First Financial Bancorp.(FFBC) - 2025 Q2 - Quarterly Report

Part I - FINANCIAL INFORMATION Item 1 - Financial Statements This section presents First Financial Bancorp's unaudited consolidated financial statements for Q2 and H1 2025, including balance sheets, income, and cash flow statements Consolidated Balance Sheets Total assets slightly increased to $18.63 billion, supported by investment securities and loans, with deposits and equity also growing Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $18,634,255 | $18,570,261 | | Net loans and leases | $11,627,674 | $11,604,987 | | Investment securities (AFS & HTM) | $3,459,556 | $3,260,736 | | Goodwill | $1,007,656 | $1,007,656 | | Total Liabilities | $16,076,100 | $16,132,220 | | Total deposits | $14,369,993 | $14,329,138 | | Total borrowed funds | $1,029,654 | $1,102,961 | | Total Shareholders' Equity | $2,558,155 | $2,438,041 | Consolidated Statements of Income Net income increased for Q2 and H1 2025, driven by higher net interest and noninterest income and lower credit loss provisions Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $158,269 | $153,311 | $307,565 | $302,051 | | Provision for Credit Losses | $9,802 | $16,443 | $18,502 | $27,603 | | Noninterest Income | $68,063 | $61,501 | $119,146 | $108,013 | | Noninterest Expense | $128,671 | $123,574 | $256,747 | $245,929 | | Net Income | $69,996 | $60,805 | $121,289 | $111,494 | | Diluted EPS | $0.73 | $0.64 | $1.27 | $1.17 | Notes to Consolidated Financial Statements Detailed disclosures cover accounting policies, investment and loan portfolios, credit loss allowance, goodwill, borrowings, and business combinations Note 3: Investments The investment portfolio, primarily AFS securities at $3.39 billion, saw sales with net losses, but unrealized losses are due to market rates Investment Securities Summary as of June 30, 2025 (in thousands) | Category | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Available-for-Sale (AFS) | $3,664,424 | $3,386,562 | | Mortgage-backed securities - residential | $1,220,107 | $1,140,315 | | Obligations of state and political subdivisions | $609,001 | $493,212 | | Held-to-Maturity (HTM) | $72,994 | $66,244 | - For the six months ended June 30, 2025, the company sold $164.5 million of AFS securities, realizing gross gains of $0.1 million and gross losses of $10.0 million[33] - As of June 30, 2025, the AFS portfolio had gross unrealized losses of $289.4 million, primarily concentrated in securities held for 12 months or more, which management attributes to market yield fluctuations rather than credit issues[44] Note 4: Loans and Leases Total loans increased slightly to $11.79 billion, with diversified categories; total delinquency decreased, but nonaccrual loans rose Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2025 | % of Total | | :--- | :--- | :--- | | Commercial & industrial | $3,927,771 | 33.3% | | Commercial real estate | $3,961,513 | 33.6% | | Residential real estate | $1,492,688 | 12.7% | | Home equity | $903,299 | 7.7% | | Lease financing | $587,176 | 5.0% | | Other | $912,549 | 7.7% | | Total Loans & Leases | $11,786,196 | 100.0% | - Total past due loans (30+ days) decreased to $55.2 million at June 30, 2025, from $72.7 million at December 31, 2024[57] - Nonaccrual loans increased to $76.9 million as of June 30, 2025, up from $66.0 million at December 31, 2024, with the increase primarily in Commercial & Industrial loans[65] Note 5: Allowance for Credit Losses ACL for loans and leases increased to $158.5 million (1.34% of loans), with lower provision expense but higher net charge-offs ACL Roll-Forward for Loans & Leases - Six Months Ended June 30, 2025 (in thousands) | Description | Amount | | :--- | :--- | | Beginning Balance (Jan 1, 2025) | $156,791 | | Provision for credit losses | $18,225 | | Gross charge-offs | ($18,840) | | Recoveries | $2,346 | | Ending Balance (June 30, 2025) | $158,522 | - The ACL as a percentage of total loans was 1.34% at June 30, 2025, compared to 1.33% at December 31, 2024[286] - The ACL for unfunded commitments was $17.1 million as of June 30, 2025, with a related provision expense of $0.3 million for the first six months of 2025[94] Note 18: Business Combinations The company announced a $325.0 million acquisition of Westfield Bancorp and completed the Agile Premium Finance acquisition for $96.9 million - On June 23, 2025, First Financial entered an agreement to acquire Westfield Bancorp, Inc. for a total purchase price of $325.0 million ($260.0 million cash and $65.0 million in stock)[205][206] - The acquisition of Agile Premium Finance was completed on February 29, 2024, for $96.9 million in cash, adding a national insurance premium financing business[209] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 net income of $70.0 million, highlighting net interest income growth, asset quality, liquidity, and capital Overview of Operations Q2 2025 net income rose to $70.0 million ($0.73 diluted EPS), showing strong improvements in key performance ratios like ROAA and ROATCE Quarterly Performance Summary | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Income | $69,996 | $51,293 | | Diluted EPS | $0.73 | $0.54 | | Return on Average Assets | 1.52% | 1.13% | | Return on Average Tangible Shareholders' Equity | 19.61% | 15.16% | Net Interest Income Net interest income for Q2 2025 increased by 6.0% to $158.3 million, with net interest margin expanding to 4.05% due to improved yields - Net interest income increased by $9.0 million, or 6.0%, from the first quarter of 2025[242] - The net interest margin (FTE) increased by 17 basis points to 4.05% in Q2 2025 compared to Q1 2025, as asset yields rose and funding costs declined[242] Asset Quality and Allowance for Credit Losses Asset quality stable despite nonaccrual loan increase to $76.9 million; total ACL is $175.7 million, with lower Q2 net charge-offs - Nonaccrual loans increased by $11.0 million to $76.9 million (0.65% of total loans) at June 30, 2025[279] - Classified assets decreased to $214.3 million (1.15% of total assets) from $224.1 million at year-end 2024[280] Net Charge-offs (in thousands) | Period | Amount | % of Average Loans (Annualized) | | :--- | :--- | :--- | | Q2 2025 | $6,044 | 0.21% | | Q1 2025 | $10,450 | 0.36% | | Six Months 2025 | $16,494 | 0.28% | | Six Months 2024 | $14,824 | 0.27% | Liquidity and Capital Strong liquidity with $5.2 billion unused funding; capital ratios improved, remaining above minimums, and dividend increased to $0.25 - The company had unused and available overnight wholesale funding sources of $5.2 billion, or 28.0% of total assets, as of June 30, 2025[310] Key Capital Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Common Equity Tier 1 | 12.57% | 12.16% | | Tier 1 Capital | 12.89% | 12.48% | | Total Capital | 14.98% | 14.64% | | Leverage Ratio | 10.28% | 9.98% | | Tangible Common Equity | 8.40% | 7.73% | - The Board of Directors authorized a dividend increase to $0.25 per common share, payable in September 2025[322] Item 3 - Quantitative and Qualitative Disclosures about Market Risk The company's asset-sensitive position indicates net interest income will increase in a rising rate environment, with a +100 bps shock yielding 3.13% NII growth Interest Rate Sensitivity Analysis (as of June 30, 2025) | Rate Shock Scenario | % Change in NII (Year 1) | % Change in EVE | | :--- | :--- | :--- | | +200 bps | 4.81% | 1.86% | | +100 bps | 3.13% | 1.16% | | -100 bps | (4.77)% | (2.52)% | - The company manages interest rate risk through its Balance Sheet Strategies and Asset Liability Committee (ALCO), using income simulation and Economic Value of Equity (EVE) models[332][333] Item 4 - Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[355] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[356] Part II - OTHER INFORMATION Item 1 & 1A - Legal Proceedings and Risk Factors No material changes to legal proceedings or risk factors were reported since the 2024 Annual Report on Form 10-K filing - There have been no material changes to legal proceedings or risk factors since the 2024 Form 10-K filing[358][359] Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the 2024 Stock Repurchase Plan during Q2 2025, leaving the 5,000,000 share authorization fully available - No shares were repurchased in the second quarter of 2025 under the 2024 Stock Repurchase Plan[360]