First Financial Bancorp.(US:FFBC)2021-10-22 16:22Financial Data and Key Metrics Changes - Earnings per share for Q3 2021 was $0.63, with a return on assets of 1.49% and an adjusted efficiency ratio of 60.1% [6][19] - The company reported a provision recapture of $10.1 million due to improving credit quality trends, specifically lower net charge-offs and declines in classified asset balances [7][27] - Total loan balances decreased by $150.6 million, primarily due to $225.4 million in PPP loan forgiveness [8][23] Business Line Data and Key Metrics Changes - Loan growth, excluding PPP forgiveness, was 3% annualized, driven by commercial and small business banking [14] - The C&I portfolio experienced a growth of 16% on an annualized basis, with origination levels exceeding loan payoffs [8][23] - Fee income surpassed expectations, driven by strong performance in mortgage banking and wealth management, with a 13% increase in deposit service charge income compared to the previous quarter [15][25] Market Data and Key Metrics Changes - Deposit balances remained elevated, with modest increases towards the end of the quarter as clients maintained substantial liquidity levels [9][24] - Foreign exchange income declined slightly from record levels in the first half of the year, but is expected to return to a typical run rate of $10 million to $12 million in Q4 [16][43] Company Strategy and Development Direction - The company plans to continue focusing on serving the financial needs of core business, consumer, and wealth management clients, while remaining optimistic about sustaining successes through core strategies [35] - Loan balances, excluding PPP, are expected to grow in the low to mid-single digits for the remainder of the year, with a focus on commercial and small business banking [30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for further economic recovery, expecting additional reductions in credit costs in Q4 2021 and early 2022 [7][28] - The company anticipates modest pressure on net interest margin due to the low interest rate environment and excess liquidity on the balance sheet [32] Other Important Information - The company repurchased approximately 2.5 million shares at an average price of $23.04 during the quarter, totaling 4.6 million shares repurchased in 2021 [11][29] - Non-interest expenses were in line with expectations, despite increases in employee costs and marketing expenses [26] Q&A Session Summary Question: Loan growth outlook and portfolios performing well - Management highlighted strong growth in the C&I portfolio and increasing pipelines, while noting pressures in the ICRE portfolio due to high levels of payoffs [37][38] Question: Foreign exchange revenues and outlook - Management indicated that foreign exchange revenue was slightly below expectations but anticipated a rebound to the typical range in the upcoming quarter [43][44] Question: Pressure from low rates on net interest margin - Management explained that pressure on net interest margin is coming from both loan yields and reinvestment rates on the securities portfolio, with stabilization expected mid-next year [47][49] Question: Capital management and share repurchase plans - Management confirmed plans to complete the remaining share repurchase authorization and indicated a potential renewal of the repurchase plan depending on capital management strategies [50][51] Question: Opportunities for traditional M&A - Management expressed no near-term visibility on whole bank deals but emphasized a preference for organic growth while remaining open to potential M&A opportunities [54][56] Question: Wage pressure and expense management - Management acknowledged wage pressures, particularly in technology and entry-level positions, while also noting efforts to manage costs through headcount reductions and branch closures [58][59]