Despite three big boosts to capital in 2009, First Financial Bancorp in Cincinnati is looking to amass an even bigger treasure chest of capital this year.

Coming off of a quarter in which its earnings beat analysts' estimates by 47%, the $6.9 billion-asset company announced plans Tuesday to raise as much as $95 million in a common equity offering. The bulk of the funds are earmarked to redeem the $80 million it received from the Treasury Department's Troubled Asset Relief Program.

Treasury rules call for such raises for repayment, but analysts and observers said the capital-raising efforts come at the right time. By paying off the Tarp funds, First Financial can shake the connotation of being a Tarp taker, as it seeks to become a major consolidator in the Midwest of failed banks and those just merely struggling.

"First Financial is clearly emerging as one of the major M&A players here in Ohio and in the Midwest; you couldn't say that a few years ago," said Rick Maroney, managing director and principal of Austin Associates LLC in Toledo. "They are at a point in time when their stock is performing well, so why not pay it off and get it and its stigma behind them?"

First Financial participated in two deals with the Federal Deposit Insurance Corp. in 2009. In July, it purchased the $706 million-asset Peoples Community Bank in West Chester, Ohio. In September it acquired Irwin Union Bank and Trust Co. and Irwin Union Bank, the failed subsidiaries of the $3.2 billion-asset Irwin Financial Corp.

While those deals together nearly doubled First Financial's assets, they also significantly boosted its capital ratios. As a result of accounting policies that allow the company to recognize the discount it received on the assets acquired as negative goodwill, First Financial recognized as much as $260 million in gains in 2009. As well, it raised $103.5 million in common equity in June before striking the deals.

All told, First Financial's total risk-based capital ratio jumped to 18% at the end of 2009, from 13.62% a year earlier. It is unclear what the most recent capital raise will do to those ratios. Eileen Rooney, an analyst with KBW Inc.'s Keefe, Bruyette & Woods Inc., said in a research note that replacing the Tarp capital with common equity will increase First Financial's tangible common equity ratio to as much as 10.6%, well above the 6% companies typically must have to be considered healthy.

First Financial would not comment, citing the "quiet period" surrounding the capital raise. Yet in a press release, Claude Davis, First Financial's president and chief executive, said the company will focus on acquisitions.

"We plan to maintain our expansion efforts in new and existing markets through the execution of our strategic plan," he said. "The infrastructure investments we have made to support our recent growth, along with our expanded footprint, place us in an excellent position to take advantage of additional market opportunities."

Rooney said in her research note that First Financial has the potential to add as much as $2.5 billion of assets in the near term. That capacity could increase later this year as the company winds down Irwin's operations in Arizona and encourages customers to move their loans to other banks.

Experts said First Financial could seek deals beyond those it strikes with the FDIC.

"I think the company is very well positioned to do FDIC transactions, or even whole-bank or branch transactions," said Daniel Cardenas, an analyst at Howe Barnes Hoefer & Arnett Inc.

Cardenas added that First Financial likely will not make big moves until it digests the Peoples and Irwin bank acquisitions, which are expected to close this quarter.

First Financial reported earnings of $13.8 million for the fourth quarter, up 557% from a year earlier. For the year, it earned $246.5 million, driven by the gain it recorded on the Irwin and Peoples transactions. For 2008, First Financial earned $23 million.

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