First Financial Bancorp's Management Presents At Barclays 2012 Global Financial Services Conference (Transcript)

First Financial Bancorp (FFBC)

Barclays 2012 Global Financial Services Conference Call

September 12, 2012 8:15 am ET

Executives

Kenneth Lovik – Vice President-Investor Relations & Corporate Development

J. Franklin Hall – Executive Vice President, Chief Financial Officer and Chief Operating Officer

Analysts

Matthew Keating – Barclays Capital, Inc.

Presentation

Matthew Keating – Barclays Capital, Inc.

Matthew Keating and I work on the U.S. Bank’s Research team here at Barclays. Our discussion of Ohio-based banks continues this morning, and we’re very pleased to welcome First Financial Bancorp to our conference returning again this year. We believe that First Financial is a very well run organization with a sound growth strategy of transitioning its business and customer mix towards faster growing metropolitan markets within its Midwest footprint, largely Ohio and Indiana. More recently, well loan demand in its strategic market has been a bit low, its industry-leading capital levels have afforded it the flexibility to pursue acquisitions and return capital to shareholders. With the current dividend yield of over 7%, its one of the highest dividend yielding stocks in our bank universe.

With us, presenting today is Frank Hall, CFO and COO and also in attendance for the company are Ken Lovik, VP of Investor Relations & Corporate Development.

With that, I’ll turn it over to Frank.

J. Franklin Hall

Thank you, Matt, and good morning everyone and thank you to Barclays for inviting us to present at their conference. Here in the printed version of our presentation is our forward-looking statement. I’ll now turn to what many of you may already be familiar with, but I do want to remind you that we are a fairly simply straightforward bank that is conservatively managed that is known for strong execution in profitability located in the heart of the Midwest. We work diligently over the past several years to develop a strong sales culture across our lines of business, which include commercial, retail, wealth management, and franchise finance.

Our target commercial client is a small- to mid-size business located within our operating markets of Ohio, Kentucky or Indiana who have traditional deposit needs and lending needs of less than $15 million. Our retail business is supported by 122 locations primarily in metro or near metro markets. Our wealth management business manages over $2 billion in client assets and contributes approximately 25% of our adjusted non-interest income.

We have placed a recent emphasis on two more traditional product areas including residential mortgage production, and small business banking. Noted on the bottom right of this slide is a recently published ranking of the top SBA lenders in Southwest Ohio. First Financial ranks second for a number of loans originated and ranks first for dollar amount of loans originated for the top nine lenders in the year.

For those of you who may not be familiar with the details of our story, this slide presents a summary of our execution of key strategic initiatives since 2005. In 2005, we began a comprehensive plan to reposition the franchise, which included operational changes such as consolidating charters, implementing a single brand, and updating our technology platform to drive greater efficiency across the company. We also repositioned the balance sheet as we sold out non-performing assets, consolidated or sold under performing branch locations, and exited non-strategic business lines.

During this time, we actually shrunk the balance sheet from 3.9 billion of assets at the beginning of 2005 to 3.3 billion at the end of 2006. As a result of the restructuring, our balance sheet and asset quality were strong adding into the economic crisis.

We were well positioned to capitalize on FDIC-assisted acquisition opportunities early in the cycle, with less competition provided favorable financial terms that further enhanced the strategic deals we closed. The two FDIC-assisted transactions we executed in 2009 essentially double the size of our company. Subsequent to the integration of the acquired banks, we spent much of 2010 focused internally on operations as we rationalized at non-strategic operations and implemented further efficiency initiatives.

In 2011, we were able to deploy a portion of our strong capital base through two branch acquisitions where we accelerated our growth plans in Dayton, Ohio and Indianapolis, Indiana. Two metropolitan markets identified for future expansion. We also implemented our variable dividend, which has been acknowledged as one of the more innovative capital management strategies in the banking industry.

Listed on this slide, what I believe there’s some often overlooked points of peer and market differentiation. Peer is defined as the KBW Regional Bank Index minus First Financial. First, our profitability on a non-risk-adjusted basis over the last 12 months is above peer median with a return on average assets 15 basis points higher and a return on average equity, 174 basis points higher than peer.

Our capital levels are also well above peer median. Our tangible common equity ratio is 9.91% relative to our peer at 8.73% and our total capital ratio, which is bolstered by the low risk weighting of our earning assets due to the covered status that what was acquired through FDIC-assisted transactions is 18.42% compared to peer median of 15.33%. It is because of this robust capital position that we have continued a total dividend payout ratio of 100% resulting in the current annualized yield in excess of 7%, both of which are substantially above the peer median payout ratio of 37% and dividend yield of 2.7%. And our quarterly adjusted return on risk-weighted assets of 1.92% is 62 basis points above peer median as our risk-weighted assets to total assets is so much lower than peer. Said in another way, we are delivering above peer median performance on a lower risk balance sheet.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

Dow Sells Off as U.S. and China Trade Tensions Escalate

Dow Sells Off as U.S. and China Trade Tensions Escalate

China Central Bank Governor Says Stay 'Calm and Rational' After Market Free Fall

China Central Bank Governor Says Stay 'Calm and Rational' After Market Free Fall

Here Is Your Market Playbook During This Tariff-Driven Selloff

Here Is Your Market Playbook During This Tariff-Driven Selloff

Dropbox Is the New Defensive Stock to Own With the Market Falling Apart

Dropbox Is the New Defensive Stock to Own With the Market Falling Apart

The Quick Answer Why Trump's Trade War Makes Stocks at Least 10% Overvalued

The Quick Answer Why Trump's Trade War Makes Stocks at Least 10% Overvalued