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 $0.76, resulting in an adjusted return on assets of 1.55% and an adjusted return on tangible common equity of 19.3% [3][5] - Record revenue was achieved in Q3, driven by a robust net interest margin of 4.02% and record non-interest income, which represented 31% of total net revenue [3][6] - Tangible book value per share increased by 5% from the previous quarter to $16.19, and tangible common equity increased by 47 basis points to 8.87% [5][11] Business Line Data and Key Metrics Changes - Loan balances declined modestly by $72 million during the quarter, primarily due to lower production in specialty businesses and a higher percentage of construction originations [4][9] - Non-interest income reached a record high of $73.6 million, led by leasing and foreign exchange businesses, with higher syndication fees contributing to the increase [6][10] - Non-interest expenses increased due to higher incentive compensation tied to fee income, but overall expenses were well managed [4][10] Market Data and Key Metrics Changes - Average deposit balances increased by $157 million, driven by higher broker deposits and money market accounts, despite a seasonal decline in public funds [6][9] - The company maintained 21% of total balances in non-interest bearing accounts, focusing on growing lower-cost deposit balances [6] Company Strategy and Development Direction - The company expects loan growth to return to mid-single digits in Q4 2025, with strong commercial lending as the primary driver [12][32] - The integration of pending acquisitions, including Westfield and BankFinancial, is anticipated to enhance operational efficiency and expand market reach [14][63] - The company aims to maintain an industry-leading net interest margin and expects it to range between 3.92% and 3.97% in the next quarter [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving strong performance in Q4 2025, with expectations for increased origination volumes and strong deposit growth [12][14] - Credit costs are expected to remain stable, with annualized net charge-offs projected at 18 basis points [7][42] - The company anticipates a continued focus on expense management while evaluating capital actions to support shareholder returns [11][44] Other Important Information - The company has received regulatory approval for the Westfield transaction, expected to close in early November 2025 [14] - The company is committed to providing attractive returns to shareholders, with 33% of earnings returned through common dividends [11] Q&A Session Summary Question: NDFI loan exposure details - The NDFI portfolio stands at approximately $434 million, conservatively managed with no adversely rated credit, primarily consisting of traditional REITs [16][19] Question: Impact of rate cuts on net interest margin - Each 25 basis point rate cut is expected to create about five basis points of near-term pressure on the margin, with a potential recovery as deposit costs adjust [20][22] Question: Loan growth expectations and verticals driving growth - Strong commercial lending is expected to drive growth, with specific verticals like Summit funding projected to perform well in Q4 [31][32] Question: Fourth quarter fee and expense guidance - The increase in fourth quarter expenses is primarily driven by higher forecasts from Bannockburn and other commission-based businesses [40][41] Question: Credit cost outlook - Credit costs are expected to remain steady, with a run rate of 25 to 30 basis points anticipated [42] Question: Capital management and buyback considerations - The company plans to assess capital ratios post-acquisitions before considering buybacks, particularly if trading below tangible book value [44]