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First Financial Bancorp (NASDAQ:FFBC)

Q1 2014 Earnings Conference Call

April 30, 2013 08:30 AM ET

Executives

Ken Lovik - VP, IR and Corporate Development

Claude Davis - President and CEO

Tony Stollings - EVP and CFO

Analyst

Jon Arfstrom - RBC Capital Markets

Scott Siefers - Sandler O'Neill

Chris McGratty - KBW

David Long - Raymond James

Emlen Harmon - Jefferies

John Artstrom - RBC

Operator

Good morning. And welcome to the First Financial Bancorp First Quarter 2014 Earnings Conference Call and Webcast. All participants will be in listen-only mode. (Operator Instructions). After today’s presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded.

I would now like to turn the conference over to Ken Lovik, Senior Vice President, Investor Relations and Corporate Development. Please go ahead.

Ken Lovik

Thank you, Nicky. Good morning, everyone. And thank you for joining us on today's conference call to discuss First Financial Bancorp’s first quarter 2014 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 first quarter 2014 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 March 31, 2014, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call.

I will now turn it over to Claude Davis.

Claude Davis

Thanks, Ken, and thanks everyone for joining the call today. For the quarter we reported net income of $15.1 million or $0.26 per share. Our results for the quarter were impacted by non-operating items related to the execution of our efficiency initiatives, acquisition related expenses and legal settlement expenses which reduced reported earnings per share by $0.02. On an adjusted basis return on assets was 1.02% and return on tangible common equity was 11.13%. Additionally as Tony will touch on his comments, our results were impacted by seasonal and weather related events, effecting certain non-interest income and expense items.

As many of you have probably seen, we announced our third transaction in the Columbus, Ohio market last night with the signing of the definitive agreement to acquire Guernsey Bancorp the parent company of the Guernsey Bank. Guernsey is a $123 million asset institution with 74.5 million in loans and 100.5 million in deposits. It has three locations in the market including its headquarters in Worthington and banking centers in Upper Arlington and Westerville, all extremely attractive communities in the metropolitan Columbus areas. Bob Patrella the CEO and sole shareholder and his team have built a successful franchise based on providing an exceptional level of client service, which we hope to enhance with our expanded product set and resources.

With its strong consumer banking business, Guernsey is a perfect strategic complement to the commercial lending and asset generation capabilities of The First Bexley Bank and Insight Bank. Taken together these acquisitions positions First Financial as one of the larger community banks serving the dynamic Columbus and Central Ohio area and provides a strong platform to capitalize in the potential of one of the mid-west higher growth markets.

We are also very pleased with our recent expansion in the Fort Wayne, our new commercial and mortgage teams which came onboard at the beginning of the year, are making excellent progress establishing the First Financial brand in this important Indiana market. The commercial team leveraging the wider product set and larger balance sheet has been active as originations and commitments have exceeded our forecast thus far. And the mortgage team after dealing with the effects of a long winter on top of industry wide volume decline is beginning to build a strong solid pipeline and is on track with our expectations heading into second quarter.

From an organic growth perspective, the momentum built in the fourth quarter continued as production remains strong in uncovered loan growth outpaced the decline in covered loan balances by over $60 million during the quarter. Period end uncovered loan balances increased for the eighth consecutive quarter and were up almost 109 million or 13% on an annualized basis compared to year-end.

Leading the way with strong performance in C&I and owner occupied CRE lending, franchise finance as well as increased originations from our investment CRE team. While the pace of growth in our local economies remains moderate, business confidence among our middle market and small business clients continues to rise. With a comprehensive suite of credit products, our relationship managers are actively calling on clients with new prospects to produce increased lending opportunities.

At the end of March, our commercial pipeline was up over 17% compared to year-end and we remain optimistic regarding our ability to generate solid organic growth.

Asset quality continued to improve as well during the quarter. Net charge-offs continued to trend lower falling to 23 basis points of average loan balances for the quarter and contributing to a decline to the provision for loan losses.

Total non-performing assets decreased 11 million or 15% during the quarter, driven primarily by a decline in OREO balances. The balance in non-performing assets declined to its lowest levels since the second quarter of 2009 equaling 95 basis points of total assets. Excluding accruing TDRs and total NPAs the ratio dropped to 74 basis points.

Additionally our allowance coverage ratio on non-accrual loans improved to approximately 122% from a 117% for the prior quarter.

In conjunction with the earnings release, we also announced our quarterly dividend to $0.15 per share to be paid July 1, which translates into a 3.7% yield based on yesterday’s closing price and remains on the upper end compared to (peer) [ph] institutions.

During the quarter, we repurchased 40,000 shares of common stock at an average price of $17.32. As we mentioned on last quarter’s call, we expended additional repurchases during the first quarter in connection with the pinning regulatory applications related to the acquisitions.

In light of our announced acquisition of Guernsey which includes cash consideration of 13.5 million and no stock to be issued and a more active M&A environment overall, we will be out of the market again in the second quarter.

As we have mentioned in the past, capital return decisions are determined quarterly by the Board of Directors in a context of our overall capital management strategies, including considerations related to organic and acquisition related growth initiatives.

Capital levels continue to remain strong, as tangible book value per share increased $0.14 to $10.24 per share and we ended the quarter with a tangible comp equity ratio of 9.23, a Tier I ratio of 14.42 and a total capital ratio of 15.67%.

Adjusting for the pending transactions and the estimated impact of Basel III, we still have sufficient capitals for further organic and acquisitions. We are through the bulk of integration work related to First Bexley and Insight with the closing for both still on track for the second quarter and anticipate that our activities related to Guernsey will be manageable from a time and resource perspective.

We remain interested in exploring further strategic opportunities and have the capacity and appetite to manage additional acquisition that lead our strategic operational and financial criteria.

To wrap up my comments, excluding the impact of seasonal and weather related items, we felt good about our operating performance for the quarter and believe we are well positioned to carry our growth momentum into the second quarter and beyond.

We capitalize on other opportunities to strengthen our entry to the high growth Columbus market, further enhancing our ability to produce sustainable loan deposit and earnings growth, once the acquisitions are closed [indiscernible] First Financial.

And finally, our strong capital levels (bill) [ph] out sufficient room to pursue additional strategic opportunity as economic and regulatory factors continue to place increasing burdens on smaller institution. We believe that our community banking model emphasizing client service and local decision making combined with the resources, product set and capital base of a larger bank offer an excellent alternative for smaller institutions looking to explore a partnership that benefits their communities, clients, employees and shareholders.

I’ll now turn the call over to Tony for further discussion on our financial performance.

Tony Stollings

Thank you, Claude. Our first quarter adjusted pre-tax, pre-provision earnings of $23.6 million which excludes certain items related to covered loan activity, as well as other significant items, increased $3.8 million or 14% from the fourth quarter, primarily due to the impact from typical first quarter seasonality, lower mortgage gain and the unusually harsh weather conditions experienced during the first quarter.

As shown on Slides 3 and 4 of the supplement, pre-tax, pre-provision earnings declined to 1.50% of average assets on an annualized basis from 1.75% in the fourth quarter. Excluding the seasonal and the weather related items, our operating performance remains strong and most consistent with the prior quarter.

Total interest income increased $900,000, or 1.4% compared to the linked quarter as lower interest income on loans was partially offset by higher interest income from investment securities and the lower amortization of the FDIC indemnification assets related to covered loans.

The first quarter decline in interest income on loans is primarily the result of $56 million or 11% decline in the average balance of covered loans as well as the decline in loan prepayment fees. The impact of these declines was partially offset by another strong quarter of loan production, as we saw an 85 million or 2.5% increase in the average balance of uncovered loans during the period.

Despite strong loan growth in recent periods, interest income continues to be impacted by the prolonged low interest rate environment as the yield earned on the uncovered loan portfolio declined 11 basis points during the first quarter excluding the fourth quarter 2013 impact related to loans that return to accrual status.

Further evidenced in this challenging environment, the average yield earned on new loan origination was approximately a 100 basis points lower, than the average yield on loans that paid off during the first quarter, which is a little wider than we’ve seen in recent quarters.

Interest income from investment securities however, increased 1.3 million or 13% during the quarter helping to offset the decline in interest income on loans. Higher income from investment securities was a result of $153 million increase in average balances compared to the linked quarter and a 14 basis point increase in the portfolio yield driven by higher investment rate and continue stabilization in premium amortization during the period.

We remain sensitive to the duration of the overall portfolio and continue to manage it through approximately four years in length. Total interest expense increased approximately $100,000 compared to the linked quarter as the cost of funds related to interest bearing deposits primarily time deposits increased 1 basis points during the period, company remained focused on growing core deposit relationships in managing our funding base.

Net interest margin declined 8 basis points to 3.82% from 3.90% for the linked quarter. However excluding approximately $600,000 of interest income related to loans that return into accrual status during the fourth quarter of 2013 net interest margin declined approximately 4 basis points during the first quarter. The margin will continue to be influenced by the quarterly re-estimation of estimated expected cash flows on covered loans and the indemnification assets as well as resolution of prepayment activity in that portfolio. As was previously mentioned, the negative impact from the prolonged low interest rate environment on the uncovered portfolio continues as higher yielding loans pay off and are replaced by lower yielding new origination. Even though the margin was a little stronger than we anticipated this quarter, it remains difficult to predict what the balance of 2014 will look like. We continue to believe however that the adjusted mid-single digit decline observed this quarter remains a reasonable expectation for the second quarter of 2014.

Moving now to non-interest income, excluding reimbursement due from the FDIC, other covered loan activity and other items as noted in table one of the earnings release, non-interest income declined 1.2 million from the linked quarter to 13.6 million for the first quarter 2014. The decrease was driven by seasonal declines and services charges on deposit accounts and bank card income as well as lower net gains on sales of residential mortgages, rental income from ORE properties and valuation in related adjustments to the client derivatives portfolio. These declines were partially offset by higher trust and wealth management fees. The seasonal decline we typically see in certain fee income items is even more evident in the first quarter as our transaction volumes were down more than usual due to the harsh weather experienced across our footprint. While bank card volumes dip mid quarter, we did see some lift in both volume and transaction size in March which should bode well for the second quarter.

Non-interest expenses for the first quarter excluding certain FDIC and covered asset expenses, expenses associated with the implementation of our efficiency plan and other items as noted in table two of the earnings release totaled $44.8 million compared to $43.2 million in the fourth quarter. The increase in non-interest expenses compared to the linked quarter was due primarily to increases in salaries and employee benefit cost typically experienced early in the year and higher weather related occupancy cost partially offset by lower state intangible pack, marketing and other non-interest expenses during the period.

Despite the seasonal and weather related expense fluctuations, we continue to be pleased with our expense management efforts and remain focused on an efficient, scalable operating platform. The company recognized income tax expense of 7.1 million in the first quarter as compared to 1.2 million income tax benefit in the fourth quarter of 2013. The income tax benefit in the fourth quarter was the result of lower net income primarily related to the valuation adjustment on the indemnification asset as well as favorable tax adjustments related to the completion of the 2012 state tax returns during the period. Company also recognized $0.4 million tax benefit during the first quarter associated with a favorable state tax change enacted during the period. While the potential for unanticipated changes remain we expect the overall effective tax rate for 2014 to be approximately 32% to 34%.

Turning briefly to covered assets, I’ll highlight two areas; first the company again recognized income from net credit cost, uncovered assets in the first quarter as highlighted on page eight of the supplement. Second, the company realized a 43% decline in the balance of classified covered loans during the quarter and the balance stands at approximately 87 million at March 31st. These areas reflect the company’s continued efforts to manage problem covered assets to positive resolutions as we approach the third quarter exploration of commercial loss year coverage and the mid-point of single payment loss coverage.

Finally with respect to interest rate sensitivity, we expect to maintain a relatively neutral sensitivity position as of March 31st virtually unchanged from the end of the year and continue to evaluate strategies to proactively manage our balance sheet with a bias towards asset sensitivity.

With that I’ll turn the call back over to Claude.

Claude Davis

Great, thanks Tony. Nicky I think we’re ready to open the call up for questions.

Question-and-Answer Session

Operator

Thank you very much. We will now begin the question and answer session. (Operator Instructions). Our first question comes from Jon Arfstrom with RBC. Please go ahead.

Jon Arfstrom - RBC Capital Markets

Couple of questions here, just Claude bigger picture on the business confidence and also on the commercial growth it seems like its strong and getting stronger. Anything driving that or anything of note?

Claude Davis

I don’t know that if there is anything of note in terms of one or two things Jon, it just seems like -- I think a couple of things, one is the activity is a bit better than we’ve seen just broader -- in broader market perspective. I think clients are more confident to make investments where take it back a year or so ago where that was one of our concerns is just the level of conservatism. So I think that’s one issue. I think the second is some of the investments we’ve made over the last two to three years in lending resources, credit product, expansion of product, whether that be in ABL equipment finance, the franchise finance. All those are beginning to pay off for us. So I think it’s a combination of market, client confidence and our investments.

Jon Arfstrom - RBC Capital Markets

How about the construction activity? Anything of note there?

Claude Davis

We are seeing some renewed construction, not so much; we’re not doing too much in the residential construction area other than in our first mortgage group, where we have a nice construction product for our individual clients if they are going to build a new home. And we’re seeing a bit of a pickup there. I would say it’s early and small, we’re seeing some nice construction in the multi-family space which is I think pretty consistent across the country. We have several big clients across our footprint in that area.

And I would say that then you got some -- we have also some medical, there is some medical facility construction going on mainly in smaller clinic type facilities that we’ve also been able to participate in. And then the final one that I think has really help drive some growth are some I would say some specific retailer built to suit models that we’ve been financing which have been a nice add as well. So there is some construction pick up but it’s in specific categories.

Jon Arfstrom - RBC Capital Markets

And then maybe Tony, either you or Claude but you talked a little bit about the margin erosion in the pricing pressure and I think we all understand that. But we’re getting to the point where you have some good organic loan growth and the covered assets in the runoff portfolio just keep getting smaller and smaller. You’re getting closer on net interest income growth but just curious how you think about your ability to grow net interest income potentially later in the year.

Claude Davis

Yes, Jon I’ll start, this is Claude, and then I’ll let Tony pick up on that. We do feel like with the organic growth that we’re seeing and as I mentioned, the pipeline is up 17% from year-end with (back fully) [ph] Insight and now Guernsey coming on Board this year and they continue to experience very solid loan growth and in their market we feel good about that ability to grow the balance sheet, grow the earning asset base, even though at different rates than what’s running of. I think if you looked at this quarter and you factored in day count compared to fourth quarter, we might have actually seen some net interest income grow at their marginal growth in that category.

So we feel good about the trends there obviously interest rate environment is going to play a big impact.

Tony Stollings

Yes, there is a couple of things as Claude said the interest rate environment even though we have very solid loan volume in the prolonged interest rate environment, there is just no way you can overcome that in terms of replacing, paying, eroding assets with new assets. As far as the covered loans, you are right it is becoming a much smaller piece of our story, and it is very much a volume driven issue there. I mean the overall when you take the indemnification asset into consideration, the overall return on those assets doesn’t change that much, it’s the volume piece that really drives it.

So when we look at the quarter, overall net interest income only down about 900,000 still solid loan growth, covered loan portfolio performing well, we like the position we’re in and are much more focused on net interest income as we are -- than we’re the actual net interest margin percentage.

Operator

The next question comes from Scott Siefers with Sandler O'Neill. Please go ahead.

Scott Siefers - Sandler O'Neill

Tony I guess I want to ask I think Jon’s question a little different way. So you mentioned the slightly widening gap between loans coming on versus those they are rolling off. What makes you guys a little unique is of course the covered loan portfolio running off. So do you have a sense for where new loan yields are or where in the first quarter versus say that the fourth quarter, just trying to get a perspective for how intense the pricing pressure is and how much is simply due to the run-off of the covered portfolio? I think my sense is if that is more of the later but would be curious to hear your thoughts there?

Tony Stollings

Yes, it’s a little bit of both. We have talked in recent quarters about that spread, I’d say some quarters were a little better at managing it than we are others. This particular quarter we saw a little bit of a widening there, a little on the origination side but mostly on the pay-off side.

Claude Davis

What comes into play there Scott, this is Claude, is in any one quarter if you certain loans that pay off, you could be getting a fixed rate loan paying off one quarter, a variable rate loan paying off the next quarter and those rate differentials can be significant. Same is true on the origination side. John asked a question about construction, we’re seeing some construction pick up, those are typically variable rates. So it also depends on the mix of short term versus long term. I would tell you I think in just in general in terms of what’s being originated in terms of the rate, I am not sure we’ve seen a substantial tightening of spread which is what we think about it. So I mean it is really on any one quarter it’s a mix determined spread.

Scott Siefers - Sandler O'Neill

Okay, that’s helpful color and I appreciate it. And then either Claude or Tony, just so you could chat about the -- just what you’re seeing on the mortgage side for a second, (I guess you guys) [ph] a little unique that you’ve got sort of that newer team out of Fort Wayne, but just curious there have been some pretty mixed messages on the strength of the spring selling season. I know it in your guys geography in particular, you’ve got that the increment weather issue which was relatively more of a factor. But just would be curious what you’re seeing on actual activity inventory levels et cetera?

Claude Davis

Sure. The first 2.5 months were pretty brutal to put it kindly, because what we’ve been doing Scott, your point is not just the Fort Wayne team, we’ve really been growing in the last year and half, two years, our MLO base in multiple markets, we’ve got a very nice team coming on board in Columbus Ohio both with Insight and First Bexley as well, so that’s really a growing business for us from a sales staff perspective.

We did see the pipelines increase a fair amount late in March and into April and so we feel good about that in terms of the increase but it was off of a very low base in January and February. So my own opinion is that it’s still a little bit early to say whether we’re going to see a substantial pickup in 2Q although it will be a pick up just because of how bad the first 2.5 months were. Now Tony if you could anything there.

Tony Stollings

Yes I mean our overall volume Scott was not -- didn’t decline too much maybe 10%, we put a little more on the balance sheet this quarter than we did originate for sale, so that impacted some of the gain numbers, but it’s been a little bit of -- it's been a steady decline since the second and third quarter of last year but our drop off from the fourth quarter through the first quarter was really not that significant.

Scott Siefers - Sandler O'Neill

Okay, all right that’s great. I appreciate it and then just the final question is on the M&A side. So obviously the last few months have been a little more active but in the aggregate even though you’ve got three sort of open items now still very small, so Claude just would be curious to hear your thoughts on if -- is there any governor for sort of number of things going on at the same time even if the size is small or I guess just judging by what you guys have done in the past few years, you certainly seem to have a capacity that handle a few things at a time without a lot of problem. So would be just curious to hear your thoughts about a lot of little things and then maybe a bigger picture question sort of how much extra capital do you guys feel like you have at this point given the regulatory items what you might see on the horizon et cetera and sort of how big would you be willing to look if the right opportunity came along?

Claude Davis

Sure, yes, a few questions there Scott and I'll -- if I don’t get them all, remind me. First one I think on our capacity, you’re right, I think in total when all three deals close and with their current growth, I would guess would be around 700 million in the Columbus market and so taken together, that’s a very manageable size and deal for us both from a resource and capital perspective it’s five locations. So we feel very good about our ability to integrate all three of the Columbus Ohio deals.

Yet I would tell you and I think what our operations staff would tell you is that it is still more difficult to integrate three deals than one deal because there is a lot of the work that has to get done that it doesn’t matter whether the banks are 100 million or 1 billion, it’s the same amount of work. So we’re very sensitive to our resource constrain issue.

One of the reasons why we feel good and I commented in my script about our ability to look at additional deals now, is that a lot of the heavy lifting on the Insight and First Bexley deals is substantially complete, not complete, obviously it’s not closed, not integrated yet, but a lot of the planning, product mapping, data mapping has been done and it’s ready to go.

So with those two we feel like we’re substantially further along and with Guernsey being on the smaller into the three, we feel good about our capability there as well. So to the extent, another opportunity comes along tomorrow, just because the way the calendar and the timing would work, our ability to execute that deal and then plan the integration in the context of the other three, I feel very good about.

And as you said, even if you go back to '09 when we did the peoples and [indiscernible] deals within a 45 day window, we have the capacity with our teams to integrate multiple things at one time. In terms of financial capacity, we articulated our capital and our targets if you will under Basel III and we have -- we think substantial room above those, because there’s a lot of moving parts related to the three deals, certainly we view our excess capital as somewhere between 50 and 100 million, we haven't calculated or haven’t disclosed the specific and it depends on their growth between now (and close) [ph] in our growth in earnings between now (and close) [ph].

So all that said, we feel very good about our capacity and if the right strategic deal came along, we think we’ve got the capacity to look at it. As it relates to size of deal, we’ve not really put a kind of an upper limit on that if you will, certainly its -- if you’re going to spend similar resources, it’s always easier to do that on the bigger, the target because you’re spreading it across a larger asset base, but we’ve tried not to focus on that, we just try to focus on the market in a strategic opportunity. And does it give us a platform for growth, that’s really the other part where we're focused is, we feel like the Columbus Ohio entry, it’s important as it relates to the 700 million of assets but it’s more important is the platform that it gives us to grow the Columbus Ohio market. So I don’t -- does that cover your kind of questions, because I wasn’t sure.

Scott Siefers - Sandler O'Neill

I think you got all half dozen of them. So that was good. No, I appreciate all the color, so that does it for me. So thanks again.

Operator

Thank you. And the next question comes from Chris McGratty with KBW. Please go ahead.

Chris McGratty - KBW

Claude or Tony, I want to ask the margin one more way. Given the color about near term, I look back in your margin (pre-Irwin) was call it 370, 375, obviously a lot has changed since then, but is that kind of where you guys feel you may be going until we ultimately drop? Is that reasonably?

Tony Stollings

You know it’s really difficult to say, I think as we try and look out over the next 9, 12, 15 months, I guess I can say that kind of feels right but it’s really difficult to say it depends on really, where rates go and how long we are kind of caught in this funk. But, I think that we probably see the biggest [indiscernible] that we’re going to see.

Chris McGratty - KBW

On the new markets maybe an update on Fort Wayne, any new wins there in terms of market share and maybe any incremental investments you guys may need to make?

Tony Stollings

Certainly, yes, we're really excited about Fort Wayne as a market which we have been for some time and now with the teams we have there, we’re even more excited and I would say the initial investment we’re going to be making there, Chris in addition to what we've already done is we're in the process of searching for a new hub for the Fort Wayne market, a permanent downtown home, we will certainly look at additional retail locations in that market over the next, probably couple of years. And there will be staff that go along with that. And then we’d like to certainly build out some of the asset or wealth management. Our product lines in the market as we get the opportunity to do so. So we'll continue to invest in Fort Wayne. And in terms of wins in market share I would just reiterate what I mentioned in the script and that is that thus far -- and it's very early but the growth thus far, especially on the commercial side has been in excess of our original forecast. Now we don’t disclose the forecast and we don’t disclose by market growth but I would just tell you that in terms of how we’ve thought about that market and our expectations thus far they are exceeding them.

Chris McGratty - KBW

That’s fair. Great. Thank you. Just last one, Tony, maybe I missed it on the small transaction. Did you disclose the intangibles in the CDI and (emerging) [ph] charges, if so could pull on it?

Tony Stollings

Yes, we didn’t get that kind of granularity on this, we did provide the potential book value dilution in about $0.12 in the earn back period, the rest is, we really don’t get into the model assumptions and pricing decisions and those things.

Operator

Thank you. (Operator Instructions) The next question comes from David Long with Raymond James. Please go ahead.

David Long - Raymond James

Thanks for giving the update on the pipeline. It sounds like the commercial pipeline is going pretty nicely, but if you look back over the last year or so, looking at that pipeline, have you noticed any changes in the closure rate those loans that were in the pipeline that have been closed say within three months?

Claude Davis

Honestly, I don’t believe so David and our commercial team did not mention anything to me related to kind of fallout rates, kind of increasing or declining, I don’t know Tony or Kenneth either one of you…

Tony Stollings

No, I’ve not heard that as being any kind of an impediment to our growth.

Claude Davis

And certainly we’ve seen a correlation between the build of the pipeline in our growth rates which lead me to believe, no, but to be honest I have not looked specifically at fallout rates to that question.

David Long - Raymond James

Okay. And then second question I had. You mentioned it a couple of times the Columbus market being particularly strong in the Midwest and just wanted to see if you can maybe provide a little bit more color, why do you think the Columbus market is particularly strong. And are there any specific metrics that you’re directly thinking about?

Claude Davis

Well want to just size the growth rates that are projected for the market compared to other Midwest growth markets and I don’t have the deck in front of me that we talk about it at first quarter call where we had some of the comparative growth statistics, David. But that was one and Tony and Ken look and see if they can find that really quickly. The second though is just the quality of the market in terms of our target client base and that target client base obviously both being consumers which its nearly a kind of 2 million person MFA, the diverse economy in terms of not only the large number of Fortune 1000 Companies of which there are about 15 in that market.

But a substantial number what we call our small and middle market business target client base. We think it’s particularly strong in the Columbus market. And then third is the stability of that market with the existence of the state capital, Ohio State University, the regional health center that’s in Columbus, all of those just give us a strong confidence in that the quality of that economy and the growth rate for us. And what we've been trying to position ourselves to be David, both, we’ve done it in Cincinnati, we believe, we’re trying to do this in Indianapolis, Portland, Columbus just to be the largest community bank alternative to the superregional banks that we can offer a very similar product set especially to that commercial client base where we can offer everything from capital markets alternatives to ABL equipment finance, traditional senior debt, treasury management capability. And if we can get enough scale on those markets to be that community bank alternative, we think it provides us a better than market growth rate in a good economy such as Columbus.

Tony Stollings

I’ll just add to that that while we were certainly we were initially attracted to the market, something that we didn’t fully appreciate until we got up there was the opportunity to build that scalable platform with some of the smaller banks that were there that we’re feeling constrained that really we’re looking to accomplish a rollup type of strategy if you will, that was something that as we spent more time in that market we begin to realize and see as an opportunity. So for all the points to coordinate on, on the economic strengths of the area once we were there and saw the opportunity to achieve the scale that we like and made it even more attractive.

Operator

Thank you. The next question comes from Emlen Harmon with Jefferies. Please go ahead

Emlen Harmon - Jefferies

On Columbus and the acquisitions, I’ll say the geography had a personally even added through three different deals, do you add anything unique in terms of kind of businesses or expertise from those three organizations and kind of how do they complement one another in that regard?

Claude Davis

Sure, they are all three slightly different and we feel very good about take as an example, the commercial teams that First Bexley and Insight kind of bring to us once those deals are closed, is they bring a group of commercial talent to us that is not typical of the -- I call it a smaller community bank. Many of these individuals have worked in larger banks in their career. They can do both small business as well as small and middle market clients which is why we’ve always talked about that ability to have a platform for growth, that to Tony’s going to point just a second ago we were pleased with our ability to create that platform for growth with two or three smaller institutions.

The Bexley Bank also had very strong kind of private banking type model, we have a lot of very good solid individual clients that we think will be wonderful for us not only as clients but as influence makers for us in the Columbus market, and then the addition of Guernsey Bank which is I’d say a bit more of a retail oriented institution, been around much longer, a much more core deposit base, each of them bring a complement to the other that we think we can meld together and make a very strong First Financial brand.

Emlen Harmon - Jefferies

Got it, okay thanks, and there is one other quick one on Guernsey, [indiscernible] like you won’t get the kind of full accretion until 2016 which is a little bit on the longer side, maybe we are just getting later in the year but I mean is there anything unique there that’s going to take you kind of longer to get the full effect from the deal or is that really just timing?

Tony Stollings

No, it’s just a transaction that we’re projecting will happen later in the year and between the field costs and our ability to achieve all the cost saves just going to stretch over into ’15, so ’16 will be the first really full clean year.

Operator

Thank you, the next question is a follow-up from John Artstrom with RBC, please go ahead.

John Artstrom - RBC

Hey thanks, Tony, I don’t know if you’ve -- I’m assuming you’ve done the math on weather, but any estimate for the cost maybe revenue and expense, together.

Claude Davis

On weather did you say?

John Artstrom - RBC

Yes.

Tony Stollings

Yes, I mean we’ve done some -- what we think is some conservative math around that and you know on the income side its maybe $0.5 million to $750,000 on the expense side, probably closer to $1 million, so we look at our performance for the quarter that’s kind of the way we talked about internally.

John Artstrom - RBC

Okay, so it’s meaningful. Okay, and then I guess the other question. You mentioned the seasonal bounce that you expect in fees that March seems to be back on track, anything else going on there or we should just expect the typical Q2?

Tony Stollings

No, I mean I think that, as I said we did see some bounce back not just in number of transactions but size of the transactions and that's a good sign. I think we’re continuing to monitor customer behavior around service charges and fees and those type of, you know the volumes there, the consumers are much more cautious around how many handle their checking accounts and the overdrafts and things like that, so that’s something that we’re watching but nothing we’re alarmed about.

John Artstrom - RBC

Okay and then just the last one, anything that we need to as analysts or investors think about on the expiration of the commercial piece of a [indiscernible].

Tony Stollings

No I don’t think there’s anything you need to think about beyond what we -- we’ve been talking about for a number of quarters now, and been very transparent about, we’re aggressively managing those assets under that last year agreement out. We’re very, very happy with where we’re headed, we had another strong quarter of resolution in the first quarter feel good about what we see thus far in the second quarter, so we think we’re going to be probably as good as [indiscernible] as we can be in mid third quarter when those things expire.

Operator

This concludes our question and answer session I would now like to turn the conference back over to Claude Davis for any closing remarks.

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