First Financial Bancorp. · NASDAQ:FFBC
First Financial Bancorp — Investor Presentation (February 2011)
21 slides from First Financial Bancorp's investor presentation, Feb 4, 2011
Slide 1: Accounting and Financial Reporting Matters Related to Acquired Loans
fiRST ern first financial bancorp First Financial Bancorp Accounting and Financial Reporting Matters Related to Acquired Loans February 4, 2011
Slide 2: Forward-Looking Statement Disclosure
fiRST Forward-Looking Statement Disclosure first financial bancorp tani tna el zane whew ind opratne may conte tata nao anna cher bigs. ithe enn att ncuron Peas slowance ean aaa sss anew nal peor, ra omar ara an nest, wh ane US Tens TARP FO ect ky aan creates en rae, apostate, comer loes and anu ne
Slide 3: Transaction background, accounting detail, strategic importance
= Transaction background = Accounting detail — Financial statement accounts utilized by First Financial for purchase accounting and FDIC assisted transactions — Accounting “Day 1” - valuations and accounting treatment * — Accounting “Day 2” — ongoing accounting — Drivers of variability = Strategic i
Slide 4: Transaction Background
fiRST first financial bancorp Transaction Background
Slide 5: Overview of 2009 FDIC-Assisted Transactions
fiRST Overview of 2009 first financial bancorp FDIC-Assisted Transactions Community Bank Irwin Union Bank & Trust/Irwin Union FSB. + Acquired 19 banking certers in Cincinnati MSA + Acquired 27 banking centers Franchise Loss Share|) * Estimated $342 milion in fir value + Estimated $1.8 bilion in fair
Slide 6: Accounting Detail
fiRST first financial bancorp Accounting Detail
Slide 7: Impact on Financial Reporting Presentation
fiRST Impact on first financial bancorp Financial Reporting Presentation = Balance sheet — Covered loans: loans covered by FDIC loss share agreements and disclosed separately from legacy portfolio — Allowance for loan and lease losses - acquired: represents recorded net impairment of ASC Topic 310-3
Slide 8: Day 1 Valuation and Accounting Treatment
fiRST Day 1 first financial bancorp Valuation and Accounting Treatment 11% Dollars in Millions. valuation adjustment ASC Topie 310-20 ASC Topic 310-20 Total discount - $583 million Approximate values at acquisition date (millions): Day 1 Balance Sheet Accounts CCreat-based adjustment covered by FDIC
Slide 9: Components of Acquired Loan Balances
fiRST first financial bancorp Components of Acquired Loan Balances Day 2 Expected Cash Flow Illustration ASC Topic 310-30 Loans oo owe = Contractual cash flows: sum of all principal and interest TE P are contractually obligated to repay cee ecto fac . cash flows: sum of all principal and interest _
Slide 10: Variability in valuation assumptions
= Variability in valuation assumptions — Assumption changes for credit losses will impact: + Prospective yield on FDIC indemnification asset + Prospective yield on acquired loans (only for improvement) + Acquired loan provision expense — increase and/or recapture of previously recognized impairment
Slide 11: Day 2 Components of Acquired Loan Provision Expense
Day 2 fiRST Components of Acquired Loan first financial bancorp Provision Expense For the three months ended December 31, Doles in thousands 2010 [ ] Current period impairment $14,592 ———> Represents reduction in expected cash flows related to certain loan pools Prior period impairment recapture (9,
Slide 12: What does this mean for quarterly earnings?
= What does this mean for quarterly earnings? — Strong operating results — Variability in isolated components + Variability in valuations will change — Margin (rate based) — FDIC loss share income and provision expense + Variability in borrower behavior will change — Margin (volume based) — Accelera
Slide 13: Pre-tax, pre-provision income for the three months ended
For the three months ended Pre-tax, pre-provision income ' 37216 $31,126 $5,724 ‘Accelerated discount on acquired loans related to: Loan sales : 362 : 1927 2919 6.113 9,086 7.408 4am 5296 Total accelerated discount 6.113 9.448 7.408 6,098 8215 Less: gain on sales of non-mortgage loans? : 2.034 : : 7
Slide 14: Strategic Importance & Embedded Value
fiRST first financial bancorp Strategic Importance & Embedded Value
Slide 15: Stress Case
fiRST first financial bancorp Stress Case Iiustrates the strength of our balance sheet assuming afl charge-off of all cquited loans under FDIC loss share agreements and a full charge-ot ofa uncovered non-performing loans. Nonperforming Assets = $89 millon Covered Loans = $1.5 billon Risk Based Capit
Slide 16: Comparison of Financial Impact
fiRST first financial bancorp Comparison of Financial Impact The tables below present a comparison of the impact on diluted earnings per share under various scenarios Extreme Cases = fall acquired loans were to prepay immediately, diluted EPS would benefit by $1.26 per share ‘= The absolute worst ca
Slide 17: Timing of Revenue Recognition
fiRST first financial bancorp $507,019 $203,343 ce Time 25> ‘Stnamertizea Discount: —cumulative Accretable Oference Timing of Revenue Recognition ASC Topic 310-30 Loans If ASC Topic 310-30 loans pay as expected, the entire accretable difference will be recognized over the remaining life of the loans
Slide 18: What happens when the covered loans go away?
Question: Doles tomar What happens when the covered loans go away? Recorded investment ‘carrying value * Unamotized discount Unpaid principal balance "> rail covered loans repaid today at 100% UPB, this is the amount — cfoosh that would be recived and reinenid in ober itarect, sat is os epoas cimnng
Slide 19: What is the Embedded Value?
fiRST first financial bancorp What is the Embedded Value? = Higher reinvestment balances — Book value of acquired loans is less than the unpaid principal balance — Full payoff = increase in earning assets + Interest income is not fully offset by lower reinvestment yield = Additional capital to lever
Slide 20: Strategic performance and important items to monitor
= Strategic performance — Overall retention rates of strategic loan portfolio + Will impact whether the “bull” or “bear” case is realized + Current retention rate is greater than 80% - leaning toward bull case = Important to monitor — Accretable difference — page 16 + Estimate provided each quarter
Slide 21: Another
fiRST first financial bancorp Another step on the path to success
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