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First Financial Bancorp's CEO Discusses Q1 2012 Results - Earnings Call Transcript

The increase will not affect the variable dividend in the short-term, as we also announced that we intend to maintain this component for the next six quarters, unless capital deployment opportunities arise that cause our capital ratios to move towards our stated thresholds sooner than expected. The six-quarter timeframe represents actual dividend that will be paid to shareholders through 2013 based on our traditional dividend payment schedule.

Our next quarterly dividend will consist of the increased regular dividend of $0.15 per share and a variable dividend of $0.14 per share based on the first quarter earnings of $0.29. The announced variable dividend results in a current yield of 6.8% based on yesterday’s closing price of $17.10.

Our variable dividend has been very well received and recognized as an innovative way to return capital to shareholders in an uncertain regulatory environment. However, we also acknowledge that many of our shareholders place greater value on the predictability of future dividend payments.

Additionally, our capital retention needs will increase in future periods as loans covered under loss share agreements with the FDIC, which enjoy a 20% risk-weighting currently begin to migrate to our uncovered portfolio and drive an increase in our risk-weighted assets. Furthermore, we will also maintain capital for pursuing future growth opportunities. These three factors compelled us to establish a timeframe for expiration of the variable dividend.

As of March 31, our tangible common ratio was 9.66%; Tier 1 leverage was 9.94%; and total risk-based capital was 18.45%. Our ratios remain well in excess of our stated thresholds of a tangible equity ratio of 7%; Tier 1 leverage ratio of 8%; and total capital of 13%. Our strong capital ratios still have the ability to support significant growth under the most constraining of our thresholds – excuse me, have capacity to support approximately $1.5 billion in additional assets.

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