First Financial Bancorp. · NASDAQ:FFBC
First Financial Bancorp — Investor Presentation (December 2012)
36 slides from First Financial Bancorp's investor presentation, Dec 4, 2012
Slide 1: First Financial Bancorp Investor Presentation Third Quarter 2012
First Financial Bancorp Investor Presentation Third Quarter 2012 EXHIBIT 99.1
Slide 2: Forward-looking statements
2 Certain statements contained in this presentation which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act (the „„Act‟‟). In addition, certain statements in future filings by First Financial with the SEC, i
Slide 3: Focused Business Strategy
3 Focused Business Strategy Client intimate strategy focused on long-term, profitable relationships with clients Strong sales culture across all business lines Lines of business Commercial Retail Wealth Management Target clients – individuals and small / mid-size businesses located in-market Ohio, I
Slide 4: Strategy and Execution – Recent History
4 Strategy and Execution – Recent History Franchise Repositioning 2005 – 2008 FDIC Acquisitions 2009 Integration / Operational Execution 2010 Capital Mgmt. / Redeployment 2011 – 2012 While the industry was pursuing growth via high-priced acquisitions and real estate lending, First Financial: While t
Slide 5: Franchise Summary Comparison
5 Franchise Summary Comparison Consistent and solid profitability LTM ROAA of 1.08% compared to peer median of 0.93% LTM ROAE of 9.65% compared to peer median of 7.93% LTM net interest margin of 4.38% compared to peer median of 3.73% Capital levels extremely robust and have capacity to support signi
Slide 6: Third Quarter 2012 Financial Highlights
6 Third Quarter 2012 Financial Highlights Quarterly net income of $16.2 million, or $0.28 per diluted common share Continued strong profitability Return on average assets of 1.05% Return on average risk-weighted assets of 1.72% Return on average shareholders‟ equity of 9.01% Quarterly net interest m
Slide 7: Pre-Tax, Pre-Provision Income Trend
7 Pre-Tax, Pre-Provision Income Trend Adjusted pre-tax, pre-provision income represents income before taxes plus provision for all loans less FDIC loss share income and accelerated discount adjusted for significant nonrecurring items The decrease in third quarter 2012 adjusted PTPP income was driven
Slide 8: Components of Net Interest Income
8 Components of Net Interest Income Net interest margin decreased 28 bps during the third quarter 2012 to 4.21% Yield earned on covered loans declined 59 bps to 10.81% Decline in investment portfolio yield due to elevated prepayment and redemption activity Cost of interest bearing deposits declined
Slide 9: Commercial Lending
9 Commercial Lending Commercial & Industrial Real Estate Loan Portfolio by Geography Loan Portfolio by Industry Target loan size is $1 million to $15 million Increased focus on middle market business clients (generally up to $30 million revenue) Specialty finance designed to expand product set and i
Slide 10: Retail Lending
10 Retail Lending $1.1 billion in total strategic loans, including home equity, mortgage, business banking and credit cards Mortgage loan originators located across footprint with concentrations in Cincinnati, Dayton and Indianapolis Business banking sales managers located in sales centers Serving r
Slide 11: Building the fIRST Brand
11 Building the “fIRST” Brand Significant growth in brand awareness Award-winning sales center prototype Proactive marketing and media relations Expands presence and market share Deeper relationships and differentiated client experience
Slide 12: Delivery Channels and Product Innovation
12 Delivery Channels and Product Innovation Launched new online banking platform Enhanced mobile apps to accommodate client preferences Sales centers focused on relationship vs. transactions Deploying image-capture ATMs Deliver a consistent brand experience in a cost-effective manner
Slide 13: Capital Management
13 Capital Management Current dividend policy consists of a 100% payout ratio comprised of two components: Regular dividend based on stated payout of between 40% - 60% of quarterly earnings; currently $0.15 per share Variable dividend based on the remainder of quarterly EPS; $0.13 per share based on
Slide 14: Capitalization
14 Capitalization Primary component of capital is common equity Capital ratios varied slightly from prior quarter due to decrease in total tangible assets but increase in risk-weighted assets Capitalization levels still remain among industry leaders and provide ability to support $1.5 billion in add
Slide 15: Low Risk Balance Sheet
15 Low Risk Balance Sheet Only 50% of First Financial‟s total assets are 100% risk-weighted assets compared to the peer group median of 56% First Financial‟s percentage of total risk- weighted assets to total assets is 60.8% compared to the peer group median of 69.1% The lower percentages are driven
Slide 16: Credit Quality (Excluding Covered Assets)
16 Credit Quality (Excluding Covered Assets) Classified assets totaled $133.4 million as of September 30, 2012, declining 8.4% compared to the linked quarter and 22.7% compared to September 30, 2011 Third quarter 2012 provision for loan losses decreased $4.8 million, or 56.8%, compared to the linked
Slide 17: Selective Acquisitions
17 Selective Acquisitions Supplements organic growth strategy through expansion in strategic markets Transactions met all internal criteria for acquisitions Loss sharing arrangements provide significant protection on acquired loans Developed scalable covered asset and loss share management team comp
Slide 18: Franchise Highlights
18 Franchise Highlights 1. Strong operating fundamentals – 88 consecutive quarters of profitability 2. Strong capital levels 3. Dividend yield in excess of 7.5% combined with share repurchase plan 4. Low risk balance sheet 5. Credit metrics have remained strong throughout the economic downturn 6. So
Slide 19: Appendix Third Quarter 2012
Appendix Investor Presentation Third Quarter 2012
Slide 20: Pre-Tax, Pre-Provision Income
20 Pre-Tax, Pre-Provision Income For the three months ended September 30, June 30, March 31, December 31, September 30, (Dollars in thousands) 2012 2012 2012 2011 2011 Pre-tax, pre-provision income 1 26,894$ 32,636$ 30,020$ 33,015$ 31,814$ Less: accelerated discount on covered loans 3,798 3,764 3,64
Slide 21: Revenue by Source
21 Revenue by Source Strategic – Elements of the business that either existed prior to the acquisitions or were acquired with the intent to retain and grow. On a reported basis, approximately 75% of total revenue is derived from strategic businesses. Not including the FDIC loss sharing income and ot
Slide 22: Noninterest Income and Expense
22 Noninterest Income and Expense Components of Noninterest Income For the Three Months Ended September 30, 2012 (Dollars in millions) Components of Noninterest Expense For the Three Months Ended September 30, 2012 (Dollars in millions) $50.3 91% $1.0 2% $4.0 7% Strategic FDIC Support Other Non-stra
Slide 23: Deposit and Loan Composition
23 Deposit and Loan Composition Total Deposits – $4.9 billion As of September 30, 2012 (Dollars in millions) Gross Loans – $3.9 billion As of September 30, 2012 (Dollars in millions) Market exits are complete; acquired-non-strategic deposits consist primarily of time deposits in Western, Michigan an
Slide 24: Loan Composition
24 Loan Composition In-house lending limit of $15 million – significantly below legal limit 21.2% of total loans covered under FDIC loss share agreements Total uncovered loans increased $53.4 million, or 7.1% on an annualized basis, compared to the linked quarter driven by growth in commercial, CRE
Slide 25: Uncovered Loans – Real Estate Collateral
25 Uncovered Loans – Real Estate Collateral Construction and acquisition and land development loans represent small portion of overall portfolio Commercial real estate and constructions loans located primarily in Ohio and Indiana markets Total Uncovered Loan Portfolio – $3.1 billion September 30, 20
Slide 26: Investment Portfolio
26 Investment Portfolio Investment portfolio represents 25.4% of total assets Average balance of investments decreased $107.2 million, or 6.3%, during the third quarter 2012 Yield earned on portfolio was 2.09% during the third quarter 2012 As of September 30, 2012 Securities Securities Other Total P
Slide 27: Deposit Composition
27 Deposit Composition Non-time deposit balances declined $24.7 million during the third quarter 2012, driven by a $37.7 million decrease in public fund balances Offsetting the decline in public fund balances was an increase of $29.2 million in core business and commercial accounts Time deposit bala
Slide 28: Funding Structure and Cost of Funds
28 Funding Structure and Cost of Funds Average Balances – Total Interest Bearing Liability Composition Average Balances – Deposit Composition Total Cost of Funds (1) Not included in cost of funds calculation Total Cost of Deposits Co s t of F u n d s 0.79% 0.72% 0.64% 0.60% 0.64% 0.57% 0.49% 0.45% 0
Slide 29: Cost of Interest Bearing Deposits
29 Cost of Interest Bearing Deposits Cost of interest-bearing deposits declined 4 basis points to 0.57% as a result of rationalization strategies Approximately 30% of total time deposits represent single service relationships with a weighted average cost of 1.78% Retained single service time deposit
Slide 30: Covered Loan Activity
30 Covered Loan Activity The majority of the loans acquired as part of the FDIC-assisted transactions are accounted for under ASC Topic 310-30 which requires the Company to periodically update its forecast of expected cash flows from these loans. As of September 30, 2012, the allowance for loan and
Slide 31: Covered Loan Performance
31 Covered Loan Performance While covered loans continue to decline, better than expected performance has resulted in a consistently high yield on the portfolio Improvement and impairment result from quarterly re-estimation of cash flows expectations; net present value of expected cash flows are inf
Slide 32: Components of Covered Asset Credit Losses
32 Components of Covered Asset Credit Losses $1,998 $3,178 $2,084 $1,685 4Q11 1Q12 2Q12 3Q12 Actual Covered Asset Credit Losses For the three months ended September 30, (Dollars in thousands) 2012 Description Net incremental impairment for period $568 Reduction in expected cash flows related to cert
Slide 33: Reinvestment of Covered Loan Proceeds
33 Reinvestment of Covered Loan Proceeds What happens when the covered loan portfolio pays down? Interest Income Comparison The “Bear Case” assumes cash proceeds from repayment of covered loans are used to purchase investment securities. The “Bull Case” assumes proceeds are used to fund loan growth.
Slide 34: Comparison of Financial Impact
34 Comparison of Financial Impact The tables below present a comparison of the impact on diluted earnings per share under various scenarios Extreme Cases If all acquired loans were to prepay immediately, diluted EPS would benefit by $0.47 per share as of the third quarter 2012 The absolute worst
Slide 35: Accounting for Covered Loans
35 Accounting for Covered Loans Accounting treatment options regarding income recognition when a loan accounted for under ASC Topic 310-30 exits the pool prior to maturity: Income recognition options subsequent to paid in full exit event Covered Loan Portfolio Accounting Treatment: ASC Topic 310 - 3
Slide 36: First Financial Bancorp Third Quarter 2012
First Financial Bancorp Investor Presentation Third Quarter 2012
First Financial Bancorp — Investor Presentation (December 2012) on 6ix