First Financial Bancorp.(FFBC) - 2019 Q3 - Quarterly Report

Part I - FINANCIAL INFORMATION Financial Statements 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 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 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] Consolidated Statements of Comprehensive Income 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 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] Consolidated Statements of Cash Flows 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 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] - 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][39][40] - 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][188][189] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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][204] - 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] - 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] Quantitative and Qualitative Disclosures about Market Risk 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][292] - 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][288][292] Controls and Procedures 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] - 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] Part II - OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds 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][316] Exhibits 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] 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]