Investor Day 2012 Commercial Banking - SNL Financial

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Investor Day 2012 Commercial Banking - SNL Financial

Commercial Banking

C. Douglas Lefferson

EVP & Chief Banking Officer

Investor Day

August 15, 2012


Commercial Banking

41 C&I / owner-occupied CRE and 10 ICRE lenders located across footprint

with concentrations in Cincinnati, Dayton and Indianapolis

10 specialty lenders (franchise, asset based lending and equipment finance)

13 treasury management advisors

Serving over 8,600 commercial clients in Ohio, Indiana and Kentucky markets

Strategic Loan Composition

Strategic Deposit Composition

Dollars in millions

Dollars in millions

$3,480

$5,046

$2,404

$3,557

$464

Franchise

$1,940

$1,053

$1,489

$123

($100)

Commercial Retail Credit Loan Mark /

Other

Total Strategic

Loans

Commercial Retail Total Strategic Deposits

2


Commercial Banking Services

Traditional Lending

Term loans

Lines of credit

Commercial real estate loans

Construction loans

SBA guaranteed loans

Letters of credit

Credit cards

Specialty Lending

Franchise restaurant lending

Equipment finance – leasing

Asset based lending

Bridge financing

Agriculture loans

Deposit Products

Business checking accounts

Business savings accounts

Sweep accounts

Treasury Management Services

Online banking and cash management

Remote deposit

Lockbox collection

Positive pay

ACH blocks

Courier services

FX hedging instruments

3


Management Structure

C. Douglas Lefferson,

EVP & Chief Banking

Officer

Regional

President,

Cincinnati, Ohio

Regional

President, Dayton

& Northern Ohio

Regional

President,

Indiana

SVP Treasury

Management

SVP Investor

CRE

SVP ABL &

Equipment

Finance

President, First

Franchise Capital

C&I RMs

TM Advisors

Business Bankers

C&I RMs

TM Advisors

Business Bankers

C&I RMs

TM Advisors

Business Bankers

Public Funds TMs

TM Sales

Management

ICRE RMs

ICRE Sales

Management

Asset Based

Lending and

Equipment

Finance RMs

Franchise RMs

4


Commercial Loan Composition

Commercial & Industrial

Target loan size is $1 million to $15 million

Increased focus on middle market business clients

(generally up to $30 million revenue)

Specialty finance designed to expand product set

and increase client base

Business banking and SBA lending for smaller

businesses

Real Estate

Target loan size is $1 million to $15 million

Regional and local developers and investors

Dedicated ICRE sales team of experts

Owner occupied real estate is a critical part of

relationship building & retention

Interest rate derivatives

Loan Portfolio by Geography

Loan Composition

Loan Portfolio by Industry

Indiana

41% Greater

Cincinnati / KY

36%

Northern &

Central Ohio

23%

Owner-Occupied

Real Estate

24% Investment Real

Estate

49%

Commercial and

Industrial

18%

Business Banking

5%

Specialty Lending

4%

Accomodations,

Food Service &

Recreation

5%

Management

& Professional

3%

Retail &

Wholesale

Trade

9%

Health Care

and Social

Assistance

7%

Construction

7%

Other (17

industries)

14%

Manufacturing

8%

5

“By Industry” graph excludes equipment leasing

Real Estate

and Rental

and Leasing

47%


Commercial Deposit Composition

Cost of Funds: 0.32% 0.13% (0.19%)

8%

69%

22%

2%

58%

41%

Significant decrease in cost of

funds

Strong sales efforts have

resulted in an increase in noninterest

bearing deposits

Declines in higher-cost time

deposits and transactional

interest-bearing deposits

2Q11

2Q12

Non-Interest Bearing Transactional Interest Bearing Time

6


Competitive Landscape

Highly competitive market, particularly for strong credits

Clients are hesitant given uncertain economic environment; using cash for

capital investments vs. borrowing (de-leveraging)

Maintaining underwriting standards

Total Commercial Loan Balances

Dollars in millions

6.7% Increase

0.9% Increase

Excluding Liberty

acquisition: +2.9%

$1,931

$1,940

$1,868

2Q11 4Q11 2Q12

7


Competitive Landscape

vs. Large Regional Competitors

Local market-based decision making

Tenured decision makers who are

consistent and known in the markets

Relationship focus

Greater personal attention to middlemarket

and small business clients

More responsive and efficient

vs. Smaller Local Competitors

Higher credit and lending capabilities

Larger product set

Greater resources and capital

Ability to handle new laws and

regulations effectively; minimize

impact on client

Local market emphasis keeps us close

to the client as well

8


Strategic Priorities

Asset generation and growth while maintaining credit

and risk management standards

Appropriate management and sales structure

Balance sheet management

Continuous process improvement

Align incentives and compensation with other strategic

objectives

9


Strategic Priorities – Metropolitan Markets

Focus on organic growth and increasing market share through:

Capitalizing on opportunities in Indianapolis and Dayton

Continued penetration of Cincinnati market

Leveraging increased brand awareness and visibility

Continued recruitment of talent

Market Presence – 2004 Market Presence – 2012

10


Revenue Growth - Loans

Top quartile performance targets on production and portfolio size

Actively addressing KPI under-performance

Implementing a sales culture based on results and accountability

Continued growth in Greater Cincinnati region

Beginning to see increased results in Dayton and Indianapolis markets

Broader product offerings – increased contribution from specialty finance products

Increased branding efforts and metro market visibility helping to drive growth

Total Commercial Pipeline

Dollars in millions

37% Increase

$220

$301

2Q11

Note: graph represents end of period “late-stage” pipeline balances

2Q12

11


Revenue Growth – Deposits

Completely re-aligned sales force and re-designed approach in 2012

Separated public funds/institutional sales from core commercial services

Utilizing TM solutions advisor (“hunter”) and regional advisor (“portfolio manager”) approach

Certain advisors assigned to:

Target markets within regions to focus on outside opportunities with prospects

Expand relationships within our current portfolio

Focus on cross-sell opportunities across business lines

Disciplined public fund pricing

Commercial

Public Funds

Dollars in millions

7.2% Increase

Dollars in millions

11.8% Decrease

$606.7

$650.6

$898.4

$793.0

2Q11

2Q12

2Q11

2Q12

Note: excludes $46 million of other deposits managed by the commercial line of business

12


Commercial Client Satisfaction

In-depth interviews, across all regions, with clients +$500,000 in balances

Overall Satisfaction – 87%

First Financial is Proactive – 83%

Would Recommend – 89%

Credit Services Meet Needs – 89%

Deposit and Branch Services Meet Needs – 98%

Website Meets Need – 98%

Client Meets with First Financial Every 4 to 6 Months – 92%

Use First Financial Only for Banking Needs – 42%

13


Efficiency

Right size and align sales force – product specialization

Rationalize the administrative and support functions in line with KPIs and

the revised sales force

Doubled the threshold for loans processed under the Business Banking

model

More efficient and timely for the client

More efficient underwriting process for the Company

Increased local credit approval limits coordinated with credit management

Keeps credit decisions closer to the client

Empowers local decision makers

Commercial specific cross-functional team in place

Identify strategic opportunities

Search for continuous process improvement

Reduce time-to-market for new products and services

14


Summary

Expected Results:

Strong Asset Generation & Greater Efficiency

Increased expectations; strong focus on execution

Originations in June 2012 represent the highest production month ever

Successfully broadened our product offerings

Re-aligned sales force for better focus on strategic execution

Continue to have decision making close to the client

Expanded in core metropolitan markets and continue to have market

share growth opportunities

Leveraged increased brand awareness and visibility

Able to attract talent given strength and opportunities

15


Franchise Lending


Franchise Lending

Acquired in 2009 with Irwin FDIC transaction

Delivered though First Franchise Capital, a wholly-owned subsidiary of First Financial Bank

Premier lender to franchised restaurant industry

Relationship-driven and creative tailored financing solutions to established multi-unit operators

Capacity to grow with experienced team

Operates within defined geographic and concept limits

Loan Profile

National Platform

Franchise Portfolio – $464 million

Real Estate

42%

Commercial &

Industrial

58%

Mid-

Atlantic

21%

Southeast

12%

Midwest

18%

Southwest

20%

Northeast

5%

West

24%

17


Franchise Lending

Established relationships with select and proven concepts that operate nationally or in

diverse regions with consistently-applied operating standards

Targets 10-20 concepts with a finite number of borrowers (franchisees) nationwide

Pricing is generally above standard commercial deals with historically low risk profile

Focus on repeat business – First Franchise Capital is sole or primary lender to many

clients

18


Competitive Landscape

Competitive Position

Major competitors include GE Capital,

TCF Leasing, Bank United, Bank of

America, Wells Fargo and Regions Bank

Increased competition from community

banks looking to grow assets

Renewed focus on refinancing due to

historic low interest rates provides

opportunities and creates challenges

Franchisee uncertainty due to elections

and pending healthcare reform

Competitive Advantages

Considered top 5 lender on any relevant

franchisor list

Strong “Top of Mind” awareness among

franchisees

National presence, but smaller and more

flexible specialty lender

Known for high level of client service

that instills confidence through expertise

and longevity of group

Brand recognition of First Franchise

enhanced by strength and stability of

First Financial

Target exposures fall below large

national bank franchise platforms

19


Biography

C. Douglas Lefferson

Executive Vice President & Chief Banking Officer

Mr. Lefferson has spent his entire career in various positions with First Financial and was

appointed to his current position in 2010 where he has responsibility for the commercial

banking line of business. Prior to his current position, Mr. Lefferson served as Chief

Operating Officer from 2005 – 2010 and as Chief Financial Officer from 2002 – 2005. Mr.

Lefferson is actively involved in several community organizations in the greater Cincinnati

area.

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