As Stanley Pontius sees it, nothing leads to success faster than some good internal competition.

At First Financial Bancorp., 14 banks and thrifts compete to top monthly ranking by measures such as return on assets and net interest margin.

"We want the peer pressure," said Mr. Pontius, the $2.6 billion-asset holding company's president, chief executive officer, and head coach. "It nudges people."

James C. Hall, president of Fidelity Federal Savings Bank, a First Financial subsidiary in Marion, Ind., said the competition is a real motivator.

"No one wants to be on the bottom of the list," he said. "If you're last, you certainly have more pressure to make changes."

The strategy is working. At yearend First Financial had a 1.71% return on assets and a 14.7% return on equity, compared with 1.27% ROA and 14.4% ROE for all publicly held Ohio and Indiana banks, according to McDonald & Co. Investments in Cleveland.

"First Financial's numbers are very strong, and I expect them to stay that way," said Timothy Willi, a bank analyst at A.G. Edwards & Sons in St. Louis.

Mr. Pontius, 51, said his strategy will help his super community banking company survive today's megamergers. First Financial's banks can draw on First Financial's resources but are autonomous and focused on their hometowns, he said.

"We see a very bright future," Mr. Pontius said.

Though he wants to win, he does not call in plays from the sidelines, he said; First Financial lets the subsidiary bankers run their banks with little interference from holding company managers.

In First Financial's hometown, about 30 minutes north of Cincinnati, two subsidiaries are within a block of one another. But nothing - no sign, logo, or slogan - indicates that First Southwestern, a bank, and Home Federal, a thrift, share a holding company. Even the product lines remain separate, on the theory that some customers prefer a commercial bank, others a savings bank.

"Our niche is our individuality," Mr. Pontius said. "We don't want to become a consolidated company."

But First Financial is not sacrificing efficiency for individuality. Its 52% ratio is lower than reported by even some of First Financial's big-bank regional competitors, such as Cleveland-based KeyCorp and National City Corp.

First Financial's performance has attracted attention from investors. The stock has appreciated 83% since January 1997; at midday Thursday it was trading at $55.75.

Mr. Pontius brought the ranking system with him when he joined First Financial as CEO in 1991. He modeled it on one pioneered by Columbus, Ohio- based Banc One Corp., where he was president of three subsidiaries between 1979 and 1991.

Banc One has now changed its strategy, but it used to stress internal competition, not conformity. "There was plenty of pressure on me to perform," Mr. Pontius said, "so I know what it's like for our banks."

At First Financial "he turned good bankers into better bankers," said Michael R. O'Dell, chief financial officer.

"He rules with a sense of compassion," Mr. O'Dell added. But Mr. Pontius said: "All friendships end with the numbers."

The company sets goals for each subsidiary, including double-digit earnings increases each year. Executives whose banks achieve their goals get bonuses.

Those at the lower-ranked banks have to take lessons from their more successful peers. Mr. Pontius has found that what works well for one of his banks can often work at another, because their markets - often rural county seats - are similar.

First Financial's worst performers tend to be recent acquisitions. (It has bought 12 banks since 1991.) Even if the acquired bank is already a strong performer, it is expected to do better as a member of First Financial family.

For example Union Bank and Trust in North Vernon, Ind., was already reporting a respectable 1.50% ROA when First Financial bought it in 1993. But Union went on to boost its ROA to 2.75%, and is the holding company's ROA leader.

Despite his emphasis on the numbers, Mr. Pontius said he defers to local bankers' judgment on how to run their banks - even if it means deviating from First Financial's philosophy.

He went along last year when executives of two neighboring First Financial units - Citizens Commercial Bank and Trust in Celina, Ohio, and Van Wert (Ohio) National Bank - decided they wanted to merge them. They combined to form Community First Bank and Trust and then absorbed 11 branches First Financial bought from KeyCorp last year.

The move was expensive; during first quarter 1997 the company incurred $345,000 in expenses and $525,000 in dilution related to the merger and branch acquisition. And Mr. Pontius insists it was an exception. "We don't want anyone to think this is the beginning of a trend."

Mr. Pontius said his goal is to double the number of First Financial subsidiaries within five years and maintain the same hands-off management structure. First Financial is shopping in-market as well as in western Pennsylvania and West Virginia.

Mr. Willi of A.G. Edwards said Mr. Pontius' growth plan is feasible.

"They're making this community banking network work as they grow, which other companies have had trouble with," Mr. Willi said. "I think they can make it to the $5 billion mark before they start to cross the threshold of a regional bank" and would have to consolidate internally.

Despite the megamerger frenzy of recent weeks, Mr. Pontius said he does not accept the idea that there will be no room in the marketplace for large community banks and small regionals.

"This is still a service business, and that's not going to change," he said. "It's up to us. If we stay focused on profitability and customer service, we'll stay an independent, super community bank."

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