First Financial Bancorp (



Q4 2011 Earnings Call

January 26, 2012 09:00 am ET


Ken Lovik - VP, IR & Corporate Development

Claude Davis - President & CEO

Frank Hall - EVP, CFO & COO


Scott Siefers - Sandler O'Neill

Emlen Harmon - Jefferies

Jon Arfstrom - RBC Capital Markets

Chris McGratty - KBW

Bryce Rowe - Robert W. Baird

David Long - Raymond James

Kennet James - Sterne, Agee

Jeff Davis - Guggenheim Securities



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Good morning and welcome to the First Financial Bancorp fourth quarter and full-year 2011 earnings conference call and webcast. All participants will be in 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 Investor Relations and Corporate Development. Please go ahead.

Ken Lovik

Thank you, Andrew. Good morning everyone and thank you for joining us on today's conference call to discuss First Financial Bancorp’s fourth quarter and full-year 2011 financial results. Discussing our operating and financial results today will be Claude Davis, President and Chief Executive Officer and Frank Hall, Executive Vice President, Chief Financial Officer and Chief Operating 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 year and the accompanying supplemental presentation are available on our website at under the Investor Relations section.

Please refer to the forward-looking statement disclosure contained in the fourth quarter 2011 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 December 31st, 2011 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 Claude Davis.

Claude Davis

Thank you, Ken and thank you to those joining the call today. We are pleased to announce another quarter of strong performance reporting net income of $17.9 million or $0.31 per diluted common share representing an increase in earnings per share of 14.8% over the prior quarter and 25.4% over the fourth quarter of 2010.

For the full year, we reported net income of $66.7 million and diluted earnings per common share of a $1.14 or increases of 12.6% and 14.9% respectively over our annual performance in 2001. Return on average assets were 1.09% and return on equity was 9.89% for the quarter and 1.06% and 9.37% for the full year, again significant increases compared to our performance one year ago. Our adjusted pre-tax pre-provision earnings were $31.5 million for the fourth quarter remaining strong at 1.92% of average assets.

The decline compared to the third quarter was significantly impacted by items related to the Branch acquisition including elevated cash balances, higher occupancy costs, core deposit intangible amortization was offset partially by higher service charges in bankcard income.

Net interest margin decreased during this quarter to 4.32% driven primarily by an increase in interest earning assets and the continued decline in our high-yielding covered loan portfolio. Frank will provide more details on these items later in the call.

In early December, we closed the Flagstar Branch acquisition successfully completing all integration activities and transferring the relationships acquired to the First Financial brand. We are pleased to welcome the new associates joining First Financial from Flagstar and look forward to building a strong relationship with all of our new clients. 2012 was a busy year for us on the acquisition front as we closed two Branch transactions that allowed us to greatly accelerate our growth plans in two keys strategic metropolitan markets.

Through the Liberty and Flagstar transactions, we added 38 new banking centers to our existing network with approximately $730 million in client deposits as of December 31. These transactions significantly enhanced our scale and brand in the Dayton and Indianapolis markets providing an immediate lift to our existing commercial teams already operating those markets.

We paid our second variable dividend during the quarter representing a 100% dividend payout ration based on our third quarter’s reported earnings per share of $0.27. The variable dividend which we believe is unique in the banking sector yielded 6% based on yesterday’s closing price of $17.90. As discussed in earnings release, the Board has authorized a regular dividend of $0.12 per share and a variable dividend of $0.19 per share for our next scheduled dividend to be paid in April of 2012, increasing the yield to 6.9% based on the same closing price.

As of December 31, our tangible common ratio was 9.23%, Tier 1 leverage ratio was 9.87% and our total risk-based capital ratio was 18.74%. Our ratios are still well in excess of our stated thresholds of a tangible equity ratio of 7%, Tier 1 leverage of 8% and total capital ratio of 13%. Despite the assets acquired during the year related to the branch transactions, we still have the ability to support significant growth and under the most constraining of our thresholds have capacity to support approximately $1.5 billion in additional assets.

Total classified assets declined for the six consecutive quarter, down $10.2 million or 5.9% compared to the linked quarter and down $39.8 million or 19.7% compared to December 31, 2010. Total non-performing loans to total loans decreased three basis points to 2.57% during the fourth quarter and total non-performing assets to total assets declined to 1.31% from 1.40% as of September 30.

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