Good morning and welcome to the First Financial Bancorp fourth quarter and full-year 2011 earnings 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 Ken Lovik, Vice President Investor Relations and Corporate Development. Please go ahead.

Thank you, Andrew. 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 2011 financial results. Discussing our operating and financial results today will be Claude Davis, President and Chief Executive Officer and Frank Hall, Executive Vice President, Chief Financial Officer and Chief Operating 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 year 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 2011 earnings release as well as our SEC filings for a full discussion of the company’s risk factors. The information we provide today is accurate as of December 31st, 2011 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.

Thank you, Ken and thank you to those joining the call today. We are pleased to announce another quarter of strong performance reporting net income of $17.9 million or $0.31 per diluted common share representing an increase in earnings per share of 14.8% over the prior quarter and 25.4% over the fourth quarter of 2010. For the full year, we reported net income of $66.7 million and diluted earnings per common share of a $1.14 or increases of 12.6% and 14.9% respectively over our annual performance in 2001. Return on average assets were 1.09% and return on equity was 9.89% for the quarter and 1.06% and 9.37% for the full year, again significant increases compared to our performance one year ago. Our adjusted pre-tax pre-provision earnings were $31.5 million for the fourth quarter remaining strong at 1.92% of average assets. The decline compared to the third quarter was significantly impacted by items related to the Branch acquisition including elevated cash balances, higher occupancy costs, core deposit intangible amortization was offset partially by higher service charges in bankcard income. Net interest margin decreased during this quarter to 4.32% driven primarily by an increase in interest earning assets and the continued decline in our high-yielding covered loan portfolio. Frank will provide more details on these items later in the call. In early December, we closed the Flagstar Branch acquisition successfully completing all integration activities and transferring the relationships acquired to the First Financial brand. We are pleased to welcome the new associates joining First Financial from Flagstar and look forward to building a strong relationship with all of our new clients. 2012 was a busy year for us on the acquisition front as we closed two Branch transactions that allowed us to greatly accelerate our growth plans in two keys strategic metropolitan…

Thank you, Claude. I will start by providing a few comments on some of the operating results of the quarter and the major components of the performance. We have also provided supplemental information furnished separately that is available on our website bankatfirst.com in the Investor Relations section or in the 8-K we filed last night. As in previous quarters this supplement is crucial to establishing and maintaining a clear understanding of our reported results as well as the concepts that have a material effect on our current and future performance. As many of you know from following our company, our operating results are materially impacted by unique accounting and reporting requirements and the strategic distinctions we have made related to our 2009 acquisitions. However to aid and a clearer understanding of our strategic activities, we will focus primarily on the ongoing or strategic aspects of our business on this call. Our earnings release and our supplemental information should provide sufficient information and transparency into the purchase accounting details and the impact of non-strategic components of our results. These complexities have also been discussed at length in our previous earnings calls and the technical accounting call that we hosted on February 4th of 2011. This information is also available on our website. Fourth quarter 2011 GAAP earnings per diluted share were $0.31. Our operating results are best summarized on the pre-tax pre-provision income slide, which are on pages three and four of our earning supplement. Our adjusted pre-tax pre-provision earnings were $31.5 million for the fourth quarter representing a decline of $1.6 million or 4.7% compared to the third quarter. The decrease was driven by higher other real estate owned write-downs as well as higher occupancy costs and core deposit and tangible amortization resulting from the Liberty and Flagstar Bank acquisitions…

Great, thanks Frank. And Andrew, we’ll be happy to open the call for questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Scott Siefers of Sandler O'Neill. Please go ahead.

Frank, I guess the first couple of questions for you, so it sounds like managing both the securities portfolio and even deposit costs more proactively is going to be a kind of a key to preserving or maybe even enhancing margins the next couple of quarters. I wonder if you could talk about one, how quickly are you able to effect that change on the securities’ portfolio side; you know it sounds like you kind of started in the last couple of quarters; you've been pretty active this quarter and will continue to do so. But is that something that takes place over the full year or can you effect it pretty rapidly in the first quarter to here, how does that manifest itself and then and a related question so the trust referred purchases, can you just talk about some of the characteristics of the securities you’re purchasing just given the kind of the changing accounting treatment and what, could those be called away from you, etcetera?

Sure. So I’ll start with the timing of the investment portfolio. We do expect to be able to put our access cash to work fairly quickly and I would expect us to take a more aggressive position of managing our cash balances to lower levels. So I would expect to see that happen throughout the first quarter. But as I noted in the prepared remarks how performance relative to peers has a lot of history baked into that performance delta. So I would expect to recover the 450 basis points, but overtime I would expect our performance to start to look similar as we’ll continue to structure our investment portfolio similar to our peers. And then as it relates to the trust preferred securities, you know it is our expectation candidly that they do get called away. These are issued by the largest financial institutions in the countries, so we do have an expectation that they will be called away and that’s okay and we knew that going into it.

And I just had one question either or one additional question either for you Frank or Claude just on how you think about capital management priorities given what appears to be a pretty sustained low rate environment. So you’ve got this enormous yield given the 100% payout target and then just as you kind of counter balance that with M&A opportunities and I guess unless you buy lots of you know higher yielding assets and you know doing things like future deposit acquisitions just might not have as much value as long as rates are this low. So you know how do you think about that kind of trade office you look at all your capital management opportunities?

Sure Scott, its Claude. Yeah, it’s something we continuously evaluate and I would tell you that, you know as we stated in previous quarters that and the Board evaluate that every quarter and I think that to the extent that we don’t have deployment opportunities, we’ll continue to consider the variable dividend because we think that’s the highest and best use for shareholders. The two branch deals that we did in 2011 were specifically done to accelerate our growth both on the deposit and on the loan side in Indianapolis and Dayton, so we did those very strategically because of those two core metropolitan markets. So that was, you know to your point about how valuable our deposit is today, just as a reminder, that’s why we did those and I get your point in terms of the return expectations on deposit only type deals. So we’ll continue to evaluate it, we’ll certainly look at other M&A transactions if they would again make sense strategically for us or internal growth rates on the asset side when that eventually returns. We would certainly want to deploy that capital if we can in the business at the right rates of return. If we can’t and we’re still above our capital thresholds, we’ll continue to consider the variable dividend.

The next question comes from Emlen Harmon of Jefferies. Please go ahead.

It was good to see organic loan growth continue and actually even pick-up a little bit in the quarter. I was hoping you could give us a sense just to kind of what the source was there and just if you see a success and well specifically Dayton just kind of new markets that you moved into recently?

Certainly, most of the growth was in commercial real estate and small business, you know a little bit of growth in the consumer portfolios but not you know the bulk of it was commercial and small business. In terms of Dayton, we have been in Dayton actually for about five years now. And you know, so we continue to see growth in Dayton, continue to see growth in Indianapolis. What we’re hoping is with the branch acquisitions and the kind of the brand awareness improvement that provides us as well as additional clients that we’ll continue to see that growth accelerate in those markets, as well as Cincinnati and our other markets that we’re part of. But you know it’s still a bit early to see kind of what the impact is of the branch acquisitions since they just closed in the last three to four months.

And then I guess just one other question on expenses. Could you give us a sense of just kind of what you would expect for a trajectory for expenses here headed into 2012 and you know with both Liberty and Flagstar kind of on the books now. You know, any opportunity to bring expenses down a bit as we head into the New Year?

Sure, this is Frank. The expense level I think, what you’re seeing in the fourth quarter, I’ll probably call it the high watermark for our expenses. Going forward, we have not yet fully recognized all of our cost savings opportunities related to those acquisitions and we just culturally are continually looking for ways to improve our efficiency and lower our overall cost structure.

The next question comes from Jon Arfstrom of RBC Capital Markets. Please go ahead.

Frank, just a follow-up on the securities portfolio, you mentioned targeting 300 million in purchases, but I guess 75 million of that is you know existing portfolio reimbursements. So what kind of a securities portfolio size target do you have as you know start to change the approach a bit?

Sure Jon. We actually don’t have a target investment portfolio size and the reason for that is you know we just want to have our access cash fully invested. So you know as we see what the results are both from retention of the recent acquisitions and the response to some of our deposit rationalization strategies, we think that the right target for now and that’s how we’ll manage the overall size of the portfolio. The duration is still you know while it’s approaching three years, I mean that still should provide sufficient cash flow for us to meet any of those potential liquidity demands.

The only thing I would add to that Frank is that, Jon the other part of it is that with our deposit rationalization strategy you know we view that the portfolio is almost entirely core deposit funded, you know we don’t have any leverage strategy now or nor any intended.

Okay, that makes sense. And then, Claude for you, a follow-up on the loan growth; you have a lift in commercial real estate, the core commercial real estate over the past few quarters. Can you talk a little bit about what the common theme is in the core CRE portfolio?

That’s a business that we’ve always been in and continue to stay in and you know what we’ve been seeing I would say through 2011 obviously we've all been very cautious in that sector due to some of the challenges that have been experienced, where we've seen our new opportunities are really with those investors who weather the storm well, had the liquidity and the cash and the capacity to kind of grow and expand if you will, kind of win assets at a cheaper level and so we've actually seen the quality be very good from our perspective in that book. Obviously staying away from the high risk areas you know like residential development or some of the kind of the higher risk areas that you would expect that are more speculative. So we've actually seen some really nice quality credits come our way in that area in 2011.

And your comments in the pipeline earlier that would apply to that portfolio as well.

It would, I mean it’s across the board.

The next question comes from Chris McGratty of KBW. Please go ahead.

Just a question on the acquisition front. Yesterday we saw a deal in Indiana. Two questions, one is that a type of acquisition that you would look at and two given the Fed’s kind of comment yesterday on interest rate policy, do you think this drives, this forces banks to consolidate?

Well, obviously we won't comment on other deals. You know as we've always said when we think about M&A we look at markets that we believe are strategic. So we've been pretty clear about our market area being Ohio, Indiana, Kentucky with the specific focus in terms of M&A on what I would call metropolitan market interest. So that's how we think about kind of where we focus any M&A interest that we might have. Now I do think the Fed’s position and it’s still not clear really to us when they say 2014, is that a forecast or is that a policy statement. It first sounded like a policy statement, but the more I’ve heard last night and this morning it sounds more like a forecast to me. But if you soon that’s the case, I think it’s obvious that all of us will have margin pressures as a result of that kind of an extended period of zero percent rates and I think that in combination with the Dodd-Frank rollout and the impact of regulations, I would certainly expect that would accelerate M&A across market areas. But I would just emphasis again our focus is on our core market areas and predominately in some of the metropolitan markets that we think are good potential growth opportunities.

And the quick follow up on the dividend. Is there, I know you guys have been pretty clear or very clear on kind of your expectations to maintain unless something a size comes about. I guess the question becomes, are you seeing opportunities of size maybe in 2012 that you could potentially see a better use the capital or is there a magic size for a bank that you would consider to say, hey I need to reconsider the dividend?

It’s like I said, we’ll keep looking at it every quarter and contemplate those organic as well as acquisition opportunities in that context because I would say just on the M&A front, I think I have mentioned this last quarter is with the two deals that we did in 2011 to really position ourselves well in Dayton and Indianapolis and with still a lot of work to do in terms of market share gain in Cincinnati, we actually don’t feel like we need to do any more deals. We feel like we’ve got lots of organic growth opportunities in those three metro markets and in our non-metro markets, even though in many of those we have large market shares. So, I would tell you on a day-to-day basis, we are really focused more on growing those metropolitan markets that we are part of and certainly should an M&A opportunity make itself available, then we would look at it if it hit our strategic criteria. And then we will contemplate the dividend in the context of all of that and that’s the way every quarter when the Board meets, that is the discussion we have.

Okay, just a point of clarification, when that day comes, will it be a concurrent event or will you kind of try to telegraph the market ahead of time in terms of the dividend policy?

Yeah. I wouldn’t want to speak for the board in that event.

The next question comes from Kevin Spellman of Dvm Asset Management. Please go ahead.

I just had a quick question on the TARP ones and just wanted to verify my understanding in light of your dividend policy now because I understood that every penny above $0.17 a quarter, drops the strike price on that warrant penny for penny, is that correct?

It’s not quite that simple as there is more of a formula involved with it. It’s a formulaic number that, that we are working through and working through the analysis and with it we will have to make the adjustment at the appropriate time.

But your observation is correct, there is an adjustment required.

Okay and where will we get that? I mean it’s above $0.17, correct?

Yeah, $0.17, that was our dividend before we entered the TARP program. So yes, that is the threshold.

And we will provide additional clarification on that to the market in here shortly.

The next question comes from Joe Stieven of Stieven Capital. Please go ahead.

Claude and Frank, isn’t the real issue that sort of people that beat around a bush is that you guys are showing tons of opportunities on the M&A side. But you just don’t want to take dilution and that’s why your, sort of been disciplined. I mean, isn’t that fair to say that you’re seeing lots of stuff, but you’re just being real disciplined and you’re not just going to give the capital away to somebody?

You know, we certainly don’t comment on what we look at. But again, as Claude mentioned early, our acquisition philosophy and approach to evaluating transactions is unchanged and so the strategic fit is first, can we manage the operational risk? And second and then third is it financially compelling? So we remain disciplined and still maintain the same financial hurdles adjusted for specific situations as we’ve in the past. So, yes if your conclusion about our previous acquisitions is that they were disciplined, then I would say, yes, that’s continuing.

The next question comes from Bryce Rowe of Robert W. Baird. Please go ahead.

Frank can you help me out with the, I guess that roughly $2.5 million of expenses that are not likely to recur. That is not included in the kind of merger related expenses correct?

That is correct. There are some that have to do with leasehold improvements that we accelerated and we recognized an acceleration of that amortization because of a physical change in location So there are multiple elements in there.

And most of those charges are in the occupancy bucket of the expense operating expenses?

That is correct

Two more question. The core deposit intangible amortization, can you tell us what that was for the quarter.

As we have acquired some deposit franchises here we recently recorded core deposit intangible and the accounting rules are that we amortize that overtime. So that is if you are looking for specific dollar amount, I don’t think on a standalone basis it was that material.

Okay, fair enough. And last question, I think last quarter I asked this question, single service CDs were roughly $600 million and you talked about $120 million of those maturing in the first quarter. What’s the maturing schedule like for the CDs over the remainder of 2012.

Sure give me just a moment and most of them should be coming to you in the course throughout 2012.

Okay. And then if my numbers is correct it’s roughly $600 million?

It’s a little bit less than that now, it’s about I want to say it’s about $450 million.

The next question comes from David Long of Raymond James. Please go ahead.

In regard to the securities portfolio, obviously more sophistication there; how are you allocating or reallocating or adding resources to manage that.

That's a fantastic question and that's actually what we are working through and why you are not seeing the instance which to a portfolio it looks similar to our peers. We are going to evaluate each asset class we think we should have exposure and understand what resources are required there before we make any trades in the space. So each asset class will go through its own evaluation. We will look at whether or not that's a resource we need to bring to add internally or is it something we can outsource. But we will survey best practices on what makes sense there and we will certainly provide some additional commentary on that as we execute.

The next question comes from Kennet James of Sterne, Agee. Please go ahead.

If I heard you correctly in the past, a part of your reason for discipline I guess on traditional deals or maybe leaning more towards fresh deals as you haven't been in a hurry to kind of take on other people’s potential problems in the loan portfolio. Have you seen any or what have you seen I should say in regards to progression in the credit cycle to where you would be more comfortable? If we had an inflexion point at all in the credit cycle to where you think you are more comfortable with larger traditional deals or is that a factor at all?

Yeah, I know I think that’s a fair statement. But we are in a stage in the credit cycle where visibility is much as better than it was 6 or 12 months ago and I think a lot of the real estate pricing while still volatile is certainly more stable than it was 6 to 12 months ago. So yeah I would say as we look at loan portfolios to the extent that we do or will, I think we would have more confidence about the predicting what the right mark would be, as well as our own experience of having now worked two years on two sale bank transactions and seeing kind of the outcome of some of their core problem assets. So that’s a fair point.

Okay. Have you given any considerations or is it kind of a complete no-no or that you would consider of buying distress credit, given your workout experience, ample capital, liquidity, all the rest of it seems like there be a lot of it out there that can be had at a good price for someone that would buy them and have the capability to work it out. Is that something you are ready come up?

The an interesting idea and I wouldn’t tell you that it hasn’t at least been surfaced as an idea but obviously there would require a fairly extensive evaluation because there would be a fairly significant departure from our strategy. But it’s an interesting idea.

And last just on the security portfolio. Given that you were managing it for low rates, are you doing anything I guess to kind of protect from pre-payment risks or premium with amortization risk if rates should fall or fall even further?

That’s certainly part of our the analysis that we go through and we’ll certainly monitor that and take that in to consideration. So it is part of the evaluation that we go through.

But some people I guess making a state of point if we buy 4% coupon pool, low-coupon pool is just kind of another strategy like we will only get to buy a low-coupons or we just won’t buy premiums, have any stated rules like that?

Yeah. I mean, again we certainly try to avoid purchasing securities with a tremendous amount of premium risk to them. But occasionally we will make exceptions depending on what the underlying assets are in the pools.

Okay. And then just last point, just on the corporate securities at 10%. I mean, as a trust preferred is it going to be viewed just like, I guess, investment grade, industrial would be, trust preferred for a bank, was the same thing in that 10% pool?

Yes. Those securities that have credit risk associated with corporate. Sure.

(Operator Instructions) The next question comes from Jeff Davis of Guggenheim Securities. Please go ahead.

Two questions; let me ask them both and then I will be quiet. One, and if you commented joined a little late, so my apologize. Just say so, and I will read it in the transcript. Any difference in the level of activity in Cincinnati versus Indianapolis from a economic perspective in loan demand? And then secondly, are there, that I don’t know to the extent share underwriting and whether holding in your portfolio or selling it meets your credit criteria. But in terms of the franchise finance book, are there any broad trends that can be discerned from looking at the fast food industry about the consumer and may be even a regional tail to that?

Sure. The first question in terms of the Cincinnati versus Indianapolis comparison, you know our loan kind of growth if you will or loan demand has been stronger in Cincinnati. However, you know a couple of factors are there. One, is we have a larger market share. We’ve been here longer. We have a larger sales team. And just in general, Cincinnati is a larger market overall than Indianapolis is. I would say we’re gaining momentum in Indianapolis. We’ve seen some nice growth there and it’s building. And I think we’re also looking at recruiting in that market. So you know, that’s a future expectation that we have that we will see greater growth out of the Indianapolis market, but today Cincinnati is clearly the larger and make it larger.

Yeah. And then let me just ask a biz, is Cincinnati then, is Cincinnati performing generally stronger than Indianapolis regardless of your growth efforts?

No, I wouldn’t say so. You know, there are a lot of, I think, both markets have been slow and steady, way just I would describe them. Both have, I think you know weathered the recession reasonably well. I think the Indianapolis real estate market has been stressed, but other parts of the Indianapolis economy has been pretty good. And I think Indiana overall, with some of their public policy positions, I think they’ve done a good job as a state managing through the recession. So we don’t see significant differences between the two at least in terms of the clients that we work with. On your second question on the franchise piece?

Yeah, this is Frank. I would just tell you that the conventionalism of our franchise business is that, you know it’s recession proof and I think what we’ve learned by studying the business that we’ve acquired is that that’s not entirely a true statement; unfortunately the loans that we acquired there are covered loans, so that’s a lesson that we get to learn without too much downside. In the other point that I would make is, as far as things that we can learn from that business and apply to the rest of the business. I would just remind you that it is national platform, I think similar to the question you asked about differences between Cincinnati and Indianapolis, you know much of what we see in consumer behavior is across the country, so it may not necessarily be applicable to our primary operating margins of Ohio, Kentucky and Indiana.

Right, I understood. But I was just more curious as the second derivative data point is, Claude as you look at, are they telling you that all of sudden the consumer America is picking it up or not; sure just more steady from what you might have seen nine months ago? I maybe asking too much new ones, but I am just –just a second derivative question, or third derivative it would be?

Fair question and I don’t know that we’ve kind of looked at it in that context or maybe the other way I would say is I don’t that we have a deepen up data to cool it, just kind of make that kind of the second derivative conclusion, because the other part I would tell you is that recent terms of what we look at, it would be very dependent also on the different concepts that we underwrite into. So you know one concept maybe doing very well, that may or may not be indicative that the consumer maybe more indicative of you know if the McDonald’s may just be doing a heck of a job right now as it relates to their product lineup. So I don’t know that we have enough data or that we’ve even thought about it in that context.

So then last question on it, are they seeing more demand or consistent demand from nine months ago?

I would say slightly up, but you know its not I would say significant, but you know slightly up.

We do have a question from Joe Stieven of Stieven Capital. Please go ahead.

Sorry for the follow-up, but back to the concept of capital, if you look at your capital ratio, give us a thought what you think more normalized capital for you is, because all of us who sort of like this dividend you know I guess the question is how long will it be out there and I think the easiest way without giving an answer is saying here is sort of what we think normalized capital should be for us then we can sort of extrapolate out from there? Thanks guys.

Sure Joe, I understand the question and the way we tend to think about kind of capital, we stated in terms to thresholds and we've been public about our statement about our thresholds which are 7% tangible, 8% leverage and 13% total capital which means that the threshold we won't go below those levels is our target. And so with our ratios being well above that and then comparing that to what our kind of capital deployment opportunities are if that comparison and our Board goes through on a quarterly basis to say does it makes sense to continue the variable dividend or not. And so that's the way we will continue to look at it; what’s our capital deployment opportunities versus where our current capital ratios are in the context of those thresholds.

So like I caught, so in a static environment in a vacuum that would support couple of billion dollars actually you know?

Yeah, we estimate about 1.5 billion.

Yeah, exactly; yeah in a static environment, right. Okay.

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

Great. Thank you Andrew and again just finally thanks to all those who participated on the call. And your interest in First Financial. Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.