Part I - FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) This section presents First Financial Bancorp.'s unaudited consolidated financial statements for Q3 and YTD 2019, including balance sheets, income, comprehensive income, equity, and cash flow statements [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets present the financial position of First Financial Bancorp. as of September 30, 2019 (unaudited) and December 31, 2018, with total assets growing to **$14.48 billion** from **$13.99 billion**, primarily driven by an increase in net loans and leases Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$14,480,445** | **$13,986,660** | | Net Loans and Leases | $9,007,126 | $8,767,672 | | Goodwill | $937,689 | $880,251 | | Total Deposits | $10,083,857 | $10,140,394 | | **Total Liabilities** | **$12,219,132** | **$11,908,411** | | **Total Shareholders' Equity** | **$2,261,313** | **$2,078,249** | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income detail the company's revenues, expenses, and profitability for the three and nine months ended September 30, 2019 and 2018, with net income for Q3 2019 at **$50.9 million**, nearly flat compared to Q3 2018, and increasing to **$149.4 million** for the nine-month period Key Income Statement Data (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $121,535 | $123,485 | $365,352 | $323,276 | | Provision for Loan and Lease Losses | $5,228 | $3,238 | $25,969 | $9,276 | | Noninterest Income | $33,140 | $28,684 | $94,605 | $73,878 | | Noninterest Expenses | $86,226 | $85,415 | $249,103 | $240,458 | | **Net Income** | **$50,856** | **$50,657** | **$149,398** | **$117,581** | | **Net Earnings Per Share - Diluted** | **$0.51** | **$0.51** | **$1.51** | **$1.36** | - Cash dividends declared per share increased to **$0.23** in Q3 2019 from **$0.20** in Q3 2018, and to **$0.67** for the nine months of 2019 from **$0.58** in the prior year period[15](index=15&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) These statements show the change in equity from non-owner sources, combining net income with other comprehensive income (OCI), with comprehensive income for Q3 2019 at **$61.1 million**, up from **$40.9 million** in Q3 2018, largely due to a significant positive swing in unrealized gains on debt securities Comprehensive Income Highlights (in thousands) | Metric | Q3 2019 | Q3 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $50,856 | $50,657 | $149,398 | $117,581 | | Other Comprehensive Income (Loss) | $10,257 | $(9,739) | $58,952 | $(27,415) | | **Comprehensive Income** | **$61,113** | **$40,918** | **$208,350** | **$90,166** | [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) These statements reconcile the beginning and ending balances of shareholders' equity, detailing the impact of net income, dividends, stock transactions, and other comprehensive income, with total shareholders' equity increasing from **$2.08 billion** at the start of 2019 to **$2.26 billion** at September 30, 2019 - For the nine months ended September 30, 2019, key changes to equity included **$149.4 million** in net income, **$59.0 million** in other comprehensive income, **$66.7 million** in cash dividends, and **$27.4 million** in common stock purchases[24](index=24&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) These statements report the cash flows from operating, investing, and financing activities for the nine months ended September 30, 2019 and 2018, with net cash from operating activities at **$108.1 million**, investing activities using **$50.7 million**, and financing activities using **$51.1 million**, resulting in a net increase in cash Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $108,102 | $174,579 | | Net Cash used in Investing Activities | $(50,699) | $(46,923) | | Net Cash used in Financing Activities | $(51,142) | $(85,018) | | **Change in Cash and Due from Banks** | **$6,261** | **$42,638** | [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures that supplement the information in the primary financial statements, covering accounting policies, business combinations, and specifics on various asset, liability, and equity accounts - The company adopted ASU 2016-02 (Leases) on January 1, 2019, resulting in the recognition of a Right-of-Use (ROU) asset of **$60.2 million** and a lease liability of **$65.8 million** on the Consolidated Balance Sheet[33](index=33&type=chunk) - The company is preparing for the adoption of ASU 2016-13 (CECL) effective January 1, 2020, and estimates its allowance for loan and lease losses will increase to between **1.12%** and **1.32%** of total loans upon adoption[37](index=37&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - In August 2019, the company acquired Bannockburn Global Forex, LLC for approximately **$114.6 million**, resulting in **$58.0 million** of goodwill. This followed the April 2018 acquisition of MainSource Financial Group, Inc. for **$1.1 billion**, which resulted in **$675.6 million** of goodwill[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=45&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the third quarter and first nine months of 2019, covering performance drivers, financial components, asset quality, capital, liquidity, and risk management Q3 2019 Performance Highlights | Metric | Q3 2019 | Q3 2018 | | :--- | :--- | :--- | | Net Income | $50.9 million | $50.7 million | | Diluted EPS | $0.51 | $0.51 | | Return on Average Assets (ROA) | 1.41% | 1.45% | | Return on Average Equity (ROE) | 9.13% | 9.94% | - The company acquired Bannockburn Global Forex, LLC in August 2019 for **$114.6 million**, adding a capital markets trading firm specializing in foreign currency services. This follows the major acquisition of MainSource Financial Group in April 2018[203](index=203&type=chunk)[204](index=204&type=chunk) - Net interest margin on a fully tax equivalent basis decreased **16 bps** to **3.96%** in Q3 2019 compared to Q3 2018, as accretion on acquired loans moderated and funding costs increased[214](index=214&type=chunk) - Asset quality improved, with nonperforming assets declining to **0.56%** of total assets at September 30, 2019, from **0.63%** at year-end 2018[233](index=233&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=60&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section incorporates by reference the 'Market Risk' discussion from the MD&A, detailing the company's exposure to interest rate risk and its management strategies, including income simulation and EVE sensitivity analyses - The company's interest rate risk profile as of September 30, 2019, was asset sensitive. A **+100 basis point** parallel shock in interest rates was projected to increase Net Interest Income (NII) by **3.96%** in the first year and increase Economic Value of Equity (EVE) by **3.78%**[291](index=291&type=chunk)[292](index=292&type=chunk) - The primary source of market risk for First Financial is interest rate risk. The company monitors this risk using income simulation models and EVE sensitivity analyses, with a strategy biased toward neutrality or slight asset sensitivity[287](index=287&type=chunk)[288](index=288&type=chunk)[292](index=292&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204%20-%20Controls%20and%20Procedures) This section addresses the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting, concluding they were effective - Based on an evaluation as of September 30, 2019, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[305](index=305&type=chunk) - There were no changes to the company's internal control over financial reporting during the third quarter of 2019 that materially affected, or are reasonably likely to materially affect, these controls[306](index=306&type=chunk) Part II - OTHER INFORMATION [Legal Proceedings](index=61&type=section&id=Item%201%20-%20Legal%20Proceedings) This section reports no material changes to the legal proceedings disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - The company confirms no material changes to its legal proceedings since the 2018 Form 10-K filing[309](index=309&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A%20-%20Risk%20Factors) This section states no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - The company confirms no material changes to its risk factors since the 2018 Form 10-K filing[310](index=310&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=62&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchases of its own equity securities during Q3 2019, totaling **1,143,494 shares** at an average price of **$23.94** per share Issuer Purchases of Equity Securities (Q3 2019) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2019 | 76,009 | $24.95 | | August 2019 | 789,485 | $23.73 | | September 2019 | 278,000 | $24.25 | | **Total** | **1,143,494** | **$23.94** | - The repurchases were made under a plan approved in January 2019, which authorizes the repurchase of up to **5,000,000 shares** through December 31, 2021. As of September 30, 2019, **3,856,506 shares** remained available for repurchase[269](index=269&type=chunk)[316](index=316&type=chunk) [Exhibits](index=63&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including merger agreements, CEO and CFO certifications, and XBRL formatted financial statements - Exhibits filed include agreements related to the Bannockburn Global Forex, LLC acquisition, CEO/CFO certifications, and XBRL data files[318](index=318&type=chunk) [Signatures](index=64&type=section&id=Signatures) This section contains the formal signatures of the company's authorized officers, certifying the report on November 7, 2019 - The report was duly signed on November 7, 2019, by James M. Anderson (EVP & CFO) and Scott T. Crawley (Controller & Principal Accounting Officer)[323](index=323&type=chunk)

First Financial Bancorp. (NASDAQ:FFBC) Q3 2019 Earnings Conference Call October 18, 2019 8:30 AM ET Company Participants Scott Crawley - Principal Accounting Officer and Corporate Controller Archie Brown - President, Chief Executive Officer and Director James Anderson - Executive Vice President and Chief Financial Officer Bill Harrod - Chief Credit Officer Conference Call Participants Scott Siefers - Sandler O'Neill & Partners LP Christopher McGratty - Keefe Bruyette & Woods Inc. Terry McEvoy - Stephens Inc ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission file number 001-34762 FIRST FINANCIAL BANCORP /OH/ | --- | --- | --- | --- | --- | |------------------------- ...

First Financial Bancorp (NASDAQ:FFBC) Q2 2019 Results Earnings Conference Call July 19, 2019 8:30 AM ET Company Participants Scott Crawley - Corporate Controller and Principal Accounting Officer Claude Davis - Executive Chairman Archie Brown - President and Chief Executive Officer James Anderson - EVP and Chief Financial Officer Conference Call Participants Scott Siefers - Sandler O'Neill & Partners LP Christopher McGratty - Keefe Bruyette & Woods Inc. Terry McEvoy - Stephens Inc. Nathan Race - Piper Jaffra ...

Earnings Presentation Second Quarter 2019 Forward Looking Statement Disclosure Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as ''believes,'' ''anticipates,'' "likely," "expected," "estimated," ''intends'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such state ...

Part I - FINANCIAL INFORMATION [Item 1 - Financial Statements](index=4&type=section&id=Item%201%20-%20Financial%20Statements) The company presents its unaudited consolidated balance sheets, income statements, and cash flows as of March 31, 2019 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew slightly to $14.07 billion, driven by an increase in investment securities available-for-sale Consolidated Balance Sheet Summary (in thousands) | Metric | March 31, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$14,074,263** | **$13,986,660** | | Net Loans and Leases | $8,752,479 | $8,767,672 | | Goodwill | $879,727 | $880,251 | | **Total Liabilities** | **$11,943,844** | **$11,908,411** | | Total Deposits | $10,133,897 | $10,140,394 | | Total Borrowed Funds | $1,593,838 | $1,611,430 | | **Total Shareholders' Equity** | **$2,130,419** | **$2,078,249** | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Net income for Q1 2019 rose to $45.8 million, driven by a significant increase in net interest income post-acquisition Consolidated Income Statement Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net Interest Income | $121,515 | $75,812 | | Provision for Loan and Lease Losses | $14,083 | $2,303 | | Noninterest Income | $26,827 | $16,938 | | Noninterest Expenses | $78,499 | $52,288 | | **Net Income** | **$45,839** | **$30,506** | | **Net Earnings Per Share - Diluted** | **$0.47** | **$0.49** | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail key accounting policies, including the adoption of new lease standards and the MainSource acquisition impact - Adopted ASU 2016-02 (Leases) on January 1, 2019, resulting in the recognition of a Right-of-Use (ROU) asset of **$60.2 million** and a lease liability of **$65.8 million**[34](index=34&type=chunk) - The acquisition of MainSource Financial Group (MSFG) was completed for a total purchase consideration of **$1.1 billion**, resulting in goodwill of **$675.6 million**[177](index=177&type=chunk)[179](index=179&type=chunk) - The Allowance for Loan and Lease Losses (ALLL) was **$56.7 million**, with a Q1 2019 provision of **$14.1 million** driven by higher net charge-offs[92](index=92&type=chunk)[94](index=94&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=43&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2019 performance, focusing on the MainSource merger's impact on income, asset quality, and capital - Q1 2019 net income was **$45.8 million**, or **$0.47 per diluted share**, compared to $30.5 million, or $0.49 per diluted share, in Q1 2018, with the increase driven by the MainSource acquisition[192](index=192&type=chunk) - Net interest margin on a fully tax equivalent basis increased by **26 basis points to 4.10%** in Q1 2019 from 3.84% in Q1 2018[200](index=200&type=chunk) - Nonperforming assets decreased to **$83.9 million (0.60% of total assets)** at March 31, 2019, from $88.2 million (0.63% of total assets) at year-end 2018[216](index=216&type=chunk) - Net charge-offs were **$13.9 million** in Q1 2019, significantly higher than $1.9 million in Q1 2018, due to a **$10.0 million charge-off** on a single franchise lending relationship[262](index=262&type=chunk) [Overview of Operations and Business Combinations](index=43&type=section&id=Overview%20of%20Operations%20and%20Business%20Combinations) The company's Q1 2019 results reflect the expanded scale following the $1.1 billion acquisition of MainSource Financial Group Q1 2019 Performance Metrics | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Income | $45.8 million | $30.5 million | | Diluted EPS | $0.47 | $0.49 | | Return on Average Assets | 1.33% | 1.40% | | Return on Average Equity | 8.88% | 13.31% | - The merger with MainSource Financial Group, completed in April 2018, involved a total purchase consideration of **$1.1 billion** and significantly expanded the company's footprint[190](index=190&type=chunk) [Financial Performance Analysis](index=44&type=section&id=Financial%20Performance%20Analysis) Q1 2019 performance was marked by strong growth in net interest and noninterest income, reflecting the larger post-merger base - Net interest income increased by **$45.7 million (60.3%)** YoY, driven by a $61.4 million increase in interest income[199](index=199&type=chunk) - Noninterest income grew by **$9.9 million (58.4%)** YoY, with notable increases in service charges, bankcard income, and loan sale gains[207](index=207&type=chunk) - Noninterest expense increased by **$26.2 million** YoY, primarily due to a **$16.8 million rise** in salaries and employee benefits[208](index=208&type=chunk) - The effective tax rate for Q1 2019 was **17.8%**, down from 20.1% in Q1 2018, due to favorable state tax resolutions[209](index=209&type=chunk) [Balance Sheet Analysis](index=47&type=section&id=Balance%20Sheet%20Analysis) The balance sheet remained stable with total loans at $8.8 billion and total deposits at $10.1 billion as of quarter-end - Total loans were **$8.8 billion** at both March 31, 2019, and December 31, 2018, as an **8.4% increase** in loan production was offset by prepayments[212](index=212&type=chunk) - The investment portfolio totaled **$3.4 billion (24.1% of total assets)** at quarter-end, with $3.1 billion in available-for-sale securities[222](index=222&type=chunk) - Total deposits were stable at **$10.1 billion**, as growth in CDs offset seasonal declines in demand deposit accounts[226](index=226&type=chunk) [Liquidity and Capital](index=49&type=section&id=Liquidity%20and%20Capital) The company maintained a strong liquidity position and capital ratios well above regulatory "well-capitalized" minimums Regulatory Capital Ratios (Consolidated) - March 31, 2019 | Ratio | Actual | Minimum Required (Well-Capitalized) | | :--- | :--- | :--- | | Common Equity Tier 1 Capital | 12.03% | 7.00% (incl. buffer) | | Tier 1 Capital | 12.43% | 8.50% (incl. buffer) | | Total Capital | 14.24% | 10.50% (incl. buffer) | | Leverage Ratio | 9.84% | 4.00% | - At March 31, 2019, the company had **$219.2 million** in liquidity on hand and an additional **$3.0 billion** in unused wholesale funding capacity[237](index=237&type=chunk) - A stock repurchase plan authorizing up to **5,000,000 shares** was approved in January 2019; no shares were repurchased in Q1 2019[251](index=251&type=chunk) [Risk Management](index=52&type=section&id=Risk%20Management) Credit risk was highlighted by a large single-loan charge-off, while market risk remains moderately asset-sensitive - The ALLL was **$56.7 million**, or **0.64% of period-end loans**, as of March 31, 2019[260](index=260&type=chunk) - Q1 2019 net charge-offs were **$13.9 million**, or **0.64% of average loans**, driven by a **$10.0 million charge-off** on a single franchise lending relationship[262](index=262&type=chunk) Interest Rate Sensitivity Analysis (as of March 31, 2019) | Rate Shock Scenario | NII Change (Year 1) | EVE Change | | :--- | :--- | :--- | | -100 bps | (6.13)% | (4.55)% | | +100 bps | 3.63% | 2.20% | | +200 bps | 6.24% | 3.66% | [Item 3 - Quantitative and Qualitative Disclosures about Market Risk](index=57&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section incorporates by reference the market risk disclosures provided within the MD&A section - The report refers to the 'Market Risk' section within the MD&A for its quantitative and qualitative disclosures on this topic[282](index=282&type=chunk) [Item 4 - Controls and Procedures](index=57&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were **effective**[285](index=285&type=chunk) - **No material changes** were made to internal controls over financial reporting during the first quarter of 2019[286](index=286&type=chunk) Part II - OTHER INFORMATION [Item 1 - Legal Proceedings](index=58&type=section&id=Item%201%20-%20Legal%20Proceedings) There have been no material changes to legal proceedings since the company's 2018 Annual Report on Form 10-K - The company reports **no material changes** to its legal proceedings since its 2018 Form 10-K filing[289](index=289&type=chunk) [Item 1A - Risk Factors](index=58&type=section&id=Item%201A%20-%20Risk%20Factors) There have been no material changes to risk factors since the company's 2018 Annual Report on Form 10-K - The company refers to the Risk Factors section of its 2018 Form 10-K, indicating **no material changes**[290](index=290&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the public plan in Q1 2019, following the approval of a new 5 million share authorization - A new stock repurchase plan was announced on January 14, 2019, authorizing the repurchase of up to **5,000,000 shares**[295](index=295&type=chunk) - **No shares were repurchased** under the publicly announced plan during the first quarter of 2019[294](index=294&type=chunk) [Item 6 - Exhibits](index=60&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including required CEO and CFO certifications

Financial Data and Key Metrics Changes - Adjusted earnings for Q1 2019 were $0.48 per share, with a return on average assets of 1.38% and a return on average tangible common equity of 16.45% [7][16] - The efficiency ratio was reported at sub 52% when adjusted for merger-related items, reflecting disciplined expense management [7][10] - Net interest margin on a fully tax equivalent basis declined by 11 basis points to 4.10% due to fewer loan fees and expected declines in purchase accounting accretion [17][24] Business Line Data and Key Metrics Changes - Loan origination activity increased by 8% over the linked quarter, reaching its highest level since the merger, with notable growth in investment and commercial real estate business lines [19][26] - The loan portfolio growth was offset by continued payoff headwinds within the commercial construction portfolio [8] - Average deposit balances increased by $18 million, driven by retail and brokerage CD growth, despite seasonal declines in public funds and business DDA [20][27] Market Data and Key Metrics Changes - The yield on securities increased by 14 basis points, while loan yields declined by 4 basis points, and the cost of deposits increased by 10 basis points [18][25] - Credit quality metrics were negatively impacted by an isolated franchise charge-off, resulting in net charge-offs of 64 basis points as a percentage of total loans [21][28] Company Strategy and Development Direction - The company aims for low to mid single-digit loan growth for Q2 2019, with long-term targets of mid to high single-digit growth [32][36] - The management is focused on strategic acquisitions, particularly in fee-based businesses, while also evaluating capital strategies to support planned growth [36][63] - The company remains optimistic about future growth potentials, despite recent challenges in loan growth expectations [32][41] Management's Comments on Operating Environment and Future Outlook - Management expressed a stable near-term credit outlook and anticipated a rebound in fee income in the range of $29 million to $31 million for the next quarter [34][54] - The company expects expenses to increase slightly, with an efficiency ratio projected in the 50% to 52% range for the next quarter [35][36] - Management acknowledged the need for quicker action when signs of stress appear in long-term borrower relationships, emphasizing a more proactive approach [51] Other Important Information - The company reported a 10-year history in lending to quick-serve restaurant franchisees, with a granular franchise portfolio averaging $3.4 million per relationship [11][12] - Capital ratios continued to expand and remain above stated targets, with a tangible common equity of $1.1 billion [31][29] Q&A Session Summary Question: Loan growth visibility and acceleration - Management noted an 8% increase in commitments, with significant growth in commercial banking and investment real estate commitments, indicating positive momentum [40][41] Question: Core margin pressures - The primary driver of margin pressure is on the funding side, with deposit costs expected to increase slightly [43][44] Question: Franchise charge-off review process - Management emphasized the need for quicker action when signs of borrower stress appear, learning from the recent franchise charge-off experience [51] Question: Provision outlook - Management indicated that provisions would return to pre-first quarter levels, covering charge-offs and supporting growth [54] Question: Capital management and buyback strategy - Management discussed timing issues regarding share buybacks and indicated a willingness to consider buybacks depending on stock price levels [60][61] Question: Strategic acquisitions - Management is open to considering smaller acquisitions that add strategic value, particularly in adjacent markets [63]

Earnings Presentation First Quarter 2019 Forward Looking Statement Disclosure Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as ''believes,'' ''anticipates,'' "likely," "expected," "estimated," ''intends'' and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statem ...

[FORWARD-LOOKING STATEMENTS](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements regarding financial projections, plans, objectives, and future economic performance, identified by specific terminology - The report contains forward-looking statements, including projections of financial items, plans, objectives, and future economic performance, identified by words like 'believes,' 'anticipates,' and 'expects'[6](index=6&type=chunk) - These statements are protected by the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995, but actual results may differ materially due to various factors and events, particularly those identified in 'Item 1A. Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations'[7](index=7&type=chunk)[8](index=8&type=chunk) [PART I](index=4&type=section&id=PART%20I) [Item 1. Business](index=4&type=section&id=Item%201.%20Business.) First Financial Bancorp. operates as a regional bank holding company through its subsidiary, offering diverse banking services and expanding its market presence through strategic acquisitions, all while navigating extensive federal and state regulations - First Financial Bancorp. (the Company) was formed in 1982 and operates as a mid-sized, regional bank holding company headquartered in Cincinnati, Ohio, through its wholly-owned subsidiary, First Financial Bank, founded in 1863[12](index=12&type=chunk)[13](index=13&type=chunk) - The Company provides commercial lending, real estate lending (residential and commercial), consumer financing, deposit products (interest-bearing, noninterest-bearing, time deposits, cash management), and a full range of trust and wealth management services[14](index=14&type=chunk) - Specialized lending activities include equipment and lease financing through First Financial Equipment Finance LLC, and secured commercial financing across the U.S. through Oak Street Funding LLC (insurance, investment advisors, CPAs, indirect auto finance) and First Franchise Capital Corporation (restaurant franchisees)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - In April 2018, First Financial Bancorp acquired MainSource Financial Group, Inc. in a stock-for-stock transaction. MainSource had approximately **$4.5 billion in assets** and 88 offices in Indiana, Ohio, Illinois, and Kentucky at the time of the merger[28](index=28&type=chunk) - At December 31, 2018, First Financial and its subsidiaries had **2,131 full-time and part-time employees**[26](index=26&type=chunk) - The Company operates a community banking business model, serving metropolitan and non-metropolitan markets primarily in Indiana, Ohio, Kentucky, and Illinois, and competes with a wide range of financial and non-financial institutions[29](index=29&type=chunk)[30](index=30&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - The Economic Growth, Regulatory Relief and Consumer Protection Act (May 25, 2018) provides regulatory relief, including exempting bank holding companies with assets under **$100 billion** from enhanced prudential standards and allowing banks under **$10 billion** to satisfy capital standards with a community bank leverage ratio between **8% and 10%**[42](index=42&type=chunk)[43](index=43&type=chunk) - The Bank met the capital ratio requirements to be deemed 'well-capitalized' under Basel III guidelines as of December 31, 2018, with minimum ratios of Common Equity Tier 1 (**6.5%**), Total Risk-Based (**10.0%**), Tier 1 Risk-Based (**8.0%**), and Leverage (**5.0%**)[57](index=57&type=chunk) - The Durbin Amendment, applicable after First Financial's assets exceeded **$10 billion**, is expected to result in an approximate **$13.0 million annual decline** in noninterest income from debit card interchange fees, starting in Q3 2019[60](index=60&type=chunk) - The FDIC's designated reserve ratio (DRR) reached **1.36%** on September 30, 2018, leading to the cessation of the surcharge on banks with assets of **$10 billion or more** with the first assessment invoice in 2019[68](index=68&type=chunk) [Supervision and Regulation](index=6&type=section&id=Supervision%20and%20Regulation) First Financial and its subsidiaries operate under extensive federal and state regulatory oversight, encompassing capital adequacy, consumer protection, and dividend limitations, with recent legislative and accounting changes impacting compliance - First Financial is a financial holding company subject to the Bank Holding Company Act (BHCA) and supervision by the Federal Reserve Board, requiring prior approval for significant acquisitions and adherence to restrictions on tie-in arrangements and affiliate dealings[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - The Bank, as an Ohio state-chartered bank and Federal Reserve Bank member, is supervised by the Federal Reserve Board and the Ohio Division of Financial Institutions (ODFI), with deposits insured by the FDIC[47](index=47&type=chunk) Basel III Capital Requirements and Status (as of Dec 31, 2018) | Capital Ratio | Minimum Requirement | Well-Capitalized Requirement | Bank's Status (Dec 31, 2018) | |:--------------------------|:--------------------|:-----------------------------|:-----------------------------| | Common Equity Tier 1 | 4.5% | 6.5% | Met | | Tier 1 Capital | 6.0% | 8.0% | Met | | Total Capital | 8.0% | 10.0% | Met | | Leverage Ratio | 4.0% | 5.0% | Met | - The Economic Growth, Regulatory Relief and Consumer Protection Act (2018) introduced a community bank leverage ratio (**8-10% tangible assets to average consolidated assets**) for banks under **$10 billion**, allowing them to be considered 'well capitalized' under prompt corrective action[43](index=43&type=chunk) - The Company expects a **$13.0 million annual decline** in noninterest income due to the Durbin Amendment's debit card interchange fee limitations, effective from Q3 2019[60](index=60&type=chunk) - The FDIC's deposit insurance surcharge for banks with assets over **$10 billion** ceased in 2019, as the Designated Reserve Ratio (DRR) reached **1.36%** by September 30, 2018[68](index=68&type=chunk) - The Bank is subject to various consumer protection laws, including the Community Reinvestment Act (CRA), Equal Credit Opportunity Act, Truth in Lending Act, and privacy provisions of the Gramm-Leach-Bliley Act, and received a 'satisfactory' CRA rating[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[82](index=82&type=chunk) - The CFPB's 'Payday Rule' (effective Jan 2018, compliance Aug 2019) addresses consumer loan underwriting and payment withdrawals, though the CFPB has proposed delaying compliance and rescinding certain provisions; the Company does not expect a material financial impact[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors.) First Financial faces diverse risks from economic and market conditions, including real estate and interest rate fluctuations, alongside business-specific challenges like credit quality, intense competition, operational failures, and regulatory changes - Weakness in the economy and real estate market, particularly within the Company's geographic footprint, could adversely affect loan loss provisions, loan values, and overall financial condition[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - Changes in market interest rates or capital markets can significantly impact net interest income, asset/liability valuations, demand for loans, and the cost/availability of capital, with the transition away from LIBOR posing additional risks[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - The credit quality of the loan portfolio is a significant risk, as the allowance for loan and lease losses may prove insufficient, and regulators may require increases, impacting operating results[118](index=118&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - The Company faces intense competition from various financial and non-financial institutions, which could lead to loss of business or reduced margins[130](index=130&type=chunk)[131](index=131&type=chunk) - Operational risks include reliance on third-party infrastructure, potential system failures, employee misconduct, fraud, and cybersecurity breaches, which could lead to financial loss, reputational damage, and regulatory actions[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) - Liquidity is heavily dependent on dividends from subsidiaries, which are subject to regulatory restrictions, and the ability to access capital markets, which could be disrupted by market turbulence or credit rating downgrades[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - Changes in accounting policies or standards, such as the adoption of CECL in Q1 2020, could materially affect financial reporting, potentially increasing credit loss allowances and decreasing retained earnings and regulatory capital[181](index=181&type=chunk)[182](index=182&type=chunk) - The Company is subject to ongoing tax examinations and changes in tax laws, which could result in material adjustments to tax liabilities or adversely affect performance[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Item 1B. Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) There are no unresolved staff comments from the SEC regarding the Company's filings - The Company has no unresolved staff comments[199](index=199&type=chunk) [Item 2. Properties](index=24&type=section&id=Item%202.%20Properties.) As of December 31, 2018, First Financial operated 159 banking centers, with its core markets in Ohio, Indiana, Kentucky, and Illinois Banking Center Locations (as of Dec 31, 2018) | State | Number of Banking Centers | |:---------|:--------------------------| | Ohio | 67 | | Indiana | 73 | | Kentucky | 16 | | Illinois | 3 | | **Total**| **159** | - **37** of the **159** banking centers are leased facilities[201](index=201&type=chunk) - The executive office is a leased facility located in Cincinnati, Ohio[201](index=201&type=chunk) [Item 3. Legal Proceedings](index=24&type=section&id=Item%203.%20Legal%20Proceedings.) First Financial is involved in various litigation matters, including loan-related claims and routine business activities, but anticipates no material impact on its financial position or operations, with appropriate reserves established - The Company is engaged in various litigation matters, including claims of improper or fraudulent loan practices, lending violations, and routine business activities[202](index=202&type=chunk) - While ultimate liability is uncertain, the Company believes damages are not likely to be material to its consolidated financial position or results of operations, and reserves are established as appropriate[202](index=202&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) Mine Safety Disclosures are not applicable to First Financial Bancorp - Mine Safety Disclosures are not applicable[203](index=203&type=chunk) [Supplemental Item. Executive Officers of the Registrant](index=25&type=section&id=Supplemental%20Item.%20Executive%20Officers%20of%20the%20Registrant.) This section details the executive officers of First Financial Bancorp. as of February 21, 2019, outlining their key leadership positions and relevant business experience Executive Officers of First Financial Bancorp. (as of Feb 21, 2019) | Name | Position with First Financial Bancorp | Age | |:---------------------|:------------------------------------------------------|:----| | Claude E. Davis | Executive Chairman | 58 | | Archie M. Brown, Jr. | President and Chief Executive Officer | 58 | | James M. Anderson | EVP, Chief Financial Officer | 47 | | Anthony M. Stollings | EVP, Commercial Banking | 64 | | Catherine M. Myers | EVP, Consumer Banking | 57 | | John M. Gavigan | EVP, Advanced Solutions and Digital Banking | 40 | | Karen B. Woods | EVP, General Counsel and Chief Risk Officer | 50 | | William R. Harrod | EVP, Chief Credit Officer | 51 | | Amanda N. Neeley | EVP, Chief Marketing Officer | 38 | | Scott T. Crawley | Corporate Controller and Principal Accounting Officer | 38 | - Claude E. Davis became Executive Chairman on April 1, 2018, previously serving as CEO since 2004[207](index=207&type=chunk) - Archie M. Brown, Jr. was appointed President and CEO on April 1, 2018, following the acquisition of MainSource Financial Group, Inc., where he previously served as President and CEO[208](index=208&type=chunk) - James M. Anderson became CFO on April 1, 2018, also following the MainSource merger, having served as MainSource's CFO since 2006[209](index=209&type=chunk) [PART II](index=27&type=section&id=PART%20II) [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) First Financial's common shares are listed on NASDAQ, with approximately **4,339** shareholders of record, and the company manages equity compensation plans and share repurchase programs - First Financial's common shares are listed on The NASDAQ Global Select Stock Market® under the symbol 'FFBC'[223](index=223&type=chunk) - As of February 21, 2019, there were approximately **4,339 shareholders of record**[224](index=224&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2018) | Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance | |:-----------------------------------------------|:------------------------------------------------------------------------------------------|:----------------------------------------------------------------------------|:-------------------------------------------------------------| | Equity compensation plans approved by security holders | 62,410 | $9.08 | 1,882,484 | | Equity compensation plans not approved by security holders | N/A | N/A | N/A | - No shares were repurchased in the fourth quarter of 2018 under the publicly announced share repurchase program or stock plans[229](index=229&type=chunk)[230](index=230&type=chunk) - A stock repurchase plan approved in October 2012 authorized the purchase of up to **5,000,000 common shares**, with **1,490,867 shares** repurchased under this plan as of December 31, 2018[231](index=231&type=chunk) - In January 2019, the Board of Directors approved a new stock repurchase plan authorizing the purchase of up to **5,000,000 shares**[231](index=231&type=chunk) [Item 6. Selected Financial Data](index=29&type=section&id=Item%206.%20Selected%20Financial%20Data.) Selected financial data is incorporated by reference from Table 1 of the Management's Discussion and Analysis section in First Financial's 2018 Annual Report to Shareholders - Selected Financial Data is incorporated by reference from Table 1 of the Management's Discussion and Analysis section in First Financial's 2018 Annual Report to Shareholders[233](index=233&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results Of Operations](index=29&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20Of%20Operations.) Management's Discussion and Analysis of Financial Condition and Results of Operations, including forward-looking statements, is incorporated by reference from First Financial's 2018 Annual Report to Shareholders - Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated by reference from First Financial's 2018 Annual Report to Shareholders[234](index=234&type=chunk) [Item 7A. Quantitative and Qualitative Disclosure About Market Risk](index=29&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk.) Quantitative and Qualitative Disclosures about Market Risk are incorporated by reference from the Market Risk section and Table 14 of the Management's Discussion and Analysis section in First Financial's 2018 Annual Report to Shareholders - Quantitative and Qualitative Disclosures about Market Risk are incorporated by reference from the Market Risk section and Table 14 of the Management's Discussion and Analysis section in First Financial's 2018 Annual Report to Shareholders[235](index=235&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=29&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) The consolidated financial statements, reports of the independent registered public accounting firm, and quarterly financial and common stock data are incorporated by reference from First Financial's 2018 Annual Report to Shareholders - The consolidated financial statements and reports of the independent registered public accounting firm are incorporated by reference from First Financial's 2018 Annual Report to Shareholders[236](index=236&type=chunk) - The Quarterly Financial and Common Stock Data is incorporated by reference from First Financial's 2018 Annual Report to Shareholders[237](index=237&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=29&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) There have been no changes in or disagreements with accountants on accounting and financial disclosure - There are no changes in or disagreements with accountants on accounting and financial disclosure[237](index=237&type=chunk) [Item 9A. Controls and Procedures](index=29&type=section&id=Item%209A.%20Controls%20and%20Procedures.) First Financial's CEO and CFO concluded that the disclosure controls and procedures were effective as of the end of the fiscal year - First Financial's chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective as of the end of the fiscal year[238](index=238&type=chunk) - Management's Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public Accounting Firm are incorporated by reference[239](index=239&type=chunk) - There were no material changes in First Financial's internal control over financial reporting during the fiscal quarter ended December 31, 2018[240](index=240&type=chunk) [Item 9B. Other Information](index=29&type=section&id=Item%209B.%20Other%20Information.) There is no other information to report in this section - There is no other information to report[240](index=240&type=chunk) [PART III](index=30&type=section&id=PART%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=30&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance.) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 'Supplemental Item. Executive Officers of the Registrant' in this Form 10-K and specific sections of First Financial's Definitive Proxy Statement for the Annual Meeting of Shareholders - Information concerning executive officers is provided in the 'Supplemental Item. Executive Officers of the Registrant' section of this Form 10-K[243](index=243&type=chunk) - Additional information on directors, corporate governance, and shareholder nominations is incorporated by reference from First Financial's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 28, 2019[243](index=243&type=chunk) [Item 11. Executive Compensation](index=30&type=section&id=Item%2011.%20Executive%20Compensation.) Information regarding executive compensation, including discussions, reports, and interlocks, is incorporated by reference from specific headings in First Financial's Proxy Statement - Information on executive compensation, including discussions, reports, and interlocks, is incorporated by reference from First Financial's Proxy Statement[244](index=244&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=30&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) Information concerning security ownership of certain beneficial owners and management, as well as related stockholder matters, is incorporated by reference from Part II, Item 5 of this report and specific headings in First Financial's Proxy Statement - Information on security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from Part II, Item 5 of this report and First Financial's Proxy Statement[245](index=245&type=chunk) [Item 13. Certain Relationships and Related Transactions](index=30&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions.) Information regarding certain relationships and related transactions is incorporated by reference from Note 13 – Loans to Related Parties in the Notes to Consolidated Financial Statements of First Financial's 2018 Annual Report and the 'Corporate Governance-Transactions with Related Parties' section in First Financial's Proxy Statement - Information on certain relationships and related transactions is incorporated by reference from Note 13 – Loans to Related Parties in the 2018 Annual Report and the 'Corporate Governance-Transactions with Related Parties' section in First Financial's Proxy Statement[246](index=246&type=chunk) [Item 14. Principal Accounting Fees and Services](index=30&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services.) Information concerning principal accounting fees and services is incorporated by reference from the 'Independent Registered Public Accounting Firm Fees' heading in First Financial's Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the 'Independent Registered Public Accounting Firm Fees' section in First Financial's Proxy Statement[247](index=247&type=chunk) [PART IV](index=31&type=section&id=PART%20IV) [Item 15. Exhibits, Financial Statement Schedules](index=31&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules.) This section details consolidated financial statements and schedules incorporated by reference from First Financial's 2018 Annual Report, alongside a comprehensive list of filed exhibits - The consolidated financial statements (Balance Sheets, Statements of Income, Comprehensive Income, Changes in Shareholders' Equity, Cash Flows) and reports of the independent registered public accounting firm for the years ended December 31, 2018, 2017, and 2016 are incorporated by reference from First Financial's 2018 Annual Report[250](index=250&type=chunk) - Financial Statement Schedules required by Regulation S-X are omitted as not required or inapplicable[250](index=250&type=chunk) - A comprehensive list of exhibits, including purchase and merger agreements, articles of incorporation, indentures, stock incentive plans, and employment agreements, is provided[250](index=250&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[258](index=258&type=chunk) [Item 16. Form 10-K Summary](index=37&type=section&id=Item%2016.%20Form%2010-K%20Summary.) There is no Form 10-K Summary provided in this report - No Form 10-K Summary is provided[260](index=260&type=chunk) [SIGNATURES](index=38&type=section&id=SIGNATURES) The report is duly signed on behalf of First Financial Bancorp. by its President and Chief Executive Officer, Archie M. Brown, Jr., and other executive officers and directors, affirming compliance with the Securities Exchange Act of 1934 - The report is signed by Archie M. Brown, Jr., President and Chief Executive Officer, and other executive officers and directors, on February 22, 2019[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)

Financial Data and Key Metrics Changes - Full-year 2018 earnings per share were $2.28, with a return on average assets of 1.62% and a return on average tangible common equity of 20.5% [8] - Fourth quarter adjusted net income was $59.7 million or $0.61 per share, with a return on average assets of 1.72% and a return on average tangible common equity of 21.3% [14][15] - The efficiency ratio was 49.3% for the fourth quarter, reflecting continued expense management post-merger [15] Business Line Data and Key Metrics Changes - Loan originations in the fourth quarter increased by 10% compared to the linked quarter, although overall loan balances remained flat due to elevated payoffs in commercial real estate [18] - Average deposit balances increased by $162 million, driven by growth in non-interest-bearing deposits and brokered CDs [19] Market Data and Key Metrics Changes - The net interest margin increased by nine basis points to 4.21% in the fourth quarter, driven by higher asset yields and a favorable shift in funding mix [16] - Classified asset balances, a leading indicator of credit losses, declined by 5%, while net charge-offs increased to 29 basis points of loans on an annualized basis [20][21] Company Strategy and Development Direction - The company completed a merger with MainSource Financial Group, successfully integrating management and sales teams while investing in strategic areas such as technology [7] - The company plans to pursue strategic acquisitions to enhance non-interest income, particularly in wealth and capital markets [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for continued loan portfolio growth, expecting low to mid-single-digit increases in loan balances for the first quarter of 2019 [23] - The near-term credit outlook is stable, with expected losses similar to 2018 levels, and a focus on growing non-interest income over the long term [26] Other Important Information - The Board of Directors approved a 10% increase in the quarterly dividend to $0.22 per share and announced a share repurchase plan of up to 5 million shares [11] - Capital ratios expanded during the period and remain above stated targets, with tangible book value dilution from the merger substantially recovered [22] Q&A Session Summary Question: Increase in NPA and charge-offs - Management confirmed that the increase was related to specific credits that had migrated to non-accrual status, with no systemic issues in the overall portfolio [32][33] Question: Confidence in loan growth despite pay-downs - Management indicated that some pay-downs were accelerated and expressed confidence in pipelines showing decent growth across various business lines [42][43] Question: Tax rate fluctuations - Management clarified that the effective tax rate for the first quarter is expected to be 19.5%, with adjustments made for the previous year [37][39] Question: Capital management and buyback plans - Management stated that buybacks will be opportunistic, evaluating against other potential uses of capital [47][48] Question: M&A strategy and branch rationalization - Management indicated a focus on smaller, strategic acquisitions within footprint and confirmed that branch rationalization related to the merger is nearly complete [61][63]