First Financial's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Jan.31.14 | About: First Financial (FFBC)

First Financial Bancorp. (NASDAQ:FFBC)

Q4 2013 Results Earnings Call

January 31, 2014 8:30 AM ET

Executives

Ken Lovik - Senior Vice President, IR and Corporate Development

Claude Davis - President and CEO

Tony Stollings - Executive Vice President and CFO

Analysts

Scott Siefers - Sandler O'Neill

Emlen Harmon - Jefferies

David Long - Raymond James

John Barber - KBW

Taylor Brodarick - Guggenheim Securities

Operator

Good morning. And welcome to the First Financial Bancorp Fourth Quarter 2013 Financial Results 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 Mr. Ken Lovik, Senior Vice President, Investor Relations and Corporate Development. Please go ahead, sir.

Ken Lovik

Thank you, Denise. 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 2013 financial results.

Discussing our operating and financial results today will be Claude Davis, President and Chief Executive Officer; and Tony Stollings, Executive Vice President and Chief Financial 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 fourth quarter 2013 earnings release, as well as our SEC filings for a full discussion of the company’s risk factors.

The information we will provide today is accurate as of December 31, 2013, 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

Thanks, Ken, and thanks everyone joining the call today. Excuse me, for the quarter we reported net income of $3.8 million or $ 0.07 per share. Our results for the quarter were impacted by several non-operating items, the most significant of which was the $22.4 million pre-tax non-cash valuation adjustment we recognized related to the FDIC Indemnification Asset that we announced on January 22nd.

In total, these non-operating items reduced reported earnings per share by $0.24. Additionally, on an adjusted basis return on assets was 1.14% and return on tangible common equity was 11.88%, representing our strongest quarter performance for the year.

This is obviously an exciting quarter for us as we announced the acquisition of two high performing institutions in the Columbus, Ohio market. The First Bexley Bank and Insight Bank are both successful franchises with extremely talented personal and together provided an excellence platform to capitalize on the growth potential of the Columbus market. Our integration team has hard at work in Columbus and we look forward to closing these transactions during the second quarter.

Also, earlier this month, we announced our entrance into the Fort Wayne, Indiana market, with the hiring of strong commercial and residential lending teams that are well-established in the market.

Their solid relationships and market knowledge combined with our comprehensive credit product set and larger balance sheet provides another channel for quality asset generation and a platform for building out a greater presence in one of Indiana's larger metro markets.

The benefits of our efficiency plan were evident as our operating expenses excluding OREO costs declined another $1.4 million during the quarter. Based on our operating results throughout the year, we are proud to say that we surpass the original goal of 85% realization of announced cost savings and achieved 100% of our annual target of $17 million during a year. All initiatives related to the original plan have been fully implemented and on an annualized run rate basis we expect to exceed the original cost savings target going forward.

Furthermore, as we announced last quarter, we identified additional cost savings initiatives. These initiatives are expected to produce an additional $5 million of efficiencies during 2014 across multiple expense categories.

We continue to produce quality loan growth as period end loan balances in our uncovered portfolio increased $74.7 million or 8.6% on an annualized basis, our seventh consecutive quarter of growth.

Commercial production remains strong as new originations and renewals were up over 22% compared to the third quarter, with strong performance in C&I, owner occupied CRE lending, as well as, in our franchise and specialty finance groups.

Additionally, growth in the uncovered portfolio exceeded the decline in covered loan balances by over $14 million, marking the fourth time in the last five quarters that we achieve this milestone.

For the year, we were pleased with our overall growth in uncovered loans, which increased $326.6 million or 10.3%. During 2013, C&I, owner occupied balances increased over $170 million or about 27%, while specialty finance balances increased $81.3 million or 73% and franchise lending balances increased $80.3 million or 26%. Additionally, residential mortgage balances increased $34.7 million or 10.9% during the year.

Given the spreads between season credits and new originations are still fairly wide. We continue to experience an elevated level of payoffs. However, our local economies are showing improving fundamentals and business confidence continues to rise.

We feel very good about our solid performance to close out the year and the momentum that provides heading into 2014 as evidenced by our strong pipeline of commitments and prospects for the first quarter.

Another highlight for the quarter was asset quality, while net charge-offs increased modestly during the quarter, we make significant progress regarding the non-performing loan resolutions we mentioned on last quarter’s call.

Total non-performing loans declined $21.5 million or 29% during the quarter and now equal 1.50% of total uncovered loans, compared to 2.16% as of September 30. The allowance as a percent of non-accrual loans, which equaled non-performing loans less accruing TDRs increased to 116.6% from 78.6% for the linked quarter.

In conjunction with the earnings release we announced our quarterly dividend of $0.15 per share to be paid April 1, which translates into a 3.6% yield based on yesterday's closing price and remains on the upper end compared to peer institutions.

During the quarter, we repurchased about 210,000 shares of common stock and have repurchased another 40,000 shares thus far in 2014. During 2013, we repurchased approximately 750,000 shares at an average price of $15.70. When combined with the regular and variable dividends paid during the year, we returned over 150% of full year earnings to shareholders during 2013.

Capital levels remained strong as we ended the quarter with a tangible common equity ratio of 9.2%, a Tier 1 ratio of 14.61% and a total capital ratio of 15.88%. Adjusting capital for the pending transactions, we conservatively estimate that we still have over $8 million of excess capital to support organic growth in further acquisitions.

In connection with the pending regulatory applications related to the acquisition, we will now be repurchasing additional shares during the first quarter. Capital return decisions are determined quarterly by the Board of Directors in the context of our overall capital management strategy and other considerations such as expected growth.

In summary, we feel very good about how we wrapped up the year. We were able to execute on strategic opportunities and into the two markets, we had identified is presenting strong prospects for future growth. We are also working hard to maintain a consistent level of operating revenue supported by strong organic loan growth while at the same time battling the headwinds to the declining covered loan book.

I'm proud of the efforts of our associates made throughout the year as we delivered on the announced cost savings earlier than expected. We’ve made significant progress in restructuring our expense base and are positioning the company to deliver solid earnings growth in future periods as the asset generation effort increasingly outweighs the impact of the declining covered loan portfolio and we capitalize on new market expansion activities.

Finally, we remain interested in pursuing further acquisition opportunities that need our strategic operational and financial criteria. For strong capital levels and manageable integration risk related to the pending deals, we have the capacity and the appetite to handle additional strategic opportunities as they arise.

With that, I’ll turn it over to Tony for further discussion on our financial performance.

Tony Stollings

Thank you, Claude. Our fourth quarter adjusted pre-tax, pre-provision earnings of $27.4 million which excludes certain items related to covered loan activity as well as other significant items, increased $1.1 million or 4% from the third quarter.

As shown on Slides 3 and 4 of the supplements, this was 1.75% of average assets on an annualized basis. Total interest income increased $300,000, or 0.5% compared to the linked quarter as higher interest income earned on investment securities more than offset lower interest income on total loans and higher amortization of the indemnification assets related to covered loans during the period.

The decline in interest income on loans was primarily the result of $83 million or 15% decline in the average balance of covered loan, partially offset by a 37 basis point increase in the yield earned on the covered portfolio compared to the linked quarter. Additionally, while the average balance of the FDIC indemnification asset declined approximately $4 million, the negative yield on the asset increased 182 basis points during the quarter, negatively impacting net interest income and net interest margin compared to the third quarter.

The impact from covered loan activity was partially offset by another solid quarter of loan production as we saw $45 million or 1.3% linked quarter increase in average uncovered loan balances, as well as modestly higher loan fees. Further, the yield earned on the uncovered loan portfolio increased two basis points during the quarter, excluding the impact of interest income related to loans that returned to accrual status.

We continue to feel the impact of the prolonged low interest rate environment that the yield earned on new loan originations during the fourth quarter was approximately 68 basis points lower than the average yield on loans that paid off during the period. This was still a slight improvement over what we saw in the third quarter.

Interest income from investment securities increased $1.1 million during the quarter as a result of $65 million increase in average balances compared to the linked quarter and an 18 basis point increase in the portfolio yield, primarily driven by stabilization in the premium amortization during the period. Total interest expense increased approximately $300,000 compared to the linked quarter as the cost of funds related to interest-bearing deposits increased four basis points during the period, primarily related to our deposit growth initiatives.

As we discussed last quarter, these initiatives are focused on growing core deposit relationships, managing our funding base, including extending the duration of the company’s liabilities where it makes sense. These deposit growth initiatives begin to gain traction during the quarter, as evidenced by the $67 million or 1.8% increase in average interest-bearing deposit and $57 million or 5.3% increase in average noninterest bearing deposit.

Further core deposits as a percentage of total deposits continue to increase now at 81% in the weighted average life of time deposits increased from 1.5 years to 1.9 years during the quarter. Net interest margin declined 1 basis point to 3.90% from 3.91% for the linked quarter, excluding approximately $600,000 of interest income related to loans that returned to accrual status during the period. Net interest margin declined approximately 5 basis points to 3.86 for the fourth quarter.

Consistent with recent periods, decline in the net interest margin is primarily a result of the balance and yield changes on covered loan and the indemnification assets discussed earlier. As we think about the net interest margin going into 2014, the margin will continue to be influenced by the quarterly re-estimation of expected cash flows on the covered loans and the indemnification asset as well as resolution of prepayment activity in that portfolio.

Further the covered portfolio continues to decline as a percentage of total earning assets at a much faster rate than any other asset on the balance sheet and at a higher yield than any available reinvestment opportunity. As a result of these variables, it is difficult to predict what the full year 2014 will look like.

We believe the adjusted mid-single digit decline observed here in the fourth quarter is a reasonable expectation for the first quarter of 2014. That’s about as far out as we’re comfortable discussing but we will continue to provide clarity on the dynamics of the margin, as we progress through the year.

Moving now to noninterest income, excluding reimbursements due from the FDIC, other covered loan activity and other items as noted in table 1 of the release, fourth quarter noninterest income of $14.9 million was slightly lower than the linked quarter. The decrease was primarily driven by modest decline in service charges on deposit accounts, net gains on sales of residential mortgages, partially offset by higher trust and wealth management fees.

Noninterest expenses for the fourth quarter, excluding certain FDIC and covered asset expenses, expenses associated with the implementation of our efficiency plan and other items as noted on table 2 of the release were $43.2 million as compared to $44.4 million in the third quarter. The decrease in noninterest expenses compared to the linked quarter was due primarily to lower salaries and employee benefits, occupancy costs, marketing and communications expenses during the quarter.

As Claude discussed earlier, we continue to be pleased with our performance with respect to expense management. Here we’re making solid progress in developing an efficient, scalable operating platform. The company recognized a $1.2 million income tax benefit for the fourth quarter compared to income tax expense of $7.6 million in the third quarter.

Income tax benefit in the fourth quarter was a result of favorable tax adjustments related to the completion of the 2012 state tax returns during the period as well as lower net income for the quarter, primarily related to the valuation adjustment on the indemnification assets. We estimate the effective tax rate in future periods to be approximately 34%.

Turning briefly to covered assets, let me first call your attention to our press release dated January 22nd, where we announced a $22.4 million pre-tax non-cash valuation adjustment to the company’s FDIC indemnification asset. This valuation adjustment was driven by a number of factors as outlined in the press release, but was primarily a result of lower actual and expected claims, higher reimbursements to the FDIC related to positive asset resolutions in recent periods. And the significantly shorter remaining life of the indemnification asset in comparison to the weighted average life of the related covered loans.

Consistent with this, the company recognized lower net credit costs on covered assets for the fourth quarter, as highlighted on page 8 of the supplement and a 58% decline in covered classified loan balances during 2013. Finally with respect to interest rate sensitivity, we expect to maintain a relatively neutral sensitivity position as of December 31st, and continue to evaluate strategies to proactively manage our balance sheet with a bias toward asset sensitivity.

I will now turn the call back over to Claude.

Claude Davis

Thanks, Tony. Denise, we are happy to open the call up for questions.

Question-and-Answer Session

Operator

Very good. (Operator Instructions) Our first question will come from the Scott Siefers of Sandler O'Neill. Please go ahead.

Scott Siefers - Sandler O'Neill

Good morning, guys.

Claude Davis

Hi, Scott.

Tony Stollings

Good morning, Scott.

Scott Siefers - Sandler O'Neill

So, I think the first question was on the cost side. I mean, Claude, you guys have obviously done a very nice job reducing the core cost base over the last year or more, and of course you’ve got the recent efficiency initiatives that should still contribute for this full year.

I’m just curious at a very top level if you are in sort of $42 million, $43 million core run rate as of the fourth quarter, is that a number you think you could still take down a bit, or do cost savings from here in out just sort of become awash against any natural increases you would have? How are you thinking about that dynamic?

Tony Stollings

Hey, Scott, this is Tony. Yeah. I mean, as we look at the third and fourth quarter here in ’13, we kind of look at that together. It’s probably somewhere in the middle, little lower than maybe $44 million a quarter. And as we enter the year, obviously we hope to -- we intend to continue to have that decline over 2014, so a little higher as we enter the year that when we exit. But on average probably a little under $44 million.

Claude Davis

And I think, Scott, related to the go forward. I don't have a specific answer for, can we get additional cost saves, or will any additional efficiencies offset just natural increases. I would tell you what we’ve tried to do over the last two years as we’ve been working on this is to really instill profits improvement discipline throughout the company. So we continue to look for opportunities for efficiencies and we certainly are not ready to announce additional initiatives at this point.

But we feel good that we’ve got a base and a capacity that can handle the additional growth initiatives and only have the incremental cost of the sales organizations and not need to add a lot of what I would call back office or support related costs. And then we will continue to look for additional improvements. But at this point I wouldn’t suggest that we’ll see additional saves until we get better clarity on that.

Scott Siefers - Sandler O'Neill

Okay. That sounds good. I appreciate that. And then, Tony, so you gave some color on the FDIC indemnification asset valuation adjustment. I'm wondering if you could just maybe explain how I guess the lower volatility is easy enough to seek in future quarters or the anticipation of it.

Can you maybe go through -- you have fees expenses in the provision all and I guess the margin as well? All have been hit by the merger-related issues in the last few years. Exactly, how will it work through with that having taken the valuation adjustment in the fourth quarter? So it reduces the volatility and then more importantly enhances the earnings statements we look forward.

Tony Stollings

Scott, I’m a little confused by your question. Are you referring to information in the release around the $0.05?

Scott Siefers - Sandler O'Neill

No, not necessarily. So you took the FDIC indemnification valuation adjustment. One thing that does is lowers the volatility in the earnings stream. And then when you guys announced it, you suggested that you have $0.02 of EPS pick up as well. How is that big of a EPS pick up manifest itself?

Tony Stollings

Well, first of all, when you think about the FDIC indemnification asset, it really comes off the balance sheet in two ways and it does have to come off. Claims that are received for amortization and once we determine that the credit was better, resolution was better, our outlook was better and it was not likely that we were going to be able to remove the asset from the balance sheet from a claims standpoint then we turned to the amortization.

Without getting into all the details and the analysis, the amortization rate that it would have taken over that relatively short period of time, talking about commercial here would have been so ridiculous that none of it would've made sense in relationship to what we were earning on the covered loans.

So it was at that that point that we went through the analysis and determined that the asset was impaired. So on a go-forward basis, you can see what that means just from a mathematical standpoint it’s a much lower balance with a more stabilized negative yield on the asset and that in and off itself, all things being equal is positive to 2014.

Claude Davis

And Scott, just to be clear, we started out at $78 million, we took the valuation adjustment to $78 million at a negative yield of $13 million, just the savings of $45 million asset having a negative yield of $13 million. That difference is a big part of that $0.05. The other part would be improved credit costs that we would expect on a go forward in that covered portfolio.

Scott Siefers - Sandler O'Neill

Yeah. Okay. That makes sense. Go ahead. I’m sorry

Claude Davis

Does that make sense?

Scott Siefers - Sandler O'Neill

Yeah, it does. I guess I was thinking exactly where is the offset because they are always kind of puts and takes, so if you have a less of an FDIC issue, where was the other one in and just I guess feel like credit costs is the main offset there?

Claude Davis

Yeah. It is between there and the margins.

Scott Siefers - Sandler O'Neill

Yeah. Okay. That's perfect. I appreciate it.

Claude Davis

You bet.

Operator

Our next question will come from Emlen Harmon of Jefferies. Please go ahead.

Emlen Harmon - Jefferies

Hey. Good morning, guys.

Claude Davis

Good morning.

Emlen Harmon - Jefferies

So, Tony, I heard your commentary about the reported margin obviously been bottled but kind of -- what are your expectations are for declines in mid-single digits? If we think about kind of a core margin side from the accretion, seems like you had, approaching kind of a point of stability there. Do you feel like that core margin can be stable from here even increasing a little bit, kind of how are you thinking about that?

Claude Davis

Well, the core portfolio or the core bank outside of the covered assets and all of that activity is performing pretty well. And we’ve seen it really fairly stable over the last couple of quarters. So, I wouldn’t expect that the decline in the margin or the compression in the margin is going to be largely driven by that. We do think that it’s actually seeing a slight contributor at the moment. So our volatility, our compression is really around the covered loans and everything else seems to be performing pretty well.

Emlen Harmon - Jefferies

Got you. And what’s -- kind of what’s your appetite for additional securities purchases ahead of these two deals you guys are closing?

Claude Davis

Those deals are -- I’ve framed this in the whole balance sheet management standpoint. But I think that regardless of the deals, we are probably about where we’re going to be on the investment portfolio. Those deals don’t take a significant amount of cash, so that’s not an issue at all. We don’t need to liquidate or rebalance or anything based on that. So investment portfolio absent some shifts -- significant shift one way or another in loan or deposit flows is probably about where it’s going to be.

Emlen Harmon - Jefferies

Got you. Thanks. And then just one more on the loan book, had a nice pick up in the core growth this quarter. Last quarter on the call you talked about how it’s installed in the pipeline and kind of fell into the fourth quarter from the third quarter. Could you give us a sense so just I guess maybe one, how big a component of the growth that was in the quarter. But then also just kind of how you're feeling about the pipeline at the end of the fourth quarter. I did hear commentary about kind of you feel good about the business environment builds, just be curious about the pipeline specifically.

Claude Davis

Sure. I know this is call out and I have this specific number of what the few big deals that kind of carried over to the fourth quarter. I tend to look at it more in the year in 10% or so growth. We feel good about them. We feel good about the mix of categories that is pretty well spread across our C&I categories of four C&I specialty franchise and then the bid in the residential, our CRE book is pretty flat for the year.

I would say going into ’14, we had a good December closing month, so the pipeline was down a bit. But we feel good about the pipeline where it’s at, certainly compared to past fourth quarters. And feel like, we’ve got some good momentum going into ’14. So, I guess, I would say I’m as optimistic about ’14, or more so than I was about going into ’13.

Emlen Harmon - Jefferies

Okay. Great. Thanks for taking the questions.

Claude Davis

You bet. Thanks.

Operator

(Operator Instructions) The next question will come from David Long of Raymond James. Please go ahead.

David Long - Raymond James

Good morning, guys.

Claude Davis

Hi, David.

Tony Stollings

Good morning, David.

David Long - Raymond James

What’s the hot airs in Fort Wayne? Obviously, there is some movement there in that marketplace with the acquisition. But what is it that you guys really brought to the table there in that team and really got them to come into First Financial?

Claude Davis

Yeah, David, this is Claude. I would talk about not just the Fort Wayne team because we’re always recruiting kind of throughout the footprints. And I what we tried to present is our operating model and that we’ve got a pretty diverse product set that we can bring to people that includes the specialty line, that includes much larger loan limits than as an example, they may have had in their previous bank.

As well as we bring a pretty high degree of local autonomy and control. So we are pretty responsive in our decision- making. So it’s those things that really matter on the commercial side to those commercial bankers and their ability to do business. But that’s through not just in Fort Wayne, I think beyond Fort Wayne.

I think on the residential mortgage side, we’ve spent a lot of time and money really investing in that infrastructure since we’ve reentered the business in 2011 and that combination of good infrastructure, good systems.

As well as, we really try to keep a lot of the processing underwriting local that we feel like is a real advantage to those originators and something that they find attractive. So it’s a combination of all those that we think allow us to recruit pretty effectively.

David Long - Raymond James

Okay. And then as they ramp-up this year. How big of a loan portfolio can happen in Fort Wayne by the end of 2014?

Claude Davis

Obviously, we do business cases and business models on every market as we kind of go into it. And it relates to the commercial side. We have five people there originating credit and we will just have to see and we are not -- we don’t typically disclose the business cases, we put together. But five really experienced talented individuals that I think will do a great job for us.

On the residential side, we primarily follow and originate and sell model. We do portfolio some and so that will be more of the function of how is the, what’s the mortgage market like and how they able to ramp-up quickly.

So we’re very optimistic about it, David, but I guess, I’d be uncomfortable kind of suggesting kind of what we think we can do. But we’ll provide updates as we progress throughout the year just so you have some visibility into it.

David Long - Raymond James

Okay. Got it. And then lastly, a couple acquisitions announced in the quarter in Columbus. What is your appetite to announce additional deals at this point? You need to get those close integrated or you feel uncomfortable going out and if you find something that’s strategically and/or financially attractive, can you go ahead and act on that at this point?

Claude Davis

Yeah. We feel, we certainly want to give both First Bexley and Insight our full attention and make sure that those are integrated well and effectively, and we think, we have all the right teams in place to do that.

But, fortunately, each only have one location total assets of the two are approximately $500 million. So we feel that from a certainly financial and capital capacity, we have plenty of capacity to continue even prior to those deals being completed.

As well as we have the operational capacity certainly based on our past history of where there is an ’09 doing the two FDIC deals within 45 days of one another or the two branch deals in ’11 where we converted 40 plus branches within 60 days of one another. We feel pretty good about our ability, if we have another opportunity to progress on that and not necessarily need to wait until First Bexley and Insight are integrated.

David Long - Raymond James

Thank you, Claude. I appreciate it.

Claude Davis

You bet.

Operator

(Operator Instructions) The next question will come from Chris McGratty of KBW. Please go ahead.

John Barber - KBW

Good morning, guys. It’s John Barber filling in for Chris.

Claude Davis

Hey, John. Good morning.

John Barber - KBW

You had pretty solid organic loan growth for a number of quarters now. You also have the two deals pending for ’14. Could you talk about your target loan mix?

Claude Davis

Yeah. What we really try to do and we included a piece in the supplement, I think it's on Page 7 in the supplement. We’ve started to disclose our loan mix and when we look at it from a risk management perspective, we obviously look at pretty broad ranges. And what I would tell you is, we like the mix we have and we'd like to see all categories continue to grow at nice rates. If we see some shift in mix on the margins that wouldn't concern us at all, our franchise portfolio in the past has been much larger than it currently is. As an example, I think the specialty portfolios are still in the early stages of growth and maturities. So we could see them being much larger percentages of the portfolio.

And C&I is such a broad bucket that I don't see a natural sealing, if you will on that. So all those are categories that we'd like to see continue to grow and ICRE actually continue to decline as a percentage of the overall portfolio and that's not necessarily by design and we were comfortable with where it was previously. So all that's a way of saying that we're not worried about any of our concentration percentages at this point. We try to watch them all. We try to be sensitive of what the economic factors are, but I think this is a pretty good reflection of how we’d like to see the portfolio grow.

John Barber - KBW

Thanks Claude. And then the other question I had was just related to the efficiency ratio. What do you think, you can get that by the end of 2015 and what are going to be the major drivers? Thanks.

Claude Davis

We don't -- we haven't kind of published targets other than our long-term targets that in a normal environment we'd like to see that ratio be in the 55% to 60% range. That continues to be our long-term targets. In the near-term, I think it's going to be a function of margin change and what happens to the rate environment. We're still at a very historically low level of rate as we all know. And the continued improvement that we want to make in terms of our expense based and efficiency initiative. So we continue to work on it. We continue to have that as our long-term target and we’ve not given up on that.

Tony Stollings

I also add. It's not just an expense equation there. But we do fight some of the headwinds around the margin. We haven't forgotten about the non-interest income side of that equation and continue to push forward initiatives around that area as well. So not just an expense side.

John Barber - KBW

Great. Thanks.

Operator

Our next question will come from Taylor Brodarick of Guggenheim Securities. Please go ahead.

Taylor Brodarick - Guggenheim Securities

Great. Thank you. First question would be as you look at future efficiency initiative. Is there sort of a minimum for deposits for branch that you've told to your branch leader or internally have discussed? Is it $20 million or $30 million?

Claude Davis

Well, we don't necessarily have a “minimum.” We certainly like to see it as those levels are higher, but it also depends a lot on mix. So if you have a branch that has a lot of noninterest bearing deposits that have good fee income associated with it than certainly that's terrific. The point I would tell you though is changing in the consumer banking business is -- I just feel it’s less about deposits per branch and more about looking at each of your markets, the network and your overall channels.

So it's mobile, it's online, call center, banking center. And then we're trying to move to is what's the overall profitability of the consumer banking in that market based on all those related thoughts and opportunities and then well rightsize the branches either by increasing branch size or branch numbers or decreasing them by market depending on that profitability.

Taylor Brodarick - Guggenheim Securities

Great. Okay. And one more question on the Columbus field. Is there anything material -- like materially different between the two banks that they each bring or is it more of a function of we like the market and it's a way to just get more scale by buying two as oppose to one?

Claude Davis

Well, first, we do like the market a lot. Columbus is a great metropolitan area, drilling diverse and we think we can bring a lot of attractive products and capabilities to the market. In terms of the comparison of the two, I won’t get too much into that, I wouldn't be appropriate. But just to say that each has a kind of unique niche in those markets, each are very dedicated to high levels of client service, which we value and appreciate and things consistent with our model and both have -- even though they're still relatively small or both very profitable. So that's really what attracted us to the market. They also have great people and great board that really know that market extremely well.

Taylor Brodarick - Guggenheim Securities

Great. Thank you. And last question, apologies if I missed it. Not going to repurchase anymore share this quarter and do you have an outstanding authorization?

Claude Davis

We are not going to be purchasing any additional shares this quarter and we do have an outstand authorization.

Tony Stollings

Yeah, the same one from late in '12, I believe, 5 million shares.

Taylor Brodarick - Guggenheim Securities

Okay, great. Thank you. That's it for me. I appreciate it.

Claude Davis

Great. Thanks.

Tony Stollings

Thanks.

Operator

And ladies and gentlemen that will conclude our question-and-answer session, I would like to turn the conference back over to Mr. Claude Davis for his closing remarks.

Claude Davis

Great. Thanks Denise. And yeah, I would just say thank you all again for participating and your interest in First Financial. Thank you.

Operator

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

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First Financial (FFBC): Q4 EPS of $0.07 misses by $0.21.(PR)