Financial Management. Frank Hall. EVP, Chief Financial Officer and Chief Operating Officer. Investor Day August 15, 2012

Transcription

1 Financial Management Frank Hall EVP, Chief Financial Officer and Chief Operating Officer Investor Day August 15, 2012

2 Overview Operating results are discussed absent the impact of acquired loan discounts, accounting valuation changes and FDIC indemnification payments and indemnification asset changes Presentations are organized to provide Overview of the strategy, background and relative context Revenue growth opportunities Expense savings or efficiency opportunities 2

3 Overview Environmental observations Net interest income Noninterest income Noninterest expense Credit Capital Efficiency Initiative Financial Reporting and Management 3

4 Net Interest Income Challenging environment Net interest income earning assets Loan portfolio environmental challenges Competitive pricing pressure Frequency of prepayments and refinancing Good news chance to bid for new business Bad news faster re-pricing of assets even if we retain the business Investment portfolio challenges Reinvestment rates are low Asset class differentiation is not reflected in relative yield Focus needs to be on growth now more than ever! 4

5 Net Interest Income Net interest income liabilities Industry loan to deposit ratio at all-time lows Pricing of deposit liabilities is one remaining margin lever 5

6 Net Interest Income August 2011 Median represents peer median for a select group of in-market competitors 6

7 Net Interest Income July 2012 Median represents peer median for a select group of in-market competitors 7

8 Noninterest Income Fee revenue is largely in a competitive-based pricing range Dependent on overall growth of core business Wealth management presents most significant stand-alone opportunity Always mindful of new opportunities 8

9 Noninterest Expense Near-term impact of branch acquisitions and openings Evaluation of where investments are made New technology Efficiency initiative 9

10 Credit Still subject to volatility Cautious outlook Not sure what normal looks like in the future 10

11 Capital Remain very well capitalized Preliminary analysis under conservative Basel III estimates are strong Sufficient capital for meaningful growth 11

12 Efficiency Initiative Utilizing area-specific KPIs and peer performance data to identify areas for opportunity Sales production comparisons Operating efficiency comparisons Deadline Targeting strategic, operating expense reduction of 5% or more Operating efficiency ratio target remains between 55% to 60% - currently in the mid-60% Timing may be up to 24 months to fully recognize some savings due to contractual or long-term implementation issues More specifics will be shared in the third quarter earnings release 12

13 Financial Reporting and Management Dedicated and integrated with business units and support areas Financial tools Business unit reporting monthly Pricing models integrated with lender incentives and credit quality Profitability model & capacity utilization reporting Aids in staffing for branches and operations areas Driver based planning KPI based accountability 13

14 Management Reporting Evolution Current Continual evolution to enhance analytics and drive business performance Dedicated staff for LOBs Profitability initiative Focus on results KPIs Driver based planning 2005 Implemented funds transfer pricing ALM model 2006 Launched client derivative product Commercial loan pricing model Profitability based Commercial incentive Introduced management reporting Established 5 year planning Streamlined budget process Acquisition integration Product profitability to support Compass Activity based costing Capacity utilization analysis Enhanced management reporting Client profitability Perfect Bank New planning and reporting system 14

15 Financial Reporting and Management Business accountability for operating plans Risks and opportunities Monthly results meetings with CEO and CFO KPI scorecards Measurable indicators of business performance Targets established to drive top quartile performance Compare to public peers and industry data (10Qs, H8, etc.) 15

16 Financial Reporting and Management Driver-based forecast Transparency of future business performance Continual analysis to identify risks and opportunities Promotes idea generation Provides connectivity of resource utilization across departments Simplifies root cause analysis and course correction dialogue 16

17 Financial Reporting and Management Business Execution / Results Business strategy execution Sales focus Performance at KPI targets Focus on results Continual analysis of business performance to identify risks and opportunities Decisioning Analysis Corporate / business priorities Project updates / management Business accountability for operating plans Course correction opportunities Driver based planning Risks/opportunities Profitability analytics Senior finance leadership; cross functional connectivity Dedicated financial analysts for all businesses Strong foundational support Integral elements for performance measurement Reporting Information Data Management KPIs / peer benchmarking Management reporting Client / portfolio segmentation Report design, automation and controls Data and system infrastructure Data mining Activity based costing Centralized data repository Archive management and database structuring Data dictionary by leveraging a user group Process based activities managed within Information Management team IT leadership for centralized data management 17

18 Biography J. Franklin Hall Executive Vice President, Chief Financial Officer & Chief Operating Officer Mr. Hall joined First Financial in 1999 and was appointed to his current position in Prior to joining the Company, he was with Firstar Bank (currently US Bancorp). He is a Certified Public Accountant (inactive) and began his career with the public accounting firm Ernst & Young, LLP. 18