Eric Stables - Investor Relations Claude Davis - Chief Executive Officer Tony Stollings - Chief Operating Officer John Gavigan - Chief Financial Officer

Scott Siefers - Sandler O'Neill Emlen Harmon - Jefferies Michael Parido - KBW Jon Arfstrom - RBC Capital Markets Andy Staff - Hozart Volume

Thank you, Keith. Good morning, everyone.

And thank you for joining us on today’s conference call to discuss First Financial Bancorp’s first quarter 2015 financial results. Discussing our operating and financial results today will be Claude Davis, Chief Executive Officer; Tony Stollings, Chief Operating Officer; and John Gavigan, 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. Additionally, please refer to the forward-looking statement disclosure contained in the first quarter 2015 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, 2015, 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.

Great. Thanks, Eric, and thanks to those who joined the call today.

Yesterday afternoon we announced our 98 consecutive quarter of profitability. Net income for the quarter was $17.6 million and earnings per share were $0.29, an increase of 12% over the first quarter of last year.

Although the prolonged low interest rate environment remains challenging, we continue to see good opportunities to grow our balance sheet organically with competitively priced high quality loans and long duration low cost deposits through our relationship oriented product structure. Our market orient and community bank model which enable our local leadership team to better serve our clients in a more meaningful is a unique advantages as we develop existing relationships and compete for new clients.

In particular, our new Columbus, Ohio market has been quite to embrace this model and continues to form better than originally expected with an especially strong fee income growth during the quarter. We are very encouraged by the amount of new high quality development occurring throughout the market we serve.

During the first quarter we committed approximately $121 million to new real estate construction projects in our communities with strong demand in our Cincinnati and Indianapolis markets for both commercial and residential projects. Of those commitments we funded approximately $23 million during the quarter and the remainder will fund as those projects continue to develop over the coming months.

Although total loan balances were essentially flat during the first quarter, we are starting to see positive growth that is more in line with our long term expectations and we are optimistic that the momentum we are seeing in our loan origination pipeline will result in solid balance growth especially during the back half of the year. Although we will not comment specifically or speculatively on this topic, our ability to generate sustainable earnings growth and our strong capital position will support both significant long-term organic growth and consideration of additional acquisition opportunities that meet our strategic objectives.

Before I turn the call over to Tony, I am pleased to report that in conjunction with the earnings release yesterday we announced our quarterly dividend of $0.16 per share to be paid July 1. This translates into a 3.7% yield based on yesterday's closing price and remains on the upper end when compared to our peer banks.

With that I'll turn it over Tony for discussion of our operating performance.

Thank you, Claude. For the first quarter we reported net income of $17.6 million, or $0.29 per diluted share compared to $0.30 in the prior quarter and $0.26 in the first quarter of last year.

Return on assets was 0.99%. Return on average shareholders equity was 9.06%, and return on tangible common equity was 11.12%.

On a net basis there were no material non-operating adjustments during the period. And all significant expenses related to the Columbus acquisitions have now been recognized.

Average loan balances were essentially flat compared to the prior quarter with balances increasing $15.5 million, or 1.3% annualized. Period end loans were relatively unchanged from the linked quarter as organic loan growth was offset by run-off of the formerly covered commercial loan portfolio.

However, this does not reflect a full impact of the quarter sales effort as evidenced by an almost 25% increase in commercial loan commitments during the quarter over the same period in 2014. As Claude mentioned we had particularly solid quarter in the real estate construction space and as those projects develop and requires subsequent funding, we expect to see solid balance growth from those commitments.

Likewise the new loan origination pipeline remains strong, and we expect to see balance growth momentum throughout the remainder of the year especially during the second half. Our deposit gathering activities continue to produce a well balanced strategic mix of core transaction accounts and low cost time deposit.

Average total deposit decreased $15.7 million compared to the linked quarter primarily related to seasonal cash requirements of some of our larger treasury management clients. However, end of the period deposit increased $58.8 million, or 4.2% annualized compared to the linked quarter primarily related to increases in both the core transactions and time deposit portfolios.

We continue to aggressively manage deposit pricing on two fronts. First on a regional basis we began to lower some of the premium pricing from our acquired deposit.

And second we have reduced offering rates on certain time deposit maturities particularly longer term and special programs. As we discussed last quarter, the expiration of the commercial loss share agreement resulted in changes regarding the balance sheet presentation and asset quality metrics.

We covered informally covered loan portfolio have now been combined in the total loans and they are related reserve has been combined into the allowance for loan loss. Likewise related charge-off and credit quality ratios have been combined.

Net charge-offs for the first quarter totaled $1.8 million, or 16 basis points of average total loans on annual basis. Compared to $3.2 million or 27 basis points for the fourth quarter 2014.

Non-accrual loans increased $0.7 million, or 1.4% while total non-performing assets decreased by $1.6 million, 1.8% and classified asset decreased $1 million, or 0.6% compared to the linked quarter. The allowance for loan loss was unchanged at 1.11% of total loans compared to the linked quarter.

Additionally, in the allowance for loan loss and remaining purchase accounting loan marks, net of indemnification asset and as a percentage of total loans declined to 1.43% at March 31, 2015 from 1.51% at the end of the year. We believe this is a more appropriate and meaningful credit risk coverage ratio or metric for our total loan portfolio.

Additional detail regarding this metric can be found in the 8-K filing associated with the earnings release. Capital levels for the first quarter remain strong.

Total shareholders equity increased during the quarter by approximately $12 million, or 1.5% to $796 million. Likewise tangible book value per share increased 1.5% to $10.54 per share as of March 31 from $10.38 as of December 31, 2014.

We ended the period with the tangible common equity ratio of 9.16%, a Tier 1 ratio of 12.29% and a total capital ratio of 13.27%. The company's Tier 1 and total capital ratios both declined during the quarter primarily due to an increase in risk weighted assets resulting from the new Basel III regulatory capital rules which became effective on January 1.

While we have an active share repurchase plan in place, we've not repurchased shares in a recent quarters and given our view on growth opportunities, we believe it is prudent to continue that strategy. With that, I'll now turn it over to John for further discussion of our financial results.

Thank you, Tony. And good morning, everyone.

As Claude and Tony noted in their remarks, we continue to executing on our strategy during the first quarter with solid and loan deposit sales efforts across our footprint complimented by the operating leverage generated by strong fee income and expense management efforts. Directing your attention to Slide 3 and 4 of the supplement, you will see our first quarter adjusted pretax, pre provision earnings of $28 million which excludes certain items as detailed on slide 4.

Decreased $800,000 or approximately 3% from the fourth quarter primarily due to seasonal factors as we indicated will be the case on our call last quarter. As shown on Slide 3, pretax pre provision earnings as a percentage of average assets remains stable at 1.58% on an annualized basis.

Total interest income decreased $2.7 million compared to the linked quarter primarily driven by fewer days in the quarter and a decline in loan fees partially offset by an increase in average loan balances during the period. Total interest expense decreased approximately $200,000 compared to the linked quarter driven by the modest decline in average interest-bearing deposits related to seasonal outflow from public fund and commercial depositors during the quarter.

Excluding the benefit from interest income recaptured during the fourth quarter, net interest margin on a fully tax equivalent basis declined three basis points to 3.67% for the first quarter from 3.70% for the linked quarter. The net interest margin continues to be impacted by the low interest rate environment and the mix of loan origination and pay off activity during the period.

Based on our current loan growth and run-off assumptions, we believe the net interest margin will remain relatively stable through the second quarter with few basis points of decline possible similar to the first quarter. Moving now to non-interest income, excluding covered loan activity and other items as noted in Table 1 of the earnings release, non-interest income increased $1.4 million from the linked quarter to $16.6 million.

The increase was primarily driven by higher fee income, from our client derivative program, and the recapture of our previously accrued liability due to the favorable resolution of a former Irwin subsidiary issue as well as higher trust and wealth management fees and income from SBIC funds. These increases were partially offset by a seasonal decline in deposit service charges during the period.

Non-interest expenses for the first quarter, excluding covered expenses and other items as noted in Table 2 of the earnings release, totaled $47.2 million, a $400,000 decrease from the linked quarter, primarily as a result of a lower salaries and benefits expense during the quarter. We were especially pleased with our ability to absorb the impact from seasonal payroll tax increases and annual merit adjustments while maintaining a stable expense base for the quarter.

We remain intently focused on maintaining a scalable and efficient operating platform, and believe our first quarter reflects -- our first quarter result reflects these efforts. Finally as Tony noted, our first quarter results do not reflect the full impact of our loan production efforts during the period.

We continue to target mid to high single digit loan growth for the full year and our success in this regard remains the single largest driver of variability in our results going forward. This concludes my remarks and I will now turn the call back over to Claude.

Thanks, John. And Keith, we will now be happy to open the call for questions.

Good morning, guys. Let see you guys gave some good color on loan growth expectations particularly the ramp that you would expect through the course of the year and I guess Claude I was hoping you might just kind of expand on those comments and I think largely what you see as the sort of the main puts and takes as we look out.

Of course, it looks like some of those commitments that will fund over the course of the year in particularly second half will be a big tailwind, but I wondered if you can talk about things like payoffs and the other kind of pricing our structure concerns that you see that might give you cause or it might give you pause or just any other dynamics across currents that you see a play.

Sure. Hi, Scott.

And you are right. I think it is -- what we are seeing in a loan market is a combination of factors, payoff side and I noticed the both other banks commenting on this, especially in the real estate market.

One of the things we are seeing are some of the loans going to the permanent market faster than they have traditionally which causes earlier payoff than we and others might expect to see in more normal times. But I think the permanent vendors as there are many in the space looking for yields so they are willing to take on loans earlier in their cycle than this has been typical in the recent past.

So I think that's been a headwind for us in the real estate space. The first quarter our C&I origination were little bit slower than we had seen, leading up to that we are not concerned about it because we've seen the pipeline kind of continue to build both in the traditional C&I space as well as in our specialty space that we would expect the season improvement in 2Q and in 3Q.

As you talked about I think the construction commitment by far and way our largest construction origination quarter in the first quarter and good projects kind of across of variety of industries multifamily to healthcare to some to build the suit and those will fund up, open the balance of 2015. So combination factors I think we continue to be positive as John mentioned that mid to high single digit is our target for loan growth for the year.

That said to your last point on pricing structure, we as many others have commented are sensitive to that. We are trying to be disciplined in it and I think it is just a very competitive market.

I wouldn't say that I am overly concerned. We certainly see anecdotal individual situations where pricing is we think is irrational or structured is to lose but in general we feel like we are still able to originate consistent with our standard and that's the discipline will stay true to.

That's terrific. I appreciate the color and then maybe if I can switch gear for just a second, just M&A obviously you guys have such a good reputation as require and certainly the capital and infrastructure wherewithal but we haven't seen anything for a little while.

Just curious on your updated thoughts on potential activity out there?

Sure. Now we continue to do be optimistic that we will see some opportunities.

I would tell you though we are cautious in this regard and that is when as we look at acquisitions on a go forward, we are really focused on making sure that their end markets that we think had growth potential and that they are companies that either have an asset growth platform associated with them or one that fits well in their current asset growth platform. And to just acquire and pay the prices that we are seeing being paid for a franchise that we don't think has a growth characteristics is probably not something we would be interested in.

So I would say we are still kind of active, interested but selective.

Hi, good morning, gentlemen. So just wanted to talk about the loan yield a little bit kind of down 12 basis points quarter-over-quarter.

I think a portion of that was you didn't have not a core recaptured this quarter, but just -- hoping you can help us breakdown the components of on the decline. How much of was non-accrual?

How much was loan fees? And what you saw is kind of like core compression?

And then just whether we should continue to see some more levels of core impression going forward?

Yes, Emlen. This is John.

I think you touched on a little bit of -- the biggest piece was really the mix of the production during the quarter, it was very heavily tilted towards floating rate assets so those are going to be on the lower end yields there. The other piece you mentioned in your comments there the loan fees, were down from prior quarters.

That double edge sword there. You lose the some of the prepay fee income that you might otherwise get in prior quarters but that means you are retaining some of those assets.

So I think those were the two biggest drivers in the decline in yield this quarter.

Got it. And so I mean as far next of fixed versus floating origination you probably see a little bit -- presuming that you continue to be biased towards floating we probably see a little bit more compression there at least.

Yes, I think as I commented, I think our expectation is for the second quarter it get more probably low product to first quarter.

Yes, and probably kind of way the you probably, this is Claude, where you are probably going to is, what that mean for overall margin and we would say expect stable to down to few basis points somewhere what we saw this quarter because on the flip side is a loan yield, we think we've got some capability as Tony mentioned in his comments to reduce deposit cost. Because if you look at our deposit cost compared to peer, we are still a bit high mainly due to some of the acquisition and the deposits that we acquired there that we think we can move rates down.

So there is a bit of compression on both sides which we think should result in a stable to slightly down margin.

Got it, perfect. And then just a quick on the constructions and line there, what is your -- what's their typical utilization rate on your construction line?

I don't have kind of an average utilization rate. I'd tell you on most of them because of the size of the projects are going to be 12 to 18 months fund up cycle just based on normal construction period.

So that's probably the best way to think about it. Our overall line utilization including everything that would be around 48%.

Hey, good morning, everybody. So question on the fee income growth potential.

I mean I appreciate the comments that the Columbus acquisition had growth quarter, what's your outlook for the income growth? Is it at low single digit too conservative given what you are seeing in some of the opportunities you are getting in Columbus or any commentary on that would be helpful?

Yes. We've not so much giving guidance on percentage increase and the reason being Michael is that our fee income mix right now is one is the more stable fee income sources are service charges and deposits, which we said are seasonally lower in 1Q.

You should see an increase in 2Q and 3Q, 4Q. Second would be trust and wealth fees which are pretty stable and then mortgage which -- we had a nice mortgage quarter and would expect to see that continue and slightly increase hopefully more than mid single digit to more in 2Q.

The variability in the fees and where we specially saw Columbus is a kind of positive story specially being relatively new to us is -- and derivative fees related commercial transaction and those can be more variable depending on what originations are in the makeup and mix of the originations. And then second is as we become more active and have been more active in the SPA space.

There is an active market as you know for SPA deals. So the commercial oriented fees tend to be more variable based on current production.

So I'd hate to put kind of an expected growth rate on those other than we see them as good continuing opportunities.

Okay, that's fair, thank you. And then just more broad question on the margin.

Your last 10-K I think out cost to asset sensitivity was still relatively neutral and little liability sensitive, I understand it is wild assumption that gone into that. But I guess are you guys doing anything today to kind of improve your positioning for higher rates or how are you guys thinking about just your overall balance sheet position if the short end of the curve was to start to rise middle or later this year?

Yes, sure. This is John.

With respect to our interest rate sensitive, it hasn't changed too much. We continue to pivot around a risk new trough position that we did become slightly asset sensitive here in the quarter.

Really we are looking at a lot of strategies trying to balance near-term pressure on net interest income with the longer term view on rising interest rate. I think a variety of the strategies we've implemented over the past 12 to 24 months around the deposits.

I mentioned the heavy biased towards floating rate assets, loan production during the first quarter. We feel we are well positioned for when rates do start to rise.

I just add to that one of our primary tools is the investment portfolio. And we continue to manage that to assure duration as well in anticipation of rising rate, if the duration is drop steadily from this time a year ago.

Good morning, guys. Tony, I missed the number, what was the number you said on the C&I pipeline?

That's about 25% over this time last year.

And those were actual commitments.

Yes.

Commitments, okay. So that's one of the reasons for your bit more optimism in terms of the growth I look that towards the construction.

Yes. And the other thing Jon with our product mix and diversity we see where one category might be a little soft in a quarter another has a natural tendency to kick in like our specially tends to be more of mid to late year volume as opposed to something else.

So over the course of the full year we feel pretty good about growth view.

Okay. That was my next question in terms of specialty.

What are you seeing there and which segments are the bigger contributors?

Just a reminder Jon, this is Claude, we -- including specialty three can main categories. One being the franchise finance base which was a little soft.

In 1Q we expect that to continue to pick up. Second is the asset based lending or what we call business capital.

That and then the third being equipment finance. And those were also softer than they had been in specially last year's 2Q and 3Q.

And we would expect those and the pipelines are such that we expect those to pick up kind of in this year's second and third quarter.

Okay, good. And then John may be question for you.

The comp numbers there is a little bit discussion in the release in terms of maybe some lower incentive to close but little surprise to see the comp number down. I guess interested in that and then also maybe a broader overall opportunities left on the efficiency side.

Sure. Yes, specific to the salaries and benefits line, I think as we noted in the release, the big driver there was really healthcare expense in which we saw the benefit here in the quarter and some of the actions we've taken over the past year or two adjusting some of our benefit plans.

And that really showed up here in the first quarter. Overall, with respect to expense we are working hard to maintain a stable expense base and balancing that with the need to continue to invest in a business.

We expect the noninterest expense level from the first quarter here is probably a pretty good indication for our run rate for the balance of the year though we reassess that as necessary based on our asset generation levels.

Yes. Jon, just one other point, this is Claude.

The other thing we had and which we noted is we had -- we always have seasonal blips which most do in 1Q and payroll taxes which are about $1 million.

That was really the heart of the question, a lot of the other banks we see those numbers are so in healthcare explanation help so, okay, thank you.

Good morning. Do you expect the fund loan growth to deposit growth or cash flow from your securities portfolio?

Obviously, our objective is always to grow both loans and deposits and so we are always trying to grow the franchise in all categories. Yes, from quarter-to-quarter it can move up and down, you can see our borrowings were down over the last couple of quarters as we had deposit growth that was in excess of loan growth.

So it bumps around from quarter-to-quarter, but generally we would expect to fund those deposit growth, we are definitely comfortable where our investment portfolio is at today net [$1,750 million] range so that would be the objective.

Okay. With your reserve coverage of loans being so strong including purchase accounting mark.

Do you think there is a room for that combined covered as a percentage of loans to come down? Further income --

Yes. Andy, this is Tony.

I mean that very much model driven based on the portfolio characteristics so it is really hard to say that there is any kind of an opportunity there. I just tell you we are comfortable where it is and I think it reflects the right characteristics the portfolio we do.

As you know, it is analyzed every quarter and can change but we don't see a huge opportunity in terms of credit leverage.

Okay. And any color that you can provide regarding expectations for the purchase accounting line items and noninterest income and stats are, is it sort of your guess is as good as mine?

Well, we hope our guess would be better than yours.

But and John Gavigan here, I mean those are pretty volatile, very tied to loans specific activity. So it is really hard to say, I mean there is certainly a trend there but it is very -- it is very deal specific.

This is Claude, the only thing I would add Andy which is I think that the deals were wonderful for us but it is also nice to be at point where those movements are less material than they once were and so while they hard to predict the impact is certainly much less significant.

Great. Thank you and just thank everyone for joining the call today.

And your interest in First Financial. Thank you.