First Financial Bancorp Management Discusses Q3 2010 Results – Earnings Call Transcript
First Financial Bancorp (
)
Q3 2010 Earnings Conference Call
November 3, 2010 9:00 AM ET
Executives
Ken Lovik – VP, IR
Doug Lefferson – EVP and COO
Frank Hall – EVP and CFO
Analysts
Scott Siefers – Sandler O’Neill
Kevin Slint [ph] – Harrier Hawk Management
Justin Maurer – Lord Abbett
John Barber – KBW
Bryce Rowe – Robert W. Baird
Joe Steven – Steven Capital
Presentation
Operator
Compare to:
Previous Statements by FFBC
»
First Financial Bancorp Q2 2010 Earnings Call Transcript
»
First Financial Bancorp. Q3 2009 Earnings Call Transcript
»
First Financial Bancorp Q1 2009 Earnings Call Transcript
»
First Financial Bancorp. Q4 2008 Earnings Call Transcript
Good day, and welcome to the First Financial Bancorp’s Third Quarter 2010 Earnings Conference Call and Webcast. All participants will be in a listen-only mode.
(Operator Instructions)
Please note this event is being recorded. I would now like to turn the conference over to Ken Lovik, Vice President of Investor Relations and Corporate Development. Please go ahead, sir.
Ken Lovik
Thank you, Mike. Good morning, everyone, and thank you for joining us on today’s conference call to discuss First Financial Bancorp’s Third Quarter 2010 financial results. Claude Davis, our President and Chief Executive Officer, is unable to join us this morning as he is fulfilling his civic duty by serving on a federal jury. Reading Claude’s prepared remarks will be Doug Lefferson, Executive Vice President and Chief Operating Officer. Joining Doug today to discuss our operating and financial results are Frank Hall, Executive Vice President and Chief Financial Officer, and Richard Barbercheck, Executive Vice President and Chief Credit Officer.
Before we get started, I would like to mention that both the press release we issued yesterday announcing our financial results for the quarter and the accompanying supplemental presentation are available on our website at www.bankatfirst.com under the Investor Relations section. Please refer to the forward-looking statement disclosure contained in the Third Quarter of 2010 Earnings Release, as well as our SEC filings for a full discussion of the company’s risk factors. The information we provide today is accurate as of September 30
th
, 2010, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.
I will now turn the call over to Doug Lefferson. Doug?
Doug Lefferson
Thank you, Ken, and thank you to those joining the call today. We’re pleased to announce another solid quarter of performance, reporting that income of $15.6 million, or $0.27 per diluted common share, which included a $0.09 per share charge related to the announced prepayment of $232 million of federal home loan bank advances. We are extremely proud of the fact that this represents our 80
th
consecutive quarter of profitability, representing a track record of stability and prudent operations through a variety of economic cycles and conditions.
Our return on average assets for the quarter of 0.96% and return average shareholder’s equity of 9.06% reflect the strong efforts of our people as we continue to work through an uncertain economy. Before Frank provides further detail on our financial performance, I would like to discuss some key events during the quarter that contributed to our results, as well highlight some initiatives we have underway that we believe leave us well positioned to take advantage of strategic opportunities and continue our high level of performance.
As we discussed last quarter, our liquidity position continued to build as loaned paydowns outpace new originations, resulting in a decline of our net interest margin. During the third quarter, this activity repeated itself as commercial banking clients remain hesitant to pursue new initiatives due to the uncertain economic environment. Therefore, we examined various alternatives and put some of our liquidity to use during the quarter to the repayment of over $230 million federal home loan bank advances and purchase of $154 million of agency mortgage-backed securities.
Our strong liquidity position also allowed for the continued and planned runoff of non-strategic deposits acquired as part of the Irwin transaction, most of which were higher cost time and broker deposits. We remain diligent in managing the pricing for all deposit products and identifying ways to utilize our liquidity in a prudent and profitable manner.
Continuing to build our core deposit franchise remained a high strategic priority. Personal and business transactions in savings accounts increased over $60 million during the quarter. However, this growth was offset by net withdrawals of $97 million in public fund transaction accounts, reflecting our determination to maintain disciplined pricing and transaction structure. While we’re always sensitive to the client relationship aspect of our decisions, we will not chase business that erodes our internal profitability targets.
As I mentioned earlier, loan repayments continue to exceed new loan generation as demand remains muted within our strategic markets. Despite the slow recovery in our markets and the economic uncertainty affecting the business climate, we continue to actively pursue opportunities in both our commercial and consumer business lines. New originations and renewals for the quarter totaled approximately $223 million, which was a slight increase over the previous quarter.
Building on one of the themes we emphasized last quarter, our balance sheet risk remains fairly low despite our strong earnings performance. On the asset side, approximately 37% of our loan portfolio consists of loans that feature loss-sharing coverage from the FDIC, and our asset quality ratios remain at favorable levels relative to many of our peers.
Additionally, 100% risk-weighted assets make up less than 50% of our total balance sheet. With our actions during the quarter related to the liability side of the balance sheet, including the prepayment of federal home loan bank advances and continued runoff of time and broker deposits, we have further lowered the risk profile of the company by decreasing our level of wholesale funding resulting in an even stronger core funded balance sheet.
Read the rest of this transcript for free on seekingalpha.com
