First Financial Bancorp. (FFBC) 26 Jul 242024 Q2 Earnings call transcript

Thank you for standing by. My name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Financial Bancorp Second Quarter 2024 Earnings Conference Call and webcast. [Operator Instructions] I will now hand the call over to Scott Crawley, Controller. Scott, you may begin your conference.

Ian. you, Thank and conference everyone, quarter for us joining year-to-date Good to thank discuss today's call results. second First on financial morning, you Financial and Bancorp's Chief be Participating call Harrod, Chief Financial Archie Executive Bill Officer; Officer. Brown, Officer; on and Jamie will President today's Credit Chief Anderson, and

accompanying yesterday contained release make during the slide Investor presentation section. the We'll presentation in at are the press and website under Both available to www.bankatfirst.com slides the reference the we issued call. accompanying on our today's Relations

Additionally, second be June to we for information company's the XXXX, XX, any our as in please the forward-looking refer will The of to statements forward-looking filings statements quarter well will or and we contained provide disclosure reflect a SEC updating release of call. facts factors. the full today discussion XXXX not this circumstances is earnings risk as as after accurate

over Brown. I'll Archie the turn call now to

and you, us everyone, Thank information. second for call. turn further on for provide results our quarter. Good to today's our afternoon, the I'll joining over and to some Jamie for Scott. we the then performance financial provide highlights announced morning, thank recent you call Yesterday

increasing was outstanding was exceptionally net assets in strong again We the earnings had XX% increase of interest driver was in quarter, which growth an Loan by return balances a equity on and XX.X%. X.X% this in $X.XX quarter. in on quarter, per and a an second share of annualized the on Adjusted significant resulted return tangible income. basis, with common this

deposits deposits fund period, grew led increase by was the Banking. the and approximately interest-bearing balances increase. driving a for XX% public seasonal broad-based average Similarly, in with was and Growth Commercial

compared from X.X% peer X% of Our or $XX.X interest the the Total near margin remains linked top at million group. adjusted the or unchanged to increased quarter. the first revenue and was quarter net

for broad-based Growth from $XX.X posted than was fee exchange revenue growing foreign Additionally, more in income income the noninterest record linked period, of adjusted XX% quarter. million. with we the

bankcard wealth another increased our X.X% and and the of expenses increase that occurred banking quarter mortgage first and increased income, annual income, quarter income Agile double-digit posted business full the to expenses, a of percentages, income. in The by impact all quarter. compared late Leasing included the to record variable fee salary quarter. by compensation tied adjustments Adjusted record management first

Through of our the this eliminated we initiative, workforce efficiency through and full-time have will the positions remainder date, continue XX year. to work

am that points, net I third point during which declined. credit basis consecutive migration period. XX experience We some the pleased charge-offs in with the downward to decline the marks XX quarter basis charge-offs have did

quarter. particular was percentage this in a prior and flat type, total compared However, relatively to as not the was nonperforming of assets loan concentrated any loans

outlook to loans. provision increased to X.XX% expect Our the our ACL on And periods. levels loan of to decline growth based quality, for first and credit in total coming would quarter approximately we

forward-looking results commentary After remarks. now turn greater I will additional up with Jamie's over the Jamie wrap discussion, that, and in these I'll discuss to With detail. some to call closing Jamie?

X everyone. Archie, you, financial recent and Slides and good most a results. X, morning, our of provide Thank summary X

and earnings, really was solid net exceptional margin, quarter second by fee record sheet a flat highlighted interest The strong, income growth. balance

yields prior comparison deposit and on costs to was and increases to investment from in offsetting Our pressure moderated unchanged the costs. remains We pleased to were the both increase strong loan the quarter expect X.XX%. net this quarters, trend margin we in linked This in hold. interest at that very deposit due

slight the expect in we margin contraction However, term. near

a an seasonal with deposits. Loan deposit larger Agile. to was C&I, balances $XXX on or which broad-based in mix exceeded cost basis, expectations. funds. basis growth annualized an million Average shift increase increased to and Summit public higher XX.X% on XX% grew Overall, in the loans continues included deposit increases Total our and annualized

in are of and total However, XX% our maintained balances strategically noninterest-bearing deposit focused we accounts balances. on maintaining

Turning to statement. the income

fee history. company's in Second quarter was the highest income the

leasing from exchange management had ever. to Noninterest and wealth revenue had variable quarter quarters best solid linked expenses increased the their quarter compensation. higher and Foreign due slightly

starting from we recognize benefits are However, the to efficiency efforts expect coming further impact in to the and our see periods.

was net basis million of X.XX% X quarter charge-offs resulted of trends increased the $XX.X provision quality period, coverage to loan ACL in the and expense increase an Overall, asset growth, slight and in were loans. assets. classified with significantly credit This which Our lower points driven total by during migration. during mixed

a XX capital period, basis a standpoint, our of during declined charge-offs relatively our period. excess were assets net in basis percentage the while the value flat X.X%, tangible points Tangible are common internal ratios points. and regulatory increased book targets. From as during Annual of XX and flat ratio $X.XX regulatory NPAs was both or at equity

increase elected dividend during to Directors the period. our of common Additionally, our Board

focused this value on our always step shareholders, been We is commitment. and delivering that of proof further have to

Slide income severance X understanding or are branch adjusted $XX.X consolidation highlighting as our reconciles was to we items believe that million of our and efficiency quarterly initiative per well share exclude as $X.XX to costs. impact Adjusted our the GAAP performance. earnings, quarter. the for important earnings acquisition, earnings Adjusted net

assets pretax, these tangible earnings average X, on return on As of a of equity ROA equate points. average pre-provision basis a common XXX X.X%, return XX% depicted of on adjusted to Slide and

investment was increase X.X%. in X Net well portfolio unchanged repositioning XX points portfolio the first the reinvestment as increased from from increased benefit driven interest on and quarter the Turning the we the margin at basis by was during executed XX. the quarter. period, in XX The investment linked to Slides Loan yields the and full-quarter as higher rates yields basis yield points.

significantly during basis prior XX lower increased period, was than costs Funding in periods. which points the

of quarter. to linked deposits basis XX points Our cost compared increased the

the end can right the that you chart, as the significantly of However, quarter. on declined growth of by see bottom pace

income beta up to has internal modeling. current our our points in the percentage which deposit details matches X betas modeling. interest XX costs increase XX%, Slide our moved net in utilized The

Going forward, be we cost mix. of increases function expect deposit to a

sources our liquidity and of various outlines Slide borrowing capacity. XX

we believe have to to expected required economic sheet balance manage the through the continue flexibility environment. We the

illustrates XX balance compared changes quarter. current Slide mix linked our the to and loan

As basis, almost an XX% with growth I before, on increased mentioned portfolio. annualized in loan every balances

As you were see can on the the C&I, Agile. and quarter largest in the right, of for growth Summit areas

growth the to We is the historically, expect originations. as the quarter Agile's moderate quarter coming periods in strongest for second

on our concentration particular provide Slide sufficiently industry. We industry. loan believe in portfolio XX to by detail any provides from deterioration diversified remains our loan protection

and of portfolio. total overall office last concentrated for our during portfolio on and office downgraded book the detail approximately provides to office our loan Similar million. metrics space, remain were portfolio relationships this XX is strong. balance the Slide $XX our performance in total about classified remains nonaccrual quarter, X% to quarter, No

of the Slide seasonal million XX increased linked in average total, CDs, quarter. deposits by well as the progression retail increase funds shows and during $XXX from deposits. as accounts in money our the In deposit quarter, mix as average as a public increases well deposit balances broker primarily driven market

deposit increases as this environment to modest driven accounts. to rate products. Similar and higher-cost current expected the savings These noninterest-bearing deposits has declines interest was recent customers quarters, offset in

as fund our XX deposits to well Slide comparison average of a and in deposits. illustrates business capacity our public trends as borrowing our personal, uninsured

of balances. [ slide, equates deposit provides stress uninsured event believe would deposits respond We larger remain total XX% this can our capacity with $X.X billion concentration and to borrowing adjusted of see the On the you our flexibility that This to ]. to right were deposits. our comfortable bottom sufficient any our

the Slide wealth revenue quarter, highlights the quarter XX Total our increased both income best in was million which the highest and and income Summit noninterest posted of the its company. ever. fee history $XX management quarters, for quarter solid during the quarter. had to Bannockburn

charge Additionally, from mortgage, service levels. first-quarter income bankcard and deposit increased

period. modest adjustments. the Noninterest Core to during is salary full-quarter annual in expense by Agile This impact expenses income, million increase tied a an increased Slide variable on was from compensation for driven XX. fee the and $X.X quarter the outlined

initiative. started ongoing the recognize of have from expected some to our benefit We also efficiency

Turning now and to Slides XX. XX

of in X.XX% funded total which resulted increase quarter. $XX.X the million provision during basis ACL first and in unfunded This was ACL reserves, was an total Our which allowance, of point of includes expense a loans, period. from the and X total a resulted both that $XXX model million

These balances was credit charge-offs expense and were total downgrades classified primarily Net NPAs our other at downgrade and relationships. concentrated held credit declined asset [ points, collateral driven basis assets, loan XX in the by total type. XX migration. loan to of increased or to In steady to growth to XX any Provision points. basis assets ] X trends, points not X.XX% basis of due

portfolio. our in a remain the environment. or changes build Our increased, We modeled reflects coverage and in the as ACL losses continue have our model slightly to coverage our expect we relatively to future we to from responds ACL believe reserve that periods anticipate flat increase macroeconomic will we conservatively

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

Slide was the excess During ratio and losses balance including the that unrealized of demonstrates sheet to have reported. portfolio. the regulatory share due capital would AOCI, XX book would ratio the from our quarter, second flat securities impact per compared TCE Absent tangible been in increased the to as value growth. in X.X% X.XX% remain the targets, ratios X.XX% TCE

our period shareholders earnings through common shareholder return our XX% total Our the the with of dividend. remains strong, returned during to

very pleased were the shareholders. elected [ the return dividend that an our our to to I common attractive commitment earlier, Board As we provide ], to mentioned increase demonstrating

actions We will continue to evaluate various progresses. the year as capital

it on turn for Archie now outlook. back comments some I'll Archie? over to our

you, Jamie. Thank

remarks, to Agile business low the growth I trends expect which to found over single modest payoff in digits to can Before healthy, on want seasonally basis on a although the we Loan our in production forward-looking near we term. loan comment in annualized XX. increase continue an to pipelines overall prepared our and contribute low our on end be Slide be guidance, unit

steady, the funds seasonal out. securities, remain stable. been more expect For Deposit as portfolio to quarter next growth and modestly has expect we to the public grow move over we

remain and X% and expect [ be margin Our X.XX% to net interest to continues and we strong resilient, between ]. it

quarter, XX basis the assumes in cut September. Fed next point by a rate For this the

decline our half is credit to cost expected be slightly a to coverage percentage increasing. slightly expect while of loans as We ACL the back the of in stable to year,

basis XX we to approximately points. For charge-offs be expect the year, XX full to net

and $XX is between is ] million million million $XX to excluding $XX business. leasing [ the million be million and Fee for ] business. $XX foreign and exchange to to leasing to income $XXX million expected the $XXX which includes million $XX for stable, expense million, $XX remain between Noninterest be [ and expected

and of of announce increase The payout $X.XX. a I'm income and pleased to net of increases our that XX% to first we're of within dividend yield. half common our this target a to our the Directors operating already to with range full performance dividend year. X.X% to for forward our Board continued XX% in increase approved Finally, success dividend through $X.XX attractive encouraged XXXX, the results look ratio

now call We'll the open questions. for up

question [Operator first Chris Instructions] McGratty with comes the Our line KBW. from of

this start expectations with outperform margin quarter. obviously the maybe Jamie, question,

beta Your have slides into forward [ How the more curve show know think are the How thinking margin the if cumulative on but is next market ] know you XX% about cut, year? on year. NIM we plays loans. expecting next do a the of a XX% September about I deposit, you I out?

at categories. the increase look were rate think to when mean of over cuts a relief X and reducing we're have on mean deposit methodical -- past kind some I the benefited some basis costs look the rate the of we it get first that at rates the I difficulty couple, from point we'll rate-sensitive so X, we cuts, some asset-sensitive we But by we quarters. significantly. more Fed, Obviously, XX in going

the that going first more a ones think significantly bit two or the than impacts we So little the margin cut forward.

the of first points going margin. point think X X subsequent get rate XX an a in And from margin we we're get the basis X, cuts, rates, point to in about So decline cuts. basis then X basis couple forward decline in or like the that, the we going

first of the outsized impact and X we've as or -- being more with the the loan and of more point fact full well growth, of I mean, difficult going would just deposit some given X side. a some at quarters, get just you towards side on acquisition the it's over deposit this the couple be little I that deposit match been tell we've to is and We balances a seen buckets. past trying aggressive the cuts, off in to our leaning that the having that growth, loan deposit if in Agile think higher-cost the even bringing growth to it's And on strategy also,

great. capital. Archie, That's maybe a question on And

CETX your really and ratio generation, good your you pretty into solid. about capital How got thinking excess using -- You've capital multiple is 'XX? potentially using are your

Yes, But it's the company's we're a would I internally the term. primarily, -- of funding and increase. we value this those the continue of in don't our increase tangible say, near be growing foremost. don't is Chris, things part think dividend it. we buyback I focused just Certainly, growth to And I'd first on to see did kind

to And versus more you a seeing this well? think of there's M&A I morning, opportunities income in that you are seeing deal if terms traditional bank -- deal, are as a fee way grow

talk maybe bank M&A let's first. about -- the on Chris, Yes,

because that term bit and I in just we're conversations would But early maybe anything where some I we more cycle think expectations see a come. little interest think, with a to I rates near the that stages. will discussions Some come start happening, approaching of especially and are down in the there's landing. soft don't in

nonbank the other any at think don't side, On I this acquisitions we're pursuing time. really

us when look And done parameters you X you your deal ] main X just one ago? [ source or finally, even the it, since years Okay. then could remind at

would focus footprint mean, we kind than tell deposit I our to we more they more adjacent like several area I change Well, in or time. certainly are today franchises they end important been years I lot like our a say, footprint. have But can ago. would density markets, more can over market, of metro areas you

Stephens Your question comes Terry the Inc. from line with next McEvoy of

a question sensitivity you of the margin, on quick you, deposit mix Maybe for term. back the just said kind to near over

on are the higher-costing the noninterest-bearing the thoughts with your insight fund third you And and quarter? the maybe any course the of over growth what deposits? wondering, into balances loan Just whether early year

Yes.

to the months you of maybe the basis at if or deposit -- months. really the costs I mean on in those pressure think mean, last chart see -- I of in we the look of X started quarter. in I costs, terms points in couple deck saw the deposit significantly X We subside that

really starting the both a shift, from -- cost mix momentum from and seeing perspective that those see pretty So significantly. a to both the we're subside were of we

percentage to we're of in that noninterest-bearing drop the noninterest-bearing we think balances to in at bottom deposits, going or were we and So especially are the somewhere those total near that the somewhere and low terms in -- we're projecting of now. low XXs, at XX%

think it. I that to hit we've the or So there close bottom

are strong. projections we to But which the going relatively our were outlook, deposit for the what I we the half can forward, in softened year, yes, loan mean, are half, of -- you were from the in our growth first back and seeing looking see

might So in on mix over of bit of cost that deposit we a the that from X, money are market especially might some side, -- fund be that but looking the going understanding be higher forward X and quarters, little to growth side side CDs not here, accounts. the borrowing the and that next the

a a close transportation you're sector step season when follow-up, just stress earnings as any on discussing C&I, transportation comments Or monitoring keeping credit. C&I eye segments up coming And within Summit whether portfolio? and just Any Or a Perfect. within taking and keeps the you're seeing on? there? back, any your this

Yes.

of We just our of with transportation -- closely challenges most that they've are the sector facing. the as some are watching pretty been most banks

closure manageable. good But the some haven't is about issues. but in some Heretofore, smaller overall, companies larger out especially stress, the had any there, of book. feel And there pretty our material trucking of we and we some is the

Your with next from Daniel the Raymond of comes James. Tamayo line question

this talked I growth I about I second [ I in loan strong know late and joined you seasonally been bit ]. on apologize little this, a if has guidance the you mention the heard question asked, Agile quarter. down, But

quarters? loan that? anything commercial we a I So over the back take more be know guidance, it's kind if guess, on and next I curious side, step but look, that's of, I opportunities else growth it. you that what might But think kind of I the next several over several how driving you think not is it about pipelines a be part how mean, would helpful. quarters of about should normalization? Just and the get for official the of

payoff production Danny, Yes, strong We've is normal been but lower growth, than really quarters in activity, combination and estate Archie. this especially portfolio. had some couple much a decent in our of of commercial real loan it's a also

So buoyed some. that's at

say, But some quarter. half. a back forward, in look be the softened second bit now. back strengthening we that They part As to will little the I seem the of into in create building mid of would pipelines, that production back

So that's a piece.

Agile. the mentioned early to We year part. mid is of part their Well, big

most our of we more will payoffs in expecting to to we unit. that -- of a And that flatten Oak see we'll Street So QX, more start the of out quarter, the estate. come see payoffs in year. half back some late got We've the for the half year. we're the large commercial are of We're back real few anticipating

the typically I lower little combined it than little just payoff they are, the a in selective say probably been. activity just side, is you the little CRE a is on that stronger little that market And So has rates the And environment. there imagine still, more with can bit market bit with a Agile. And current production where a bit softer. we're is would

a have expenses good balance the job managing growth. on growth and maybe expense then And of revenue good Okay. sheet this guys you despite really side, done

identify the environment? that, or just that's any in you've FTEs I'm to as identified you've just been think savings or issues how pull this curious, over any able if about areas going, curious, just need as kind had continued to of been through been few that you years? And cost you invest where next out going the you've opportunities growth

bit talked in a this little we've about Danny, both quarters.

us it. it's So question talk a good to more a for about little maybe bit

of First, in management and in but doing. technologies always invested we believe amount be as you expense the industry, system. part and heavily and the control about in years need us a we have certainly the significant But we to happened good recent of view tools created capacity what great think have if of what's

I'd to last have some we're making. identified or which a we think the keep the going to certainly more could XX% or all two of as guess, like at of other -- of through late areas To because did will we the areas. process we will through or the kind date, end numbers company. So it our doing review of by progress -- the trying throughout that of on through started we'll done, touched in through about it, get all an do we'll on whole kind year, really capacity. But work call areas you as were update we'll We I support two all that work. up the the same work point. and we some, XX% methodical be what we go we call we're take each of we the company. But don't support embarked, that in much that the quarter rest we're stakeholders most It's the area of to in we and been the that in do, not testing them hold And into we now and some I'm this have hope all beta sure of desk-to-desk year, group through the excess of we're review almost a we're proof-of-concept capacity going to out this before system. And production areas

future. invest as us didn't mean in to to also expense jump And this the And go and Danny, up that lot the were is well, to is I savings in absorb allowed Agile do with that help has base we to those use what a through will just other essentially Jamie. us in grow that. areas expenses also able

being [ ] So office... it

commercial Jamie's still point, salespeople our other opened a a we group in able a on added offices, banking have keep Yes. expenses. offices, couple to To the and few been wealth of lid

comes with question of the Instructions] RBC. Our line Arfstrom [Operator Jon next from

short you On fee Chris talk about Do perform rates impact you have down, about improvement margin coming down? down, maybe McGratty's that how any come the if come kind can on there? rates think question businesses expect you will the of to if some

rate environment that Jon, clients. Bannockburn maybe point has they at their generate can multiple slightly. think We shown this with income in

But Leasing going more. And the leasing in think, think income would improvements part is of So continue just little the the of XX-year see what We've continue. think continue expect are wealth the group, really the and a on we markets mortgage side. then they're we We'll investment effectively. we more to maybe bit in curve. side incrementally depend even to going strong. continue environment, they'll forward. make even going it's If wealth mortgage on perform we volumes to increase different our hold on go side, grow, to rate lot of as an a to the maybe in I probably up, happens a to put

the big areas. are those So

Okay.

very about market is you there? just little and than activity like what commercial little bit a Can You share? you're it? outlook. Or or a touched it obviously feels leasing. what bit the the on talk market It's in Is It leasing different strong. been it's seeing pipelines

and more of they're country they sales other Well, got business. throughout and of connections on people a do the national platform, how they've

they pretty do more into broadly. And maybe with to And get companies. I a of lot we larger do are healthy, So say, in, business tend a especially lens companies. things would larger banks

of had the especially back to will originate just that you focused -- origination their last They of a now year where quarter. strongest back part with couple a look amount fourth also ends funding. We them. year, do bit ability year, the we've of good. activity in occurs see on we're the in restraining are there more anything, we're pipelines in probably So environment If little the if

term. That sure think we that -- certainly fourth single-digit strong a the low Not have they'll quarter looks pick like, will said near in I fourth up. growth but what So will quarter.

just helps. continue That themes? any for can And then, the the then, little few quarters? we And classified the we probably and themes know Good. downgrades, but a Okay. about talk expect should more next bit to what you are, the increases Bill,

Yes.

credit So migration was classified multifamily the in the downward by C&I bucket driven X X credits. and

currently first multifamily is The an deal LOI [ ]. under

and The stable. other credits just experienced are reasonable in to The conversion experience remain years solutions are customers, do -- for delays. C&I longtime XX-plus them. And think has look respective both the cost there's stabilization markets. that X navigating out, we all through as of some expect shifts size we And our we

they Looking a quarter, mention were at the our flat. special down little for

And stable. of kind looking kind of this at so what we're at, that's point,

at call time. remarks. back like no over further for questions There would turn Archie the Brown this to I are the to some closing

a again forward for want We Bye with weekend. Have quarter. quarter. now. today look for to great I story you Friday, to and talking hearing thank our joining the next great a everybody

This concludes today's conference call.

You good a may disconnect. day. now Have