Good morning and welcome to the First Financial First Quarter 2016 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 Scott Crawley, Controller. 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 first quarter 2016 financial results. Discussing our 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 the press release we issued yesterday announcing our financial results for the quarter is available on our Web site at www.bankatfirst.com under the Investor Relations section. Additionally, please refer to the forward-looking statement disclosure contained in the first quarter 2016 earnings release, as well as our SEC filings for a full discussion of the company’s risk factors. Information we will provide today is accurate as of March 31, 2016, 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.

Thanks, Scott, and thanks to those joining the call today. Yesterday afternoon we announced our financial results for the first quarter. Before I turn the call over to Tony and John, I would like to comment on another strong quarter of operating results which is now 102 consecutive quarters of profitability. We are pleased with our results which reflects continued strong loan growth across our markets and products, stable net interest margin and disciplined expense management. While we have areas for improvement with fee income being top on mind, we continue to capitalize on our comprehensive suite of credit products and unique client focused strategy to grow our commercial and specialty product segments both in our metropolitan markets and across our two nationwide lending platforms, franchise and Oak Street. The first quarter was marked by significant market volatility related to concerns around energy, the strength of the U.S. currency and other global economic headlines. Despite this global economic backdrop, we continue to see solid credit demand and financial performance across our clients and prospects. While individual credit relationships come under stress from time to time, we believe the overall credit outlook across our markets remains stable and conducive to continued growth opportunities. As we look towards our strategic objective achieving top quartile performance, our focus remains centered on serving the financial needs of our business, consumer, and wealth management clients while remaining disciplined in our approach. So overall the company remains well positioned to continue to grow organically and meet our strategic objectives. With that I will now turn the call over to Tony.

Thank you, Claude. Net income for the quarter was $19.8 million, an increase of $2.2 million or 12% over the first quarter last year. Earnings per diluted common share for the quarter were $0.32 with return on average assets of 0.98% and return on average tangible common equity up 13.06%. Including approximately -- or excluding approximately $500,000 of pretax non-operating expenses which were primarily related to the consolidation of six branches during the period. Net income was $20.1 million or $.33 per diluted common share. Return on average assets was 1% and return on average tangible common equity was 13.27%. Consistent with our comments over the last few quarters we continue to see opportunities to organically grow our balance sheet across a number of diversified products, including our two national lending platforms, First Franchise and Oak Street Funding. We remain focused on a disciplined underwriting approach to optimize capital deployment and increase yields while still managing credit risk. End of period loans increased approximately $116 million or 9% on an annualized basis compared to the linked quarter and is in line with our long-term expectations of mid to high single digit growth. Average loan balances increased $175 million or 13% on an annualized basis during the period as we recognized a full quarter impact from late fourth quarter 2015 originations in addition to another strong quarter of production, particularly in the C&I and specialty finance portfolios. Loan origination pipelines, primarily in our Metro markets and our specialty finance businesses remain strong and we head into the middle of the year with positive momentum. Our client relationship centered strategy, diverse product offerings and a strong cross sell culture continue to produce sustainable growth. In the period, deposits were relatively unchanged from the fourth quarter with total average deposits declining $111 million or 7% on an annualized basis, primarily as a result of seasonality in our public funds deposits. Our overall cost of deposits increased three basis points from the linked quarter to 36 basis points as we recognize the full quarter impact on our indexed accounts from the late fourth quarter increase in interest rates. Turning briefly to Oak Street. The significant areas of integration are now complete. The new associates are adapting well to the banking environment in general and more specifically to the First Financial culture. I will note that we are learning from Oak Street as well and we remain very optimistic about their long-term growth potential. With that, I will turn the call over to John for further discussion of our first quarter results.

Thank you, Tony and good morning everyone. Net interest income for the first quarter was $66.6 million, an increase of $500,000 or approximately 1% when compared to the linked quarter as strong organic loan growth was complemented by the impact of the December interest rate hike as well as the higher yield on our securities portfolio during the period. Net interest margin was 3.68% on a fully tax equivalent basis compared to 3.69% in the prior quarter as a modest decline in loan yields was largely offset by the higher yield earned on investment securities. The effective yield earned on the securities portfolio increased 15 basis points to 2.59%, benefiting from the December rate hike as well as our efforts to reposition the portfolio and improve the yield profile in recent periods. Looking forward, we expect net interest margin for the second quarter to again be relatively stable with the first quarter with potential fluctuation in either direction depending on production mix and prepayment activity. Further, I will note that our interest rate sensitivity continues to trend toward higher asset sensitivity and we remain well positioned for rising interest rates, should we see additional rate hikes later this year. Noninterest income for the first quarter was $15.5 million, in line with the prior quarter but impacted by seasonal declines in deposit service charges, bankcard income and mortgage revenues during the period. Additionally, while wealth management fee benefited from seasonal tax services during the first quarter, these were negatively impacted by market volatility through much of the period. Client derivative fees were stronger in the first quarter, increasing 16% over the fourth quarter while covered and formerly covered loan related income declined on a linked quarter basis. As Claude noted earlier, we are focused on improving fee income performance and have…

Thanks, John. And, Andrew, we will open the call up for questions now.

[Operator Instructions] The first question comes from Scott Siefers of Sandler O'Neill & Partners. Please go ahead.

I wanted to ask you first, a couple of different comments from you and John on fee income initiatives. I wonder if you could drill down a bit more into a couple of things. One, if there are areas you guys are sort of disappointed with where [indiscernible] you have been doing or just haven't had the kind of focus you like. Or are you saying that there are things that you guys haven't done well or is it just there is a lot of understandable market choppiness that makes it tougher to sustain momentum and fees. And then beyond that if you can maybe just give some examples of some of the initiatives and what you are focused on most intently.

Go ahead, John.

Sure, Scott. As we mentioned, we have got multiple initiatives across the company. Now I wouldn’t say it's something that we are necessarily disappointed in, it's just areas that we feel we have room for improvements. In the past years, we have been focused on some of the acquisitions and this is really kind of focusing on, executing on our existing products and services here. Multiple initiatives across the company, I would say broadly targeted across really three categories. First being product pricing relative to market, second being pricing governance and being disciplined in the level and frequency in which we are granting exceptions. And then the third one being product penetration. So these aren't necessarily second quarter events per say, these are longer term strategies, but I do think some of the earlier strategies that we are working on would start to see income hopefully in the second half of the year.

Okay. Perfect. So this is more or less just sort of natural strategic expansion as, an appropriate expansion as opposed to anything else, it sounds like that?

Exactly. Yes. This is Claude, Scott. We feel like we have got, that we have been under market a bit in a few areas that we have got some opportunities to improve. So, yes, it's more about just improved operating leverage.

Okay. That’s perfect. Thank you for the clarification there. And then, Claude, I was wondering if you could talk a little bit about the construction book. In the aggregate, it's not a huge part necessarily of you guys, but it has grown very very rapidly over the last couple of years. So just curious about your comfort level and outlook for overall growth in the construction book.

Yes, Scott. No, it has grown. And we, I would say started from a relatively low base as that didn’t really grow much coming out of the crisis until really the last year. Actually in the last couple of years it's grown. And what I would say is, we have seen lots of good opportunities, especially in the last two years in our metropolitan markets around a few different categories, some being multifamily, some being healthcare, some being build to suites for a variety of tenant types. And I would say we are now at a point where while you may see that balance grow some just as those projects finish out or build out, we are not looking for significant growth in the construction portfolio. We will look at good opportunities. We will continue to serve our clients well but we will see some movement up that you won't see the same kind of growth over the next two years that you have seen over the past two. Maybe isn't a better way of saying it.

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

Just wanted to hit on the interest income outlook. Have you guys learned anything about how you expect the balance sheet to react to rate now that we have got kind of one quarter of fed fund hikes behind us. And then I did want to hit on the increase in the wholesale borrowing cost. It sounds like you did have some public funds outflows this quarter but seemed maybe a little larger than you have seen in the past. Just wanted to ask to if there was anything unusual in there.

Yes, sure, Emlen. This is John. I think the interest rate hike in December really manifested itself exactly as we kind of expected. We saw that with margin holding pretty much in line with fourth quarter which was in line with our expectations. The December rate hikes significantly closed the gap between loan origination and payoff spreads. Saw some life on the securities portfolio as well. Saw some lift on the deposit side as well as we have had success in recent years with an indexed money market product for clients who are rate sensitive and it also gives us a good opportunity to sell and bring new money into the bank there. With respect to the last part of your question around the public fund, you are exactly right. We did see the typical cyclical outflow of public fund deposit which starts late in the fourth quarter. They tend to come back in mid to late first quarter. We saw that this year as we have in years past but it was a little bit larger this year. I don’t know that there is anything specific driving it but we certainly noticed as well that the magnitude of the outflow was a little larger than we have seen in the last few years.

Got it. Thanks. And then just a quick follow up. On repurchases, I think last quarter you had said growth opportunities, you probably put the repurchases on the sideline for the near-term. That continues to be the case from here?

Yes, Emlen, this is Claude. It does. I mean I think we continue to see good growth opportunities organically and just kind of given that we don’t foresee any repurchase activity here in the near term. We look at it every quarter as a board but at this point I would say your assumption is accurate.

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

Maybe a question on expenses. With the branch closures, how should we be thinking about the near-term run rates for expenses.

Yes, Chris. The branch consolidation activity that we referenced in the release. Certainly there is some expense saved there but that was included in the guidance we gave back in January for the full year operating expense run rate of approximately $50 million a quarter. We opened a couple of branches late last year. We have got one or two more coming this year. And those are some of the efficiencies that we have spoken about in the past that we are looking to realize to help offset some of the continued investments we are making elsewhere in the business.

Understood. Thank you. Maybe a question on fee income, specifically the FDIC loss share. Can you remind us where you stand in kind of your opportunity to terminate it? And then if you don’t, what is the, what's a reasonable estimate, and it was about $11 million accelerated just kind of last year. Isn't that continued to tail off place? Maybe any update on that would be great.

Yes, Chris, this is Tony. Regarding the exit, I mean as we have talked previously, late last year the FDIC widened their criteria for eligibility for their early exit program. It's certainly something that we view as a strategy to be evaluated but beyond that we really can't make any comments about if we are doing it or where we might be but it is certainly something that if the numbers work, it would be attractive to us. Regarding the income, I mean that is a, it's a fairly volatility couple of lines on the income statement and I don’t want to say, it is somewhat hard to predict but it is very volume based and we have a much smaller portfolio of loans now, so right around $200 million total from an original $2 billion portfolio. So it's much less meaningful than it has been in the past.

Okay. Maybe last one and I will hop out. Tax rate going forward, any help there?

Yes, Chris, we are still expecting in the low 33% range there. Probably a little lower than what you saw here in the first quarter but in that, probably between 33% and where you saw here in the first quarter.

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

Let me follow up on Emlen's question a little bit on funding. In your release you talk about one of your goals is reducing the funding cost through targeted initiatives. Can you just talk a little bit more about that? Help us understand what you are thinking?

Yes, I will start, Jon. This is Claude and then I will John kind of give his thoughts as well. We are doing a couple of things. I think one is, obviously we are always trying to grow core DDA, which is always the best when you reduce those costs, and really doing it through continued pro-active sales efforts which we have always done. But we have also added a couple of people to kind of call into the franchise book of business as well as to call into the Oak Street book of business. Maybe get some treasury management opportunities within that group. So those, from a core sales perspective are the main initiatives.

Yes. Jon. I would just add to Claude comments there and this also touches on kind of the pricing governance comment that I made earlier around being a little more disciplined around the exceptions and the level of exceptions we are allowing to our standard pricing.

Okay. Good. Just somewhat related to loan to deposit ratio. It continues to creep up a bit and I know this past quarter it might be -- part of it might be the public funds you talked about but what do you think is an optimal level for your company, where would you like to be?

Yes. Jon, I would say we are now in the kind of high 80s depending on where deposit flows are. I think we could kind of easily be in the mid 90s as an optimal level so we have got some runaway there. And just given the size of our securities portfolio, I think certainly we can convert that into loans that would be more efficient for the balance sheet. So that’s what we think about is one, kind of mid 90s range.

Okay. And then I guess last question. You had a core ROA of 1% and I think you have some aspirations to bring that number up over time. Maybe walk us through where you would like to be maybe a year from now and kind of the past to get there?

Sure. You know certainly our goals, as we have talked about in the past is to move that number closer to the 110 given the current rate environment. And we think obviously continued organic growth in that mid to high single digit range that we have discussed, we think with the combination of growth platforms that we have now from our core community markets to the metropolitan markets, to some of our end market specialty product, to Oak Street and franchise. Some of which have higher yield associated with them. We think we can do that in a stable margin type environment and get operating leverage by holding expenses down. So that's, I would say, primary. Secondary would be some of the fee income strategies that John referenced earlier. So it really is about that core blocking and tackling. We continue to realize the growth we have talked about with maintaining the expense discipline assuming a well behaved credit environment. So that’s the way I would describe the walk forward of it.

Okay. And, John, you are really not seeing any material expense pressures from here. This feels like a pretty good run rate on expenses.

Yes. We are still maintaining our expectation of a $50 million operating expense run rate through the balance of the year quarterly.

The next question comes from Erik Zwick of Stephens, Inc. Please go ahead.

Maybe first just on Oak Street. When you first announced the acquisition, you mentioned that you could potentially start to move up market in terms of size of the deals that they do, which could potentially have some impact on yields. I know it's still relatively early but just any comments on the average size in yields that you have seen there and whether you have started to kind of go up market at all?

Yes. I would say in their core insurance business, we have seen a couple of bigger deals since we closed the deal and as you get with strong borrowers that are of larger size, they maybe at lower margins than what the core business is. But I would say the bulk of their originations have been consistent with what they were originating pre-transaction. And so yields have been comparable. That said, Erik, I think we are seeing yield pressure on all the business lines and I think they will, Oak Tree will continue to see it as well. But I give that management team credit. They have been able to hold yields pretty strongly. Still realize the growth we expected. So at this point, kind of nothing material or significant but I would expect that as we do bigger deals, that on those specific relationships you will see lower yields than what their overall portfolio is at.

Okay. And next, turning to credit. Most metrics are strong and continue to improve but within the classified bucket, it looks they were up for the second quarter in a row and I know last quarter you mentioned it was mainly one commercial relationship that drove the increase. Any color to what drove the increase here in the first quarter?

Yes. I mean we have seen some movement in and out, Erik. We had one larger deal move out, another larger deal move in. So we have seen some, again some singular credit movement that’s caused those variances. Nothing of particular concern or of significance at this point. But, yes, anytime we see those numbers move around, we are sensitive to it and try to get on top of it quickly.

Got it. Finally, maybe just turning to loans. How was the pipeline as you headed into the second quarter here and first quarter growth was strong. I guess you are still expecting kind of mid to high single digit growth for the full year.

Yes, we are. I think the pipeline continues to be solid going into the second quarter. And we kind of still feel good about that mid to high single digit type organic growth rate. That said, it's still very competitive and we continue to try to see discipline both from a pricing and structure standpoint. So I always put the caveat in there about that, that we would rather not do a deal than to do a deal that’s too high risk. So we will balance those two but at this point we think that guidance is appropriate.

The next question comes from Andy Stapp of Hilliard Lyons. Please go ahead.

I have a two part question regarding the flattening of the yield curve. Number one, how much should it or how should it impact the net interest margin and number two, do you plan to grow your securities book in this environment?

Well, I will take your second question first there on the securities book. It really depends on the growth we see on the loan side, to Claude's earlier comment, our preference is to deploy capital in the loan portfolio we saw on a period end basis the securities book was down about $50 million here as of March 31 versus a year-end. If loan growth trends continue, continue to see good deals with risk appropriate returns than I think it's probably safe to say, you would see the securities portfolio come down similar to what you saw here in the first quarter. Your second question on the yield curve. We disclosed in our Qs and K the similar interest rate sensitivity disclosures to others which are primarily on a parallel shaft. We also run additional scenario that are more of, kind of a slow, bare, flattener type scenario. And we continue to be right around neutral to slightly asset sensitive under those scenarios as well.

The other thing I would mention we are seeing is, and we mentioned this last couple of quarters, is the vast majority of our originations have been variable rate originations which are obviously priced of the shorter end of the curve. So at least at this point the longer end moved down, it's not had a significant impact.

Okay. And given your neutral interest rate sensitive position, do you think the margin can hold in there, there is no fed rate hikes during the year?

Yes. We don’t really give guidance out beyond the near term and the next quarter but as I commented earlier, we are expecting margin to remain relatively stable.

[Operator Instructions] The next question comes from Daniel Cardenas of Raymond James. Please go ahead.

It sounds like things are pretty much on track on the organic growth side. Maybe a quick update on what the M&A environment looks like both for bank and non-bank?

Sure, Dan. This is Claude. The way we are thinking about M&A right now is that we really feel like the work we have done over the last few years, we have positioned the franchise in really the markets and product sets that we were interest in being in. So right now we are most focused on organic growth and the execution of the strategy. We will certainly look at yields if they are strategic and make sense for us either from an asset platform or from a market extension, but I would tell you that’s not the first priority right now. Really it's about organic growth and executing on the core strategy.

Okay. Good. And then in terms of competitiveness. I mean are you seeing any irrational behavior on either the loan or the deposits side in any of your bigger markets?

Yes. I would tell you, it's been interesting. It's been episodic in terms of moves and competitive conditions. We have seen it most competitive lately in what I would call some of the middle market C&I type business where I would say both the rate and structure have been competitive. So we are trying to compete against that but still stay true to our strategy and our risk profile. Commercial real estate continues to stay competitive but I think that plateaued as it relates structure and pricing. And then on the deposit side as well as either loan products, it just tends to be market by market and depending on which competitor may at that point be more aggressive than another. So I would say it's still a market we feel like we can compete in, we can grow in and hit our yields and returns in. But it's still very competitive.

And we have a follow up from Scott Siefers of Sandler O'Neill & Partners. Please go ahead.

I just thought there was something you could just talk a little bit about the $10 billion bogey you guys are kind of slowly inching towards that, I guess, if you remain on your current growth trajectory you are probably a couple of years away. What kinds of things are you doing to prepare for that and is that, I guess a typical question, is that the kind of thing you want to leap over and does that have any bearing on your, perhaps less enthused outlook on M&A?

Well, the answer to the last question first, yes. You know it's one of those where we all get it that if you are going to go, you need to go. And we are very cognizant of that. So we certainly don’t want to do a deal just to do a deal and then put us into a situation where we see lower returns because of the $10 billion issue. So we are sensitive to that. That won't cause us not do a good strategic deal. But the way we look at it, Scott, is we have got probably three to four years of organic growth runway before we would do it on an organic basis. But that said, it's soon enough that we are preparing for it and Tony can kind of speak to some of the things we are doing.

Yes, Scott. We have moved kind of as a company to the next stage from just thinking about it actively doing some things. Primarily making sure our risk and compliance platforms are scalable. We are doing some work around data management. Really getting a handle on a lot of our internal reporting and data management, data governance, primarily as it relates to loans. These are all things that when John talked about the expense run rate that we are creating the ability to invest here without really negatively impacting our overall expense base. So we are doing some things but we are being very measured about it in controlling the pace of our investment because as Claude said, we have got three or four years runway on an organic basis and in M&A you can't really plan. We think that we will be on a good place if something were to materialize, we could turn some dials pretty quickly. But we are staying very measured right now about it.

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

Great. Thanks, Andrew, and again thanks everyone for joining our call today and for your interest in First Financial. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.