First Financial Bancorp. (FFBC) 23 Apr 212021 Q1 Earnings call transcript

Good morning, and welcome to the First Financial Bancorp First Quarter 2021 Earnings Conference Reference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I’d now like to turn the conference over to Scott Crawley, Corporate Controller. Please go ahead.

Jason. Thanks, and discuss joining quarter First results. everyone, conference on XXXX you to call Financial thank morning, us for today’s financial Good Bancorp’s first on Bill Harrod, President Credit Officer. Archie Jamie Participating Chief Chief will Executive Anderson, and Chief Officer; Brown, Officer; Financial call today’s and be Both release section. Relations yesterday we and presentation accompanying slide Investor the available under on the press are our issued the website www.bankatfirst.com

in make the slides accompanying reference today’s during will We contained call. to presentation the

the circumstances forward-looking for as the The updating XXXX I’ll now statement of to after provide accurate of first today to be refer XX, in as filings turn the will quarter will release contained any SEC the please call a well XXXX, as is Additionally, information Brown. to we and over factors. statements earnings disclosure not or this we discussion company’s forward-looking our Archie call. March facts risk full reflect

us Thank and you, our call. once ability morning, thank we everyone, reflects Yesterday quarter, and Scott. deliver value for to Good consistent shareholders. our earnings results strong first for on again afternoon, which the today’s our announced financial to joining you

at accelerated remains time led for stimulus, the to uncertainty pandemic, vaccine this which is Reserve ongoing economy, fiscal to our While the sentiment distribution, last to contrast unprecedented and the our Federal due accommodative optimism an COVID have widespread stark in year.

costs. interest in after loan to are challenges the sentiment quarter ongoing operating quarter, non-recurring business being we very that optimistic an change muted first demand. most a items; reflects remove to the and environment this due and for result improved despite adjusted Our for recent low robust mortgage climates, operating performance Highlights as more of strong rates of wealth presents non-interest $X.XX, credit and quarter foreign of on and the expected ratio. to higher included was income Net X.XX% healthy seasonal demand, and due earnings management activity significantly income assets by lower bolstered was a Despite expenses declines, fees. XX% efficiency lower per average exchange share return

adjusted and resulted in $X.X non-interest from In ratio. the expenses million addition, declined a efficiency sub-XX% linked quarter

were As million economy. provision quarter, loans, of and assets are an credit with low allowance losses credit excluding I quarter, expense mentioned, X.XX% of from various increased the actions for during in significantly, improved resulted PPP. however borrowers total has costs outlook of in the and during improved overall our the Classified seeing benefits our the stimulus credit $X

a net slightly previous relationship. customer charge-offs first single driven While increased from by quarter this quarters, was

outlook, continue in progress for expect credit our the the to losses be continue with we’ve allowance overall the credit over pleased to reducing our course made we XXXX. Given to of decline I modifications CARES total total X.X% the or making $XXX end with Act loan million million, at up modifications. loans, Active first $XXX of deferrals. of or of totaled XX% these quarter loan the loans

loan year. to modifications with of steadily the decline We through quarter expect balances third this

with an As March loans of the you protection $XXX second active average for first through payment quarter fee originated program. And million period draw of in over again an XX, was the we know, PPP X.X%.

in round forgiveness expect through to payoffs for of flow this year. remainder We this the

loan loan to HELOC liquidity, due for and quarter payoffs, Excluding PPP demand. mortgage muted increased declined activity balances accelerated and the borrower business slightly

the As acceleration in growth a trends, second with result the of anticipate some year. slower near-term, the of these in we half

will Absent in last charge likely record loan, first remained over us led continue anticipate our a deposit December. in shares capital our Jamie a results. increasing stimulus details up to near-term. the The strong balances capital demand approximately second anticipated first quarter I’ll the anticipate growth after repurchase recent the of with quarter. alternatives, businesses And as additional of through discuss capital second levels XXX,XXX service Jamie? priority As quarter. quarter We stimulus during and in during improved package suppress standpoint, levels approved the average forward-looking passage call XX, and the bill. This outlook turn Jamie’s credit higher current commentary. combination of From wrap the ratios the income most after deployment by to our activity I’ll to some growth our of deposits, the now consumers to were the Congress buyback discussion further quarter of of quarter. the the holding balance additional March with we result and

and Slides you, quarter and everyone. morning XXXX of summary Thank first results. good Archie a our X X provide

by encouraged the we Earnings strong elevated results. were moderated. and remained income were quarter margin As expense stabilized, Archie our fee solid as first mentioned, interest net provision

to addition, our remained expense efficiency quarter, XX%. linked decrease the below compared ratio our base and In

expected, point net Lower during stabilized loan continued pressure and FTE As net to core in nine basis decline yields margin the asset a an fees interest margin on on basis. interest lead quarter. total

by volatility partially were Well, some to to offset the there margin periods. total due declines core be will in expect margin fees, slightly in we coming loan cost reductions. these deposit decline However,

exceeded headwinds. banking mortgage expectations despite income, seasonal fee Regarding

primarily income COVID-related million and Bannockburn wealth a assets income and single during addition, and during strong management while to migration. charge-off another quarter In grew credit had increased the charge-offs period. classified and, of foreign $X exchange the period Net trust due

we absorb levels these were reserve negatively, current quarters, previous largely credit than believe more further in XXXX. any in and are to deterioration our adequate While these continue events anticipated trended to

capitalize conditions XXX,XXX shares and quarter. addition, during repurchase approximately on the In market we

strong remain internal and excess Our ratios both capital regulatory of are in targets. and

performance. for items. Highlighting earnings. another million million of and understanding per excludes net adjusted quarter, to these and future. Slide earnings to both to which important long our We for are that we our balance $X.X of or items severance was And ability continue indicate GAAP million income to well $X.XX $XX foreseeable share believe the testing capital the our Adjusted our $X.X reconciles X stress costs, the nonrecurring continue positioned maintain levels results that our to believe term. quarterly for sheet near is

earnings assets X, on average As to adjusted average on depicted equate these X.XX% return equity on of a and a of return common tangible Slide XX.X%.

diligently very remains adjusted reflecting manage XX.X% our to ability strong, our ratio addition, efficiency expenses. In

low to higher In to contributed in the continue on period decline we quarter, to asset interest declining yields points the These Turning to net interest yields, yields, of decline and mix. impact price a rate as related as mix from basic PPP cost in the mix net as basis outpaced asset lower deployed balance of primarily lower five strategic sheet. reflect and deposit basis from to period. deposits. shift points period nine during asset continues Despite lower decline the as we from total margin, lower CDs This Similar we to cost six a fees, basis well related points. which core increased margin to to the forgiveness linked-quarter to deposits, X securities aggressively to the costs funding rate fees. in the these negatively which The declines impact environment in response liquidity the during XX asset investment basis costs was interest X, changes fourth higher declined very excess the lower including that overall Slides margin points to in loan and X.X%. declined pleased adjustments, were decreased yields mix our funding

more is Slide and current expected to XX to pricing as gradual While quarter. some linked mix approach coming periods, balance loan floor. decline additional compared we the we our illustrates in expected our expect the be changes this

on and slightly the modest well and from as declines Excluding XX cost deposit driven transactional decline pleased PPP mortgage by in increase declined the million loans during in of of was with our the a mix deposits. $XXX period. end loan in trajectory a deposit an annualized by period during loans in deposit increased consumer basis low balances deposits as increase total, In grew loans, balances fourth balances C&I average We as ICRE average remain Slide quarter. first in increases the of progression the average loans. quarter, transactional balances, as primarily deposit an very offset shows XX%

stimulus tax funding Slide on based We million we pricing, another XX noninterest In to income bearing checks. deposits quarter our and highlights receive our focused remain market the addition, for $XXX will quarter. as noninterest and adjustments necessary deposit any grew round conditions refunds clients make the needs. of on continue during and

back decrease and driven with the a and remain pleased our rebound trajectory that fees salaries previously, income on driven to fee from well the strong additional in quarter the highlighted of Despite is during lower and fee with first core due and line the mentioned in this the incentive also of benefits banking Seasonal stimulus remained linked tied compensation declined care year. remained period, will needed Slide management half deposit the decline in mortgage was round government elevated XX. expectations period. in for Noninterest expenses elevated health and compared by to quarter quarter were the wealth were I by our income income incentive and increase as fees. As of the to optimistic income. charge service professional We when exchange high that expense costs. foreign headwinds increased the as we prior the compensation Overall

Slide XX. to Turning now

offset loans the allowance, from annualized The a fourth ACL percentage economic a to quarter driven expense relationship. Moody’s in the charge-offs million $XXX driven basis, improved of total utilized linked by points in net which utilizes single decline the improved on forecast first of The end as funded for in a at of baseline an the provision by credit includes $X resulted and $X million quarter. which total related model unfunded charge elevated Our and partially were XX Net March, losses. which forecast reserves model provision was economic both million basis the forecasts, a quarter to increased from and charge-offs. released primarily was by

XXXX. the from on And ACL credit reserve for model. credit migration the in Borrowing assets The resulted of related as stress period. shown at some potential expense this this we classified lower for $XX.X time, unforeseen, point led in Slide COVID to we’ve as stress believe of bill the the significant negative in our pandemic risk Additionally, during expect provision levels increased migration million, captured related XX, credit we XXXX. remainder something future in rating

ratios regulatory minimums and ratios internal Finally, and XX excess capital of in All XX targets. shown strong. remain as remain Slides capital on

decline a March book tangible our resulted during common to in rates ratio and However, period. of a in decrease our other value at end the the in and slight and interest equity the income comprehensive led tangible shift

during In we program buyback to quarter again, any changes we term did the anticipate our near resumed XXX,XXX and addition, common repurchase dividend. approximately share the Once not shares.

turn our to outlook progresses. related for However, going various as it will commentary Archie? back evaluate over I’ll now year actions capital forward. continue we the to Archie to

Thank you, Jamie.

found as be $XXX Average we PPP forgiveness balances Before we remarks, the deposit as to low further Slide activity. to quarter interest payoffs and second further securities year. are the prepared want XX. over be associated continue the portfolios to to balances are PPP net acceleration recognition I additional term stabilize the are increase million on can Loan our expected our flat fee in of positively The we expect without expect of remainder certain by single-digit impacted stimulus back the in see we to forward-looking growth half margin to balances remain year. further the projected is through the approximately expected which by of on into comment and get near end as guidance, pressure excluding

to fees, portfolio. volatile the subsequent to well interest environment balance Excluding, margin pressure excess variables the such we as purchase our and loan as PPP securities expect under increases our from the on liquidity low more fees, accounting rate and the be as sheet modest

decline partially income, fee expect throughout credit, XXXX. the performance strong Specific continued seasonal offset Regarding continue by on mortgage we the premiums. provision to volume with pressure to expense we increases expect to

are under Foreign consistent we modest interchange remain as with quarter given But activity. pressure growth charges customer prior deposit exchange stimulus income service revenues our in should expect spending and accelerates. some remain to expect

this near We fee expect fluctuate some expenses to term, income. quarter with the over the could be prior consistent with

with over the to the started We deployment year. repurchases into continue associates collaborative office look will an of time year workplace. their And forward safe we’re we the locations. pleased to to and share we to from our transition last create evaluate outlook Overall, implementing this lessons improved including learned over back past performance efficient, physical and capital Lastly, opportunities year. remainder the

our national clients and believe we’re industry to the we economies our we’ll to now questions. to leading deliver local improve, open call to positioned returns up As for that, With services well continue and Jason? shareholders.

with you. [Operator first go Thank from Sandler. comes ahead. Please Our Scott Instructions] question Siefers Piper

taking. for Thanks guys. morning, Good

Hi, Scott.

be, that XX%, guess couple charge-offs been range, back last with basis revert like you at just I has forward question cited? the on generally you had expect I of guess, I pardon forward? further at guess, for Is to, Or and of sort the any then just look points to me was sort to that expectation resolved? charges least first reasonable fully to look charge-offs, net that quarters, and something at XX% to going would

Yes, back from on to down levels Scott. the quarter rate now. We seeing expect we’re based to what would come charge-off right first

You normal of more answer that that you have Bill, give And an talk about the of to there. the kind I’ll you’re Bill? in range let credit resolution describing. specifically maybe

Archie. Yes, how Scott? absolutely. Hi, are Thanks, doing, you

you? are How

– malpractice. the of time, that with carrier. the were the it between a from relationship customer led And and us Good. bank, the we there cut borrower, that deal Group. had an a Over medical some breakdown. agency aggregator our longtime morphed carrier was of issues traditional Yes, Finance this our of And some to Commercial into and deal

should us after So this quarter behind all or discharge. this after be

Okay.

So conclusions. kind this impacted. kind special of enough is of Fair to COVID me even sort areas any mean, strikes really a that this it’s I of, would related situation. be

we outside if Scott, terms was were would of in provision. provision, led probably Yes, something COVID it it – completely we because more outcome but that, related, it we’d think a I to say of the different probably have think, had

Yes.

And certainly I Thank think you on look for the what’s the second commercial? to on and side, maybe, all just the what of to then half/XXXX And expect recovery Okay. half the of as you can consumer you versus end, on where provide going side. we those sort to that. color waiting that commercial utilization to sort year, Perfect. we’re is, might in are of we the maybe second then as this for go typical rates any currently recovery where number a look understand

I’m rates? utilization on Scott, you sorry, said the first part,

rates. utilization commercial Yes,

on. things in – Yes. of Scott, you year, demand mean, we’re mean, the several And up. think sure we we Certainly in that’s liquidity got year. record, sitting some would move I going firm we the both through think that then there There’s making sitting happening. start clarity start are balance to still I in getting half consumer deposit I some around the business half they’ll but disruptions they’ll pandemic that would think final supply have better still, work the seeing is on have footing. end back get we’re think, balances accounts, all to the and and think back to, that the sheets, you to and of

Perfect. sense. Makes Yes.

Okay, guys very thank you much.

Yes. Thanks, Scott.

McGratty is question ahead. KBW. next go from Please The Chris from

guys. morning good Hey,

Hi, Chris?

balance kind bond a Jamie portfolio of loan the you maybe expectation to add sheet just to stay question kind on start and book flat. of the with

an for quarters? upward I mean, remix expect couple all to have just we kind of Given in is, the liquidity assets bias? do a earning you Or

the going now, right so investments the we’re mean, bond to to I Yes, securities. book add to

up. And so will that go

around now investment $X is right billion for targeted security. Our balance

yes, that earning assets staying period-to-period amount. will that’s So just loan relatively up flat. with by overall, And go

that, Chris, probably And going about about maybe side, security think dilute in you so margin, on maybe have reinvesting X.XX%. from your – net an the to next you’re we’re X% probably about when question interest margin slightly. that a that’s when the margin talking we’re the when – to When on right you around that, somewhere think and now, the effect getting range, about

see some down not moved going We room as side, had margin. that And the expecting. had on that that in at dilutive we And points. repricing the room as were a loan you were on we so on seeing the deposit We we here much move XX large is to a points basis costs deposit that, deposit move – forward. when there’s well. obviously, could we’re we bit XX little to coming. knew, down side a And you to and the first to we about And look basis quarter starts then from that think still side, the of

two the get it that one to that we we points, all down. just down but by bit can time little here three next two or So basis in takes think quarter, over quarters get three not a another of or

the So margin some on see that from to work the going a we’re in repricing pressure quarter, the given just rate loan in perspective the that book, continued putting liquidity securities to second on just some and side. excess

Thanks. great Okay, color. that’s

a few your the You efficiency ratio in prepared guys remarks. times referenced

the environment, clarification, Just a expectation the adjusted is XX? to just that or expense below reported number? question And can the flat, this is stay mean, about a number that near-term that, I relative the in then you

Yes.

So that’s adjusted the number. relative to

yes, we’re the about talking talking number. whenever So about operating we’re that,

that back up expenses of think maybe expenses yes, year. here we half short in the as back you then the flat then the half take We in So may the of back little a in come the bit the to those in relatively T&E year. start term, the bit, of a term, start year, it’s a number, up we’ll up bit. back the flat. And see But half remain operating bit, little just the in and off a and see to short little open things little

from side, here efficiency that and we we mean, And and then can additional securities Yes. fee Hopefully, slightly see the revenue maybe will on revenue I with certainly income, ratio improving hold that book. stick. the

do were and balances kind and the quarter have the last come what be on that maybe also quarter average in one might fees still then of the you And next? PPP, in then the Okay. housekeeping the to

Yes.

$XX at in PPP, of in round the those Chris, this fees that to – unearned We the million on in the right come of will think of second end we’re balances going of a remainder the the average of have the of but quarter, the to round last bulk about me. we we’re side. come we and So be low still about year. the fees actually and have I from over in first don’t is front expecting have the talking quarter little that But

the kind has forgiveness this with of wrapping Just kicked up as last kind round, quite the hasn’t of much. of round really kind first in in the

quarter, if overall, and think come out – quarter. fourth two-thirds other think it’s one-third those, the the we trying the we to in So those project then and roughly third maybe of be will second spread you’re in

Thanks, Jamie. right. All

is Jon Please from from question next RBC. The ahead. Arfstrom go

Good Thanks. morning, guys.

Just bit little talk maybe maybe on about ago. a you up little bit a commercial pipelines following about, Scott’s relative quarter to question, the what look talk they and a like

is in Jon, our Sure. we’re is especially recent pipeline even more Actually pipeline this seeing was slightly than ago. in to improved quarter it is Archie. activity, up. that And overall the a higher weeks, move starting

flattish. think some we’re we in its stuff again, a But momentum think in near chain, to more So is and we back little term, the things half. improved some through, worked starting that the supply that see way all

some We will of see group. out start to growth that

the would environment, How maybe quarter a ago? describe to relative competitive also you Well.

Highly very competitive. I mean – on and it’s very, - when structure. it’s mean, pricing I you competitive

our highly a side to more competitive right loans competing the structuring on we’re now. it’s to stick to price, little but have disciplines probably We’re trying but deals, of for we on when

is a doing? that you And touch finance how Can business franchise second? on for

well the know now. on in you have color, But that little maybe little got the portfolio portfolio just deck. color as give Bill we’ve a how can looking maybe give Bill We’ll slide a is Yes. I on a –

COVID the and well our book restaurants. and very, has in quick-serve Yes. The especially very delivery, franchise our pandemic, through the performed

normal So the new they during the adapted pandemic. very quickly to

the talked And the Corral, but stores things the is Denny’s have plans GC now. this about a performance made the be the downs Corral end open IHOPs this IHOP not our the are being but some Denny’s, reopen. IHOP all of nicely of at are them all stores of also Denny’s and Not their are Golden place are the starting bulk the all and they Golden very in and of sit returns and lot but XXXX some Golden Denny’s, of and side, that. of Corral we’re IHOP progress little past a as format see like QX through the year. Golden in the those by and we’ve portfolio to have earlier open bit on and the quarter. We the and Corral, than has in that sit QX on been, level, should rebounding And down results with that

the hungry, me making by It’s way.

classified about Just on or can I touch – you bit, touch the couple there anything unique but a going Can more. little you’ve know increase? you asset talked on a that’s different?

into look where appropriate. retail of on of portfolio out, feel improving down in that in the as the our classified projections then credit. think do credits, tied we bulk mods the things we about credits we portfolios seeing up. our that, And XX% and about pretty I fell And the time. vaccine, of the And we hotel them we actually thought rebound, open beneath uptick Yes, our that and set those the Based is COVID assets to we’re are uptick attraction place, we pent-up mean impacted that the COVID optimistic sit was this opposite monitored they plans. of as we obviously ones wouldn’t over with really demand and adjustment put these rate a made that benchmark as and our and

think north we’re the XX% is I seeing of now. what, Bill, occupancy

Yes.

our is in on for we’re of the around customer all a Starz right of the occupancy reports books. uptick or based hotel in the We’re line, bit occupancies XX%, balance year. up above And anticipating which XX% little seeing feedback,

as well. calls credit. Okay. and been Last one here has popular on This other

you so, the you any levels? on a of let that? path day do your reserve CECL shot. thoughts So, if back give see one a to But I’ll it timing And

Yes, Jon Jamie. it’s

back really here, should where were yes, theory, end where we is to, but come key in think we I cycled So, through should should that’s once kind right. everything I industry of the the timing think us – – has

land. the next end And probably kind see over, recovery of with so, see it year you are on of they’re of post is is where landing where think we when recovery, bit those things kind or kind going to take I a is time think pandemic. hotels at the about up to where that and just specifically, little of so as it’s And the where

So, I is that for we’re a think us, when it personally see until But start of at than out yes, about so our out think year to the even bit so you little that be could loans. take loans, we – XXX you that. longer and that, our reserve, and PPP

Our day at one XXX. was right

XX of ever you loan it obviously, have that’s many if So, – the to be affects denominator of to are charge-offs different can forms, points And term. basis obviously are that intermediate pointing that lower we growth release. some of and But provision signs expense here come the in equation. obviously going that and the

Okay. lot, Thanks Appreciate guys. a it.

Jon. Thanks,

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

everyone. morning, Good

Dave. Hey,

to NIM about securities of these had Obviously, place on getting And the buying are in the level I shifting. you type the mix today? the you’re But securities are You dilutive have those yields question still yields? what is, investments, still mentioned as X%. that at to get is

would right I reinvestment blend, X%. our say about around that’s rate that’s blended our Yes, is

our between when time. roughly the of current mix have So same book we that it at the agencies, would our mix in non-agency, the it’s out at be would you essentially book XX% of XX% – look investment

and So any nothing going out really longer different, extending. not we’re

half four and that portfolio duration. to a securities is in Our three

So it’s extending not lot really a there.

really reinvestment same yes, of it’s into that going the we’re in currently roughly we And rate. type so securities that And still book. that the getting X% have

PPP question about then to Got two Were in that net about half And round you start deferred report round fees, when you some with gross this fees the talked your fee back two there year? the the the that – second of X.X%. offset to out expenses it. maybe comes gross would

There’s no. deferred with No. that. Yes, no expenses

So all will coming be X.X% that in. of

then period. get the bring I over five-year are And we’ll those we or initially fees amortizing maturity in they obviously, Now, as guess, those accreting, forgiven, in.

Thank you, the it. color. Jamie. Got I appreciate

Yes, David.

from question next Scott Piper ahead. Instructions] Siefers [Operator The go follow-up is Please from Sandler. a

guys. follow-up. Hey, for the Thanks taking

Yes.

of just ticky-tack one one of have today’s sort versus balances one round by breakout between round and round two is First the chance two? of the Do you round any balances PPPs. one on

Yes, Scott, this is Jamie.

at $XXX – the first million – about at end about say million $XXX round So round. the in in the the and the of first March, of end in second we had draw

follow-up was Chris projecting and of earlier period $XXX fourth just second in And loans was average a – quarter. in quarter from it question, $XXX So we’re for And quarter average was the million. McGratty’s first million. in the the for – the PPP $XXX million the about balances the

What with All considering sort a modest in Perfect. of more put just or of just situation. then you. charge-off want the anticipate you thinking very on sort quarter special of you guys see don’t very, provision? Could less hotels, first And maybe pretty there? costs, negative everything Or fine would credit taking particularly Thank that the great. is you shape, of That’s provisions? good I exception was yourself right. make a positive like that it. the too lower to the point on But seems it

you European going does the it Super to depends, the and guess hoping Scott. I League, follow on to Yes. demise was about it hate of provision, are depend. the but say Yes. up yes, – But I on I

going forward. here expense provision the on So,

– going We going mean, can – have here like charge-offs we do If be I whether be guess again, what or to lower, we are, lumpy. I look that the becomes, question charge-offs forward. think it’s

if have there’s a where that the real on side, – mean, million, here charge-offs quarter have I expense. over So provision chance lower call are negative next over it we the of sub quarters, a the couple next we $X could

going here over But, in then like. where the would looks what that into that for or could obviously, that would next growth have again, we much forecast happening had the quarter And factors, other three, how period. loan a be you two overall the just The us. charge-offs, see we low

of [indiscernible]. sort on, very influence a politicians Thank and you in follow the me fans And excuse then much. up perfect. just regarding or Okay, of British off-line,

Yes. That’s Scott. it. longer discussion. appreciate a I Thanks

you, Thank guys.

This in over more like conference closing the are remarks. I’d any the our There question-and-answer back queue. for concludes turn Archie Brown no to session. questions to

I look again all progress. thank and Bye our day. Jason. of following great being want call now. you, Thank us with with next quarter. Have forward talking to a you today on you We for on to the

you conference today’s The for presentation. concluded. Thank has now attending

may disconnect. You now