Good morning, and welcome to the First Financial Holdings First Quarter Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I will now turn the call over to Donna Pullen, Senior Vice President of SCBT.

Thank you for calling in today to the First Financial Holdings' earnings conference call. Before we begin, I want to remind our listeners that our discussion contains some forward-looking statements regarding both our financial condition and financial results. We have included some slides for this call that outline our results and our general comments this morning. Let me first refer you to Slide #2 for cautions regarding forward-looking statements and discussion regarding the use of non-GAAP measures. I would now like to introduce Robert Hill, our Chief Executive Officer, who will begin our call today.

Good morning. I'll begin our call today with a few summary comments about our start to 2014. John Pollok, our Chief Financial Officer and Chief Operating Officer, will then provide some detail on our operating performance. And I will wrap up our prepared comments with a brief summary of our merger integration efforts, and we will conclude the call with a Q&A session with the research analyst community. We made substantial progress in many areas in the first quarter. This effort produced record operating earnings of $19.8 million for the quarter, which represents $0.82 per diluted share and a 15.5% increase from a year ago. The quarter was highlighted by improving credit quality, very little levels of credit losses, preferred stock repayment, improved expense management and continued organic growth. Improved performance in these areas resulted in an operating return on average assets of 1.06%, and an operating return on tangible common equity of 15.47%. Net income available to common shareholders totaled $15.8 million for the quarter or $0.66 per diluted share. This was impacted by merger and branding calls totaling $0.16 per diluted share, and preferred stock dividends of $0.04 per share. While our credit quality has been consistently above average and steadily improving, our nonperforming asset levels are higher than we would like. We are making good progress in this area, and the reductions in NPAs are leading to the lower levels of credit cost, which we certainly benefited from this quarter. Classified loans decreased over 4%, and nonperforming assets decreased 11%. We had a good quarter from a total credit cost perspective, with net charge-offs totaling only 5 basis points on an annualized basis for the quarter, and OREO impairments totaling $1.7 million. Opportunities to grow our company organically are very good. We have continued to attract very talented bankers, and our company's unique position in the market in terms of size, market share and responsiveness have really differentiated our bank. Our team increased our non-acquired loan balances by $115 million or 16% on an annualized basis, and we are experiencing very solid organic growth in Savannah, Wilmington, Charlotte and Greenville. We are also experiencing very good growth in Charleston. However, we have tremendous potential for additional growth in the Charleston market. Mortgage and wealth management both performed well. Mortgage produced revenues of $3.3 million for the quarter, and we took additional steps this quarter to improve the strength of our platform. Our wealth area produced $4.5 million in revenues this quarter and significantly increased assets under management. Another significant step for our company was taken this quarter as we retired the $65 million in preferred equity on March 28. Our balance sheet remains very strong, and we have continued opportunities for a reduction in expenses, for revenue growth and improved performance metrics. Based on our performance improvement, we are increasing our dividend to $0.20 per share. I will now turn the call over the John Pollok to give you some detail on our first quarter financial performance.

Thank you, Robert. On Slide #5, we have highlighted for you some of the link quarter changes within our interest-earning asset categories. As with all of our mergers, there's a fair amount of balance sheet restructuring that takes place during their early post-closing periods. The overall interest-earning assets increased by $47 million link quarter, but the increase was mostly in short-term investments. Excluding short-term investments, interest-earning assets decreased by $45 million. This decrease was led by a decline of $189 million in the acquired loan portfolio, but was partially offset by an increase of $115 million in the non-acquired balances. We attribute some of the acquired loan runoff to refinanced loans that we are making, which is showing up in our non-acquired growth rates. Our expectation is that the pace at which the acquired loan portfolio is running off will moderate in the coming quarters as we continue to manage the risk within the combined portfolio. On the pie chart on Slide #6, you can see the categories that make up our earning assets. We had significant liquidity to deploy and a fairly small investment portfolio. We have been very careful with the additions to our investment portfolio, given the potential for a rising rate environment. Our funding mix is particularly strong, with noninterest-bearing DDAs in excess of time deposits. For the quarter, our margin improved to 4.99% due to the continued credit improvement in the acquired loan portfolio, leading to higher yields. Switching to the expense side. Noninterest expense, excluding merger and branding-related expenses, totaled $71.4 million, down $3.1 million as cost saves are being realized. You can see that improvement within our operating efficiency ratio on Slide #7. For the quarter, our operating efficiency ratio, which excludes OREO, loan-related and merger cost, totaled 64%. We hope to get to the low 60s post-conversion. As we've mentioned before, the majority of the cost saves are anticipated during the third quarter after the systems conversion, and we are on track to achieve this savings as modeled. On Slide #8, you can see the improvement in operating earnings per share through our most recent mergers. We are pleased with our progress so far, and continue to work towards $1 per share per quarter, which we anticipate coming after we get past systems conversion. As we've discussed in the past, our branding initiative as South State Corporation and South State Bank are underway, and we will be rolling out these changes beginning this summer. Our total budget for these onetime branding-related expenses totals $4.3 million, of which, $1.3 million has been incurred this quarter with the balance to be incurred during the remaining 3 quarters of this year. I will now turn call back over to Robert for some closing comments.

Thank you, John. Our merger integration plans are certainly on track, and we continue to upgrade our technology and our process and procedures to build a strong, efficient platform for the future. We rolled out the South State Bank branding initiative to our team and the markets in the first quarter, and are very pleased with the response as they now see the enhanced franchise strength that combining our 5 brands into one will have in the Southeast. That concludes our prepared remarks. And so I'll ask the operator to open the call for questions.

[Operator Instructions] Our first question comes from Jefferson Harralson at KBW.

I want to ask a question on the expenses. You improved by $3 million quarter-over-quarter. How much of that was FFCH merger integration? And how much is left to get from FFCH?

Jefferson, this is John. If you kind of look at this quarter, #1 is the goal to get to, is we need to get to $9.5 million in cost saves from FFCH. This quarter, we realized another $1 million in cost saves. So we've achieved a little under $4.5 million of that $9.5 million that we're trying to get to. So from an EPS standpoint, that has about a $0.12 impact on this quarter. So we got about $0.13 or $0.14 to go. We closed 10 branches this quarter. Obviously, we haven't gotten the full effect of that yet. We got 2 branches closing in the second quarter, and then we have 8 closing in the third quarter. And as we've mentioned in the past, our systems conversion is in July. And after that, that's when we will get the majority of the rest of these cost saves. So we feel like we're well on track to achieve that target.

All right, great. And in the meantime, is it -- with the runoff and some books of FFCH, is it possible that you can keep them on book flat? Or should we expect a couple of the combined acquired and non-acquired loan book? Or should we expect a couple of down quarters here?

Yes, I think, as we've said in the past, we're still kind of early in. We think we'll continue to have some runoff through the next few quarters. It's a little hard to tell, but we feel like, by the end of the year, we should really be able to flatten it out. If you go back and look at First Financial before conversion, it was a fair amount of significant runoff happening at that time. So we've been able to slow their runoff. As Robert mentioned earlier, we're getting great loan production there, but we've only tapped the potential that we can get in those markets.

Our next question comes from Christopher Marinac at FIG Partners.

Robert and John, I was just curious if you can talk a little bit about maybe pipeline in the mortgage business, and then also maybe commercial pipeline, just in terms of kind of comparing, kind of what you experienced in the first quarter versus kind of what's teed up for the next couple of quarters.

Chris, this is Robert. Thanks for calling in. I would say fairly consistent. The commercial pipeline right now is right around $400 million. That's really close to where it was at the end of the year. Our mortgage pipeline also very steady. It's about $190 million right now. So overall, the pipeline looks pretty robust. A lot of opportunities for expansion in pretty much every category. I think if you kind of look this quarter, you can see, I mean, we had good growth in C&I, we had good growth in owner-occupied, nonowner occupied, resi growth. So overall, I felt like it was fairly diverse. We're seeing the same thing on the deposit side. We grew about 2,100 new accounts this quarter. And our core funding now is about 74% of our total funding, but we're mostly pleased, which we had $93.4 million increase in noninterest DDA. And I'd say, Chris, outside of loan growth, the one we've probably spent equally as much time on this is just our fee income businesses. And the one that really is gaining a lot of traction is our wealth management area. They've closed new business of about $100 million in assets under management in the first quarter. You saw some of that impact in the fee income, their fee income growth this quarter, more to come there. Feel good about the commercial pipeline, the mortgage and the fee income businesses.

Okay, great. I guess, just one follow-up. As you changed names to South State, are there any additional costs that we should see in the next couple of quarters or will those be kind of small incremental items?

Well, this is John, Chris. As we mentioned in our comments, our total branding budget for the year is about $4.3 million. We've expensed $1.3 million of that, so we've got about $1 million over the next 3 quarters that will come through. In terms of new depreciation on signage or any of that, we really have all that wrapped up in our cost save number, so no new incremental costs associated with that.

Okay. So the $4.3 million covers everything there?

That's correct.

The next question comes from Jennifer Demba of SunTrust Robinson Humphrey.

Another question on the rebranding. You said you got $4.3 million in expenses for that effort this year. Would you anticipate marketing cost being more inflated, just core marketing cost being more inflated over the next 1 to 2 years as you build the new brand awareness, Robert?

Jennifer, we -- we've talked a lot about that. Obviously, there's the fixed asset expenses that we mentioned earlier, but our normal branding and marketing expenses -- our rebranding efforts will be our normal run rate. So we don't expect elevated marketing expenses as we build the new brand. We're going to do that within our normal marketing budget.

Okay. And second question on acquisitions. You said you sort of want to wait until 2015 before you start examining more opportunities. Do you still feel that way? And are you -- what are you seeing in terms of a pipeline? Or are you seeing any pipeline there?

Well, certainly the calls continue, but our message has been really pretty clear for the last year or so, that we want to get through this conversion, make sure we execute well, get to our dollar run rate and then kind of see what's next. And we're not to that finish line yet. So as we get later -- to the latter point of '14 and '15, I think we'll begin to talk about kind of what the next steps are. But we're very focused on the organic growth opportunities that we have, getting the efficiencies from the integration and making sure we hit our performance targets. But I don't -- I think the opportunities are still there, but I think we have better opportunities right now internally to make this merger work.

The next question comes from William Wallace of Raymond James.

I was looking through some of the materials since you've announced the First Federal acquisition, and I don't think we've got any updates on long-term targets. And I'm wondering if you could maybe update us on what are some of your long-term profitability targets are. I'd love to know what long-term ROA targets, efficiency, ROE, maybe even margin, once we kind of get it integrated all the cost saves represented, and then you feel like maybe you're getting some of the efficiencies that could come on the revenue side.

Wally, this is Robert. I think, we've never made any -- we've never made those numbers public. So what I would say is, I think, if you look back in our history that we've historically been a 1 to -- kind of 1 15 [ph] ROA company. And we certainly think we get back to those levels and probably exceed those levels. From a -- we tend to look at return on tangible equity as our kind of our return metric, and we certainly think those numbers will going to be -- they're certainly going to be higher than they have been historically. But we've typically been in a 13% to 15% range kind of pre-downturn range. And we think we're going to get back to the higher-end of that range. And then if you think about an efficiency ratio standpoint, we're going to be down in the low 60s by the time we get to the other side of this integration. And then we think we come up for air, we look for better ways to become more efficient and continue to drive that number down, which we believe there will be more ability to drive it down. So can we get that number down to maybe 60 or slightly below in the years to come? We think that's a possibility.

Wally, this is John. I think if you really look at our balance sheet, there are a number of levers that we still have to pull. We still have about $100 million in troughs capital. If you look at the yield on that, it's almost 6%. There's a nice lever to pull there. We have a tremendous amount of liquidity on our balance sheet. As we mentioned in our prepared comments is, we're not going to go out there in the low-yield environment and stretch from that. We want to keep continuing to put that firepower there. And then lastly, if credit continues to improve, obviously, when you look at the acquisitions that we've made, we have still like significant amount of credit reserve that's there. So we feel like that we've got a lot of levers to pull as we try to figure out longer-term what some of those targets look like. Ultimately, today, we want to get to that dollar per quarter run rate in earnings.

We also -- as we continue with return level, we're building capital at a pretty nice clip, but we had a nice increase in our tangible book value per share this quarter. And as our tangible common levels continue to grow, John, we have what? $102 million in trust preferred securities.

Right at $100 million, that's right.

That's -- I think around just under 6% cost on that. So there's a lot of opportunity on the balance sheet.

Okay. And then on the -- in the mortgage business, you guys are certainly bucking the trend of what we're seeing across the industry. Maybe you could speak a little bit about how you're picking up so much market share there, or if there's something else going on internally that's allowing you to drive such meaningful increases in the revenue line there quarter-over-quarter?

Wally, this is John. Obviously, when you put these 2 companies together, SCBT and First Financial, we have such a dominant footprint in mortgage. I think as we've mentioned in past calls is, in the legacy SCBT, we were fairly vanilla in mortgage. We sold everything, service and release. We felt like we were leaving a fair amount of fee income on the table. First Financial had the platform in place to be able to sell direct, so we're beginning to see some of those efficiencies come through the revenue side. And then obviously, the new piece that we got in the First Financial is now we have the servicing portfolio. And we feel like the servicing business is going to be a key component for us on the mortgage revenue. So really good production. If you look at our production last quarter, we really started focusing last year on purchase business. So we got a lot of purchase business coming through. If you look at our state, in general, home sales are up significantly, construction's up. There weren't a lot of developed lots over the last number of years, so a lot of these subdivisions that were sitting vacant had a lot of new construction in it. So I think, just the combination of the 2 companies together, plus what we're seeing out in the economy, more people are beginning to sell their houses in Ohio, in the Northeast and buying down on the coast. So a lot of really good things coming together on that side.

So was your production up in the first quarter compared to the fourth quarter?

It was, yes. And our pipeline's building.

Okay. And then you mentioned the higher margin by selling direct. So you're now selling direct?

That's correct.

Did you -- were you signed right at the end of the quarter? So do we have a full quarter of impact from the higher margins there?

Probably not. You don't just dump it all in at once. You've got different types of loans, so we still got a little ways to go there. Ultimately, in mortgage, we'll be through the operational conversion by the end of the third quarter, have everything on the same origination platform, have all those loans going into the servicing bucket. So we got a little bit more work to do there. But by the third quarter, Wally we really ought to have it dialed in terms of all the efficiencies.

Okay. And is that -- remind me, is that business, is it best efforts or mandatory delivery?

We do a little bit of both. We do a little bit of both of it, but selling direct, obviously, you pick up a lot there. So you are able to -- in a best efforts environment, basically, you hedge every loan. And so you're giving up 20 to 25 basis points on each of those loans. But being able to sell direct, sell it in a pool, sell it at the cash window, it's just a much more efficient process.

Great. So is it more weighted to best efforts then?

No, it's not. It's not now. No, it is not.

Our next question comes from Blair Brantley at BB&T Capital Markets.

I had a question on earning asset growth and how we should be thinking about that versus kind of the Q1 levels going forward? Is there a room for growth? Or it's just as the runoff occurs, do we see that trending down before kind of finding like a bottom closer towards the end of 2014, early 2015?

Blair, this is John. Yes. I think as we've said in the past, it's going to be flat to down some. Obviously, with the amount of cash that we have, we got a number of levers we could pull. But it should be, hopefully, by the end of the year, really begin to flatten out. Really the story this year, I think, to get to that dollar run rate is to get these cost saves. I mean that's ultimately what we've got to do. I think, as -- you've all seen us in the past, is our focus is to make sure we have a good sound balance sheet. So for example, towards the end of last year, we went in and sold a fair amount out of the legacy First Financial investment portfolio because it didn't fit our risk profile. We obviously gave up income doing that. And I think what you'll find on the loan side, we're going to do the same thing. We want to get the type of business that we want, we want good core business, we want relationship business. And so we're going to continue to move that out. I think as Robert commented on the loan pipeline, we feel we got really good momentum in the loan pipeline, but as you know, it's a little hard to tell exactly when all that's going to level out.

Okay. And then in terms of the growth this quarter for the legacy portfolio, how much of that was driven by transfers from the acquired book?

That's a little hard to say, but we had 16% growth. I would tell you that we feel like, at least, 10% of that was pure legacy growth. You can see in the -- especially in the residential bucket, that's where a fair amount of the movement's going to be. As you know, First Financial was a thrift. There was a lot of on-balance sheet mortgage business. And so we feel like, at least for this quarter, is that organic piece of it, netting out the transfers, is probably still somewhere around 10%.

The next question comes from Peyton Green at Sterne Agee.

Just wondered if -- based on kind of your commentary about the economy, you would expect the legacy loan number to tick up, or are you just that internally focused that's still going to be a little bit of a break on loan growth?

You mean the non-acquired loan growth? Is that what you...

Yes, yes, exactly. I mean, kind of backing out the transfers and just thinking about SCBT legacy.

Yes. We felt like kind of coming into the year. And I think we've said maybe even in our last call, the high single-digits kind of -- mid to high single-digits felt about right. It seems to be the pipeline as robust as it was at the early part of the year. So I think that number still feels about right. If you kind of back out the transfers, which, again, are hard to exactly do. But we felt like on a standalone basis, that high single-digit number still feels pretty good.

Okay. And then with regard to the troughs, was that -- is that something that has been communicated by you in your past regulatory dealings with the approval of the merger and so forth, so that you wouldn't have to necessarily go through another kind of process to get that done? I mean, is that something that's at your discretion or do you have to get prior approval?

Well, this is John. Obviously, what we will do is as we get to the other side of the merger, and if you've heard people talk about acquisitions and when is that going to happen is, we're going to update our capital plans at that time. So I think my comments around the troughs were, as you look for levers to pull in the future, as Robert mentioned, we're now really beginning to accumulate a lot of tangible equity on the balance sheet. And you see the expense of that is that's a lever that we feel like we can pull. I think from a regulatory standpoint, hopefully, you have some comfort to see how fast we got the preferred equity paid off. If you think about it, the third quarter, we didn't have a full quarter of First Financial end [ph], in the fourth quarter, was our first full quarter with the combined balance sheet together. So we feel very good about our relationships with the regulators. But I think what we'll do in the fall, as we get to the other side of the conversion and kind of figure out what's next, we'll make that kind of part of our capital planning process.

And I think, where we are overall from a capital management perspective is if we can generate the return on tangible equity numbers that we hoped to, post-integration, that we're going to be accumulating capital at a pretty nice rate. And so we're just -- I think the next step for us is what's the highest and best use in terms of investment and the returns on that capital.

Okay, great. And then, I guess, I mean, compared to how you felt 90 days ago or 180 days ago, I mean, how do they like the economic landscape is in the footprint? And then maybe, secondarily, how do you think the productive capacity is at First Financial in terms of the non-SCBT part historically? I mean, is there a capacity improving? Are they able to produce more loan volume maybe than they were 6 to 9 months ago?

Well, this is Robert. I'll take the first, the economic piece is, I would say, we continue -- the economies in where we operate continues to get more traction. Now I will say this, I think it's a have and a have-not market is the, the markets that are robust, the Charlottes, and the Charlestons and the Greenvilles and Savannahs of the world are doing very well. The more rural part of our franchise, which is a fairly small part, but still a part are laboring more for town employment, and not a lot of job growth. But if -- but most of our growth is coming in the more metropolitan markets. They're very strong. You look at, like, BMW's expansion in the upstate of South Carolina is going to be the largest plant in the world. They're going to go from 300,000 a year in production to 450,000. The manufacturing sector in many of our markets is rebounding pretty nicely. Just in South Carolina, manufacturing growth in terms of all new job growth was 60% of the new jobs and 80% of the investment. So we're starting to see a real resurgence in the capital investments spending on the business side. Now we've seen it on the residential side for a while, it's been getting it -- and you take a market like Charleston, of all the building permits in the state of South Carolina last month, 1/3 of them were just in Charleston. So I feel like the markets that we're in continue to get lags, the residential market continues to build, the piece that was missing was commercial and business investment, and we're starting to see that pick up now as well. So I'd say, overall, we feel better. In terms of the First Federal productivity level, obviously, when you go through mergers like this there are a lot of changes. But the line part of our company really, immediately after announcement and closing, we put all that together. So our teams now, even though they have 2 different flags in front of the branches still, they've really been one team for almost a year. So the pipelines are picking up. So I'd say, there was certainly an initial slowdown. But what we saw out of Charleston and the legacy First Federal franchise in the first quarter is very encouraging. But I'll tell you, I think it's nowhere near its potential. It's -- we've got -- if we can get it producing at the level that some of our other regions are with the market share and the branch network we have, that can be a strong organic growth generator for us for a long, long time.

Okay. So I mean, that could potentially get the growth rate, not this year necessarily, but if things work out, certainly moving into next year, you could be mid-teens kind of organic loan growth rate?

Well, I think it's too early to say but what -- obviously, it depends on what happens in the other markets. But I think that they're -- we are doing better in our legacy First Federal markets but the potential that we have, we're nowhere near it. So what is that in terms of net growth? I'm not totally sure at this stage. But all I know is there's a lot more to be had.

Peyton, if you look at the branch map today and you look at our footprint, what we've always said in the past is we've always felt like we could out-people and out-service the large guys. And now we're on par with convenience. So having dominate market share in all of these markets and a lot of these companies that have offices around the states is just going to make it more convenient. And I think that is a very, very unique thing when you look at our company today.

And just to compare 2 markets, you take the upstate of South Carolina, the Greenville market, well, we have good share and a good branch network, but it's probably half of what we have, branch network-wise and asset-wise in the Charleston MSA is we're doing about 3x the production in the Greenville market that we're doing in the Charleston market.

And that's 3x? So that's about half the infrastructure, so to speak?

That's right.

, Wow. Okay. And then John, for you. How should think about the margin burn over the next year, 1.5 years with the purchase accounting marks?

Well, it's still early. I think, as we've said in the past, we've still got credit marks that are pretty high. Those are still very high. We have a lot of negative accretion running through the noninterest income side. Obviously, as these lost year agreements expire, that goes away. So I still think, we've got a lot of wind at our back in terms of our margin. Obviously, when you're sitting on the amount of liquidity that we have -- that we haven't put to work, that's going to help a tremendous amount, but I just think we still got a good long ways to go on that. We're not through the first year with First Financial. The reserve there continues to hold in extremely well. So I think if you look at the margin slide we have, we have a pretty good range on there. Hopefully, we're going to continue to be in that range that we have on our margin slide.

The next question comes from Kevin Reynolds at Wunderlich Securities.

Most of my questions have been asked and answered. I guess, just sort of talking about -- you noted that the new loan yields were down 15 basis points sequentially. And I'm just curious about that. Like, what is it that's driving that? Is it just the pace or organic loan growth and -- or is it the competitive environment? Has anything changed out there? And maybe you can wrap a broader competitive discussion in that, if you'd like, just to talk about where seeing from some of your competitors, both in terms of the shorter duration, commercial stuff, and maybe the longer-dated fixed rate type lending that we've heard so much about across this earnings season.

Kevin, this is John. I'll start on the margin and then flip it over to Robert in terms of the pipeline. If you look link quarter, it was down. I think the main driver there is just a lot more residential production. As we've mentioned, First Financial being historical thrift, there's a lot more resi there. So that definitely had an impact on it -- on a linked quarter.

Yes, I think in terms of the pipeline and the new production, we're still seeing our new production come in on average, even with the residential, north of 4. And so we -- I think that, obviously, there's -- it's always been a competitive environment, especially for the credit quality that we expect. But overall, still feel pretty good about our yields. I'd say our mix needs to change more. In the first quarter, it was, I think, mainly our margins were pulled down because of the residential piece and the growth there.

Okay, okay. So but there hasn't -- you haven't noticed any material change, one way or another, in terms of the intensity of competition over the last, say, 3 months, 6 months? I guess, just going back to last year when the Fed first started talking about tapering, has there been any change on the part of competitors in terms of the types of pricing that they're going after out there?

I think, one of issues is so many banks have so much liquidity they're trying to kind of put it to work at any cost. So it is fairly competitive from a pricing perspective, but I think there's more competitive pressure where we see it more. Where we walk away is where there's the long term fixed rate. We're seeing some do some 10, 15-year fixed rate financing, and we're just not playing much in that arena.

Our next question comes from Jefferson Harralson at KBW.

I just want to follow-up on the troughs opportunity you guys are talking about. At 6%, it's hard to replace that because from an after-tax basis, if you were to repay or pay it down. And if so, would you just run your common to be your total Tier 1 ratio, it seems like that 6% trough sitting there is actually relatively efficient from the outside looking in. I just wanted to see if you would comment on that.

Jefferson, this is John. I think it is efficient. I think when you look at how fast we're going to build tangible book value, at some point, it's a lever that we can pull. Obviously, the larger you get, you can leverage that capital for a while, but you can't leverage it forever. So as I mentioned earlier, I think, as we do our capital planning process, we'll take a look at it. $43 million of it is something we inherited through the First Financial transaction and it's really at 7%. So maybe we don't retire it all, maybe we begin to look at pieces of it, but if you -- ultimately are not going to leverage it at some point down the road. We just believe that building our equity with pure common tangible with -- when you look at the earnings that we have, that at the end of the day, that's a lever we possibly will pull. But again, we'll look at it as we do our next capital plan.

The next question comes from William Wallace at Raymond James.

Just one quick follow-up. John, the $1 quarterly EPS run rate that you're talking about, is that what you need to hit your original EPS accretion in tangible book value payback targets with the First Financial deal? Or do you need growth on top of that to hit those targets?

I do not. We do not.

You do not need growth? You just need the $1?

That's correct.

And then in your commentary, you sounded like you were suggesting that you would expect to possibly hit that in the fourth quarter once after the cost saves related to the conversion.

I think what we've said, fourth quarter, first quarter, we feel good that we ought to be somewhere in that range.

And then your cost saves, the $9 million that you need, it sounds like you might be able to hit that with the cost savings around the conversion, is that correct?

Well, it's $9.5 million, so we need to get to $9.5 million. And we're going to do the conversion in the middle of the third quarter. So you get past the conversion, but you're still going to have some duplicate systems that run through the end of the quarter. So we feel like by the end of the third quarter, definitely by the fourth quarter, we ought to have it all done.

The $9.5 million that you're referencing, that is the total cost base that you originally targeted, which were originally going to be partly '14 and then a little bit less in 2015? So in other words, you're ahead of budget, you expect already?

I would say, we're maybe a tad ahead. But feel pretty much on track.

[Operator Instructions] As there are no further questions, I will now turn the call back over to John Pollok.

Thanks, everyone for your time today. We wanted to remind you, we will be participating in the Gulf South Bank Conference in New Orleans, which begins on May 12 . And also, we'll be participating in the SunTrust Robinson Humphrey Financial Services UnConference in New York on May 20. We look forward to reporting to you next quarter.

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