,485		100.00	%

	December 31, 2009
	Certificates of
(Dollars in thousands)	Deposit		IRAs		Brokered CDs		Total
Maturing in
3 months or less	$	118,411	$	4,972	$	43,412	$	166,795
3 months to 6 months		91,508		5,928		78,726		176,162
6 months to 12 months		161,746		14,906		115,394		292,046
over 12 months		197,234		49,395		120,043		366,672
Total	$	568,899	$	75,201	$	357,575	$	1,001,675

											Rate of
						Expected Return on					Compensation
	Discount Rate					Plan Assets					Increase
	-100 basis		+100 basis			-100 basis		+100 basis			-100 basis			+100 basis
(Dollars in thousands)	points		points			points		points			points			points
Change in Projected Benefit Obligation	$	7,363	$	(6,014	)		N/A		N/A		$	(672	)	$	733
Change in Pension Expense	$	685	$	(630	)	$	620	$	(620	)	$	(109	)	$	123

	Principal Amount Maturing In:																					FAIR VALUE
																						December 31,
(Dollars in thousands)	2010			2011			2012			2013			2014			THEREAFTER			TOTAL			2009
Rate sensitive assets
Fixed interest rate loans(1)		205,805			178,061			151,522			180,650			111,283			112,807			940,128			938,419
Average interest rate		5.47	%		5.68	%		6.90	%		6.12	%		6.07	%		6.68	%		6.08	%
Variable interest rate loans(1)		740,053			192,088			506,518			108,165			97,552			317,038			1,961,414			1,975,642
Average interest rate		4.46	%		4.41	%		4.00	%		4.76	%		4.30	%		4.79	%		4.40	%
Covered loans		701,104			308,168			255,026			179,378			106,545			379,328			1,929,549			1,929,549
Average interest rate		8.83	%		8.63	%		8.53	%		8.40	%		8.23	%		7.58	%		8.44	%
Fixed interest rate securities		16,922			57,818			88,308			83,861			34,410			86,447			367,766			368,241
Average interest rate		4.11	%		4.99	%		4.65	%		4.83	%		5.21	%		5.22	%		4.91	%
Variable interest rate securities		438			56			10,666			39,306			17,025			143,890			211,381			211,381
Average interest rate		1.25	%		4.14	%		4.75	%		4.15	%		4.37	%		3.60	%		3.81	%
Other earning assets		262,017			0			0			0			0			0			262,017			262,017
Average interest rate		0.25	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.25	%
FDIC indemnification asset		175,043			88,792			20,034			12,015			3,544			16,612			316,040			316,040
Average interest rate		6.50	%		6.50	%		6.50	%		6.50	%		6.50	%		6.50	%		6.50	%

Rate sensitive liabilities
Noninterest-bearing checking		754,522			0			0			0			0			0			754,522			754,522
Savings and interest-bearing checking		236,672			2,130,046			0			0			0			0			2,366,718			2,366,718
Average interest rate		0.54	%		0.54	%		0.00	%		0.00	%		0.00	%		0.00	%		0.54	%
Time deposits		1,362,667			306,505			297,605			221,542			31,604			9,477			2,229,400			2,230,173
Average interest rate		1.95	%		2.53	%		3.43	%		3.09	%		2.82	%		1.94	%		2.36	%
Fixed interest rate borrowings		20,570			50,017			52,000			500			0			241,629			364,716			386,468
Average interest rate		0.23	%		3.90	%		4.16	%		4.31	%		0.00	%		4.66	%		4.24	%
Variable interest rate borrowings		37,430			0			0			12,500			27,500			20,620			98,050			99,940
Average interest rate		0.19	%		0.00	%		0.00	%		3.55	%		3.45	%		3.35	%		2.20	%

Interest rate derivatives
Interest rate swaps
Fixed to variable		1,801			3,714			2,329			2,551			1,398			10,767			22,560			(1,365	)
Average pay rate (fixed)		6.80	%		7.06	%		6.73	%		6.56	%		6.73	%		6.84	%		6.82	%
Average receive rate (variable)		2.64	%		2.20	%		2.45	%		2.43	%		2.22	%		2.18	%		2.28	%

	-200 basis			-100 basis			+100 basis			+200 basis
	points			points			points			points
December 31, 2009		(5.28	)%		(1.69	)%		4.76	%		7.53	%

			Payments due by period
			Less than		One to three		Three to five		More than
(Dollars in thousands)	Total		one year		Years		years		five years
Contractual Obligations
Long-term debt obligations (including interest)
Federal Home Loan Bank borrowings	$	429,665	$	8,424	$	136,287	$	17,548	$	267,406
National Market Repurchase Agreement		76,244		2,119		4,814		43,701		25,610
Junior subordinated debentures owed to unconsolidated subsidiary trusts		36,318		679		1,361		1,359		32,919
Operating lease obligations		34,059		11,512		15,591		4,436		2,520
Total	$	576,286	$	22,734	$	158,053	$	67,044	$	328,455


Claude E. Davis	J. Franklin Hall
President & CEO	Executive Vice President & CFO
March 16, 2010	March 16, 2010

	December 31, 2009
						Net
	Gross Carrying		Accumulated			Carrying
(Dollars in thousands)	Amount		Amortization			Amount
Core deposit intangibles	$	5,691	$	(332	)	$	5,359
Mortgage servicing rights		2,072		(96	)		1,976
Other		178		(52	)		126
Total other intangible assets	$	7,941	$	(480	)	$	7,461

	Amortization
(Dollars in thousands)	Expense
2010	$	1,265
2011		919
2012		652
2013		462
2014		462

		December 31, 2009							December 31, 2008
		Notional		Estimated Fair Value					Notional		Estimated Fair Value
(Dollars in thousands)	Balance Sheet Location	Amount		Gain		(Loss)			Amount		Gain		(Loss)
Fair value hedges
Pay fixed interest rate swaps with counterparty	Accrued interest and other liabilities	$	22,559	$	0	$	(1,928	)	$	24,703	$	2	$	(3,339	)
Matched interest rate swaps with borrower	Accrued interest and other assets		216,759		10,266		(32	)		129,358		15,074		0
Matched interest rate swaps with counterparty	Accrued interest and other liabilities		216,759		32		(10,661	)		129,358		0		(15,020	)

Cash flow hedges
Trust preferred swap	Accumulated other comprehensive loss		20,000		998		0			0		0		0
Total		$	476,077	$	11,256	$	(12,621	)	$	283,419	$	15,076	$	(18,359	)

		Decrease to Interest Income
(Dollars in thousands)		Twelve Months Ended
Derivatives in fair value hedging relationships	Location of change in fair value recognized in earning on derivative	December 31, 2009			December 31, 2008
Interest rate contracts
Loans	Interest Income – Loans	$	(1,008	)	$	(466	)
Total		$	(1,008	)	$	(466	)

						Amount of Gain or (Loss) Reclassified
	Amount of Gain Recognized in					from Accumulated OCI into Earnings
	OCI on Derivatives (Effective Portion)					(Effective Portion)
(Dollars in thousands)	Twelve Months Ended					Twelve Months Ended
Derivatives in cash flow hedging relationships	December 31, 2009		December 31, 2008		Location of change in fair value recognized in earnings on derivative	December 31, 2009			December 31, 2008
Interest rate contracts
					Interest Income –
Other long-term debt	$	636	$	0	other long-term debt	$	(369	)	$	273
Total	$	636	$	0		$	(369	)	$	273

	Held-to-Maturity									Available-for-Sale
	Amortized		Unrealized		Unrealized			Market		Amortized		Unrealized		Unrealized			Market
(Dollars in thousands)	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
U.S. Treasuries	$	13,857	$	204	$	(31	)	$	14,030
Securities of U.S. government
agencies and corporations										$	20,036	$	585	$	0		$	20,621
Mortgage-backed securities		149		1		0			150		407,221		15,407		(369	)		422,259
Obligations of state and
other political subdivisions		4,109		301		0			4,410		17,949		303		(130	)		18,122
Other securities		0		0		0			0		9,747		266		(13	)		10,000
Total	$	18,115	$	506	$	(31	)	$	18,590	$	454,953	$	16,561	$	(512	)	$	471,002

	December 31, 2009
	Less than 12 Months				12 Months or More				Total
			Unrealized				Unrealized				Unrealized
(Dollars in thousands)	Fair Value		Loss		Fair Value		Loss		Fair Value		Loss
U.S. Treasuries	$	2,277	$	31	$	0	$	0	$	2,277	$	31
Mortgage-backed securities		23,800		266		1,608		103		25,408		369
Obligations of state and other political subdivisions		621		10		1,540		120		2,161		130
Other securities		312		13		0		0		312		13
Total	$	27,010	$	320	$	3,148	$	223	$	30,158	$	543

			Loans Excluded
	FASB ASC		from FASB ASC		Total Purchased
(Dollars in thousands)	Topic 310-30		Topic 310-30(1)		Loans
Commercial	$	422,257	$	87,470	$	509,727
Real estate – construction		86,810		0		86,810
Real estate – commercial		1,000,378		11,795		1,012,173
Real estate – residential		213,674		77,536		291,210
Installment		9,979		0		9,979
Other covered loans		0		19,650		19,650
Total covered loans	$	1,733,098	$	196,451	$	1,929,549

	Accretable			Carrying Amount
(Dollars in thousands)	Yield			of Loan
Balance at beginning of period	$	0		$	0
Additions(1)		553,831			1,862,642
Accretion		(51,753	)		51,753
Payments received, net		0			(181,289	)
Balance at end of period	$	502,078		$	1,733,106

			Repurchase
(Dollars in thousands)	FHLB		Agreement
2010	$	895	$	0
2011		50,001		0
2012		55,372		0
2013		537		12,500
2014		0		27,500
Thereafter		232,911		25,000
Total	$	339,716	$	65,000

	December 31, 2009
	Transactions									Balances
(Dollars in thousands)	Pre-tax			Tax-effect			Net of tax			Net of tax
Unrealized gain on securities available-for-sale	$	5,138		$	(1,853	)	$	3,285		$	10,224
Unrealized loss on derivatives		251			(89	)		162			931
Unfunded pension obligation		(3,310	)		1,162			(2,148	)		(21,761	)
Foreign currency translation		119			0			119			119
Total	$	2,198		$	(780	)	$	1,418		$	(10,487	)

	December 31, 2007
	Transactions							Balances
(Dollars in thousands)	Pre-tax		Tax-effect			Net of tax		Net of tax
Unrealized gain on securities available-for-sale	$	1,179	$	(431	)	$	748	$	328
Unfunded pension obligation		8,697		(3,197	)		5,500		(7,455	)
Total	$	9,876	$	(3,628	)	$	6,248	$	(7,127	)

						For Capital					To Be Well Capitalized Under
	Actual					Adequacy Purposes					Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2009
Total capital to risk-weighted assets
Consolidated	$	703,202		17.99	%	$	312,648		8.00	%		N/A		N/A
First Financial Bank		622,076		15.95	%		311,929		8.00	%	$	389,911		10.00	%

Tier 1 capital to risk-weighted assets
Consolidated		654,104		16.74	%		156,324		4.00	%		N/A		N/A
First Financial Bank		565,666		14.51	%		155,965		4.00	%		233,947		6.00	%

Tier 1 capital to average assets
Consolidated		654,104		9.57	%		242,495		4.00	%		N/A		N/A
First Financial Bank		565,666		8.24	%		273,698		4.00	%		342,123		5.00	%

Components of net periodic benefit cost
	December 31,
(Dollars in thousands)	2009			2008			2007
Service cost	$	2,301		$	2,242		$	3,254
Interest cost		2,704			2,558			2,744
Expected return on assets		(5,273	)		(4,049	)		(4,341	)
Amortization of initial net asset		0			(35	)		(47	)
Amortization of prior service cost		(423	)		(423	)		(187	)
Recognized net actuarial loss		1,605			1,097			896
Settlement loss		0			0			2,222
Net periodic benefit cost		914			1,390			4,541

Other changes recognized in accumulated other comprehensive income (loss)
Net actuarial loss		4,492			19,748			534
Prior service credit		0			0			(6,484	)
Amortization of prior service cost		423			423			187
Amortization of gain		(1,605	)		(1,097	)		(896	)
Amortization of transition asset		0			35			47
Settlements		0			0			(2,222	)
Total recognized in accumulated other comprehensive income (loss)		3,310			19,109			(8,834	)
Total recognized in net periodic benefit cost and accumulated other comprehensive income (loss)	$	4,224		$	20,499		$	(4,293	)

Amount expected to be recognized in net periodic pension expense in the coming year
Amortization of loss	$	2,055		$	1,549		$	958
Amortization of prior service credit		(423	)		(423	)		(423	)
Amortization of transition asset		0			0			(35	)

Weighted-average assumptions to determine:
	December 31,
	2009			2008
Benefit obligations
Discount rate		5.88	%		6.26	%
Rate of compensation increase		3.50	%		3.50	%

Net periodic benefit cost
Discount rate		6.26	%		6.12	%
Expected return on plan assets		8.50	%		8.50	%
Rate of compensation increase		3.50	%		3.50	%

	Fair Value Measurements
			Quoted Prices in		Significant		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
Asset Category	Total		(Level 1)		(Level 2)		(Level 3)
Money market fund	$	10,982	$	10,982	$	0	$	0
U.S. Treasury securities		460		0		460		0
Corporate bonds		16,463		0		16,463		0
Equity securities:
Stock mutual funds		24,529		24,529		0		0
Exchange traded funds		7,878		7,878		0		0
Total	$	60,312	$	43,389	$	16,923	$	0

(Dollars in thousands)	Retirement Benefits
2010	$	3,097
2011		3,358
2012		5,407
2013		5,809
2014		4,864
Thereafter		25,584