First Financial Bancorp.(FFBC) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net income for Q3 2025 was $72.6 million, with adjusted earnings per share at 76 cents, resulting in an adjusted return on assets of 1.55% and an adjusted return on tangible common equity of 19.3% [4][12] - The net interest margin remained strong at 4.02%, despite a slight decline of three basis points from the previous quarter [9][13] - Tangible book value per share increased by 5% from the previous quarter to $16.19, and tangible common equity ratio increased by 47 basis points to 8.87% [7][18] Business Line Data and Key Metrics Changes - Noninterest income reached a record of $73.6 million, representing 31% of total net revenue for the quarter, driven by leasing and foreign exchange businesses [5][10] - Loan balances decreased by $72 million during the quarter, primarily due to lower production in specialty lending areas and increased construction originations [6][14] - Average deposit balances increased by $157 million, driven by higher brokered CDs and money market accounts [10][14] Market Data and Key Metrics Changes - Asset quality metrics remained stable, with nonperforming assets flat as a percentage of total assets and annualized net charge-offs at 18 basis points, showing slight improvement from the previous quarter [7][12] - The company maintained 21% of total balances in noninterest-bearing accounts, focusing on growing lower-cost deposit balances [10] Company Strategy and Development Direction - The company expects loan growth to return to mid-single digits by the end of the year, driven by strong commercial lending and seasonal public fund inflows [19][43] - The integration of pending acquisitions, including Westfield, is anticipated to enhance operational efficiency and expand market reach [21][76] - The company is committed to providing attractive returns to shareholders, with 33% of earnings returned through dividends [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong origination volumes in Q4, with expectations for continued profitability and growth momentum into 2026 [19][22] - The company anticipates credit costs to remain stable, with a projected charge-off rate of 25 to 30 basis points in the current environment [54] - Management noted competitive deposit market conditions but expects a reduction in deposit costs due to recent rate cuts [66] Other Important Information - The company has received regulatory approval for the Westfield acquisition, expected to close in early November [21] - The allowance for credit losses (ACL) coverage increased slightly to 1.38% of total loans, with a total provision expense of $9.1 million recorded during the quarter [11][17] Q&A Session Summary Question: NDFI loan exposure details - The NDFI portfolio stands at approximately $434 million, primarily composed of traditional REITs and conservatively managed with no adversely rated credits [28] Question: Impact of rate cuts on net interest margin - Each 25 basis point rate cut is expected to exert about five basis points of pressure on the margin, with a potential starting point of around 3.90% for early next year [32] Question: Loan growth expectations and verticals driving growth - Strong commercial lending is expected to be the primary driver of growth, with projections for a 5% annualized growth rate [43] Question: Fourth quarter fee and expense guidance - The increase in fourth quarter guidance is primarily driven by higher forecasts from Bannockburn and Summit, with expectations for continued growth in those areas [52] Question: Capital management and buyback considerations - The company plans to assess capital ratios post-acquisitions before considering stock buybacks, especially if trading below tangible book value [58]